STATE OF IOWA DEPARTMENT OF COMMERCE BEFORE THE IOWA UTILITIES BOARD
: IN RE: : DOCKET NO. NOI-2011-0002 : HIGH VOLTAGE TRANSMISSION : COMMENTS OF CLEAN LINE PROJECTS : ENERGY PARTNERS LLC : :
COMES NOW Rock Island Clean Line LLC (“Clean Line”) and, by way of response to the
Iowa Utilities Board (“Board”) “Order Opening Inquiry on High-Voltage Transmission Projects and
Soliciting Comments” (the “NOI”), submits its comments. The Board’s questions will be set forth and the responses of Clean Line will follow each in order. This Response includes photographs, tables and graphs that serve to illustrate points made in the response.
1. Describe the proposed project, including beginning terminus and end
terminus (at least by county, with a more detailed description if possible),
MW size, DC-Classic or DC-VSC or AC configuration, location of
interconnects with existing facilities and other major facilities such as
converter stations or substations, and proposed construction
commencement and in-service dates.
Iowa has some of the best wind resources in the nation, but the transmission infrastructure does not exist to connect those resources with communities and cities that have a strong demand for renewable energy. Because the vast majority of electric transmission development occurred before the start of the modern wind energy era, the northwestern region of the state, with its superior wind resources, contains enormous, undeveloped wind potential. In fact, several counties with world- class wind resources lack any operating wind farms. Clean Line is developing the Rock Island Clean Line, an approximately 500-mile, overhead
High Voltage Direct Current (“HVDC”) transmission line, to connect the renewable resources in northwest Iowa and the surrounding region with communities in Illinois and in other states to the east (the “Project”). The Project will make possible 3,500 megawatts (“MW”) of new wind energy projects that could not otherwise be built due to the limitations of the existing electric transmission grid. The name of the Project originates from the Rock Island Railroad, which stretches across
Iowa and Illinois. Just as the Rock Island Railroad allowed farmers to move their goods to market, the Rock Island Clean Line will deliver clean energy to the communities that need it, representing the new farm to market road for the 21st century.
The Project will consist of one bi-pole ±600 kilovolt (“kV”) HVDC Classic transmission line capable of delivering up to 3,500 MW of power and will make possible approximately $7 billion in renewable projects at the western end of the line—creating thousands of jobs. The Project will deliver enough clean energy to power around 1.4 million homes, reduce power prices for consumers, contribute to energy security, increase state and local tax revenues, and reduce both pollution and water consumption.
A. Location
The planned location for the western converter station is O’Brien County, Iowa. The eastern converter station will be located in Grundy County, Illinois. As shown in Figure 1, the Rock Island
Clean Line will draw from some the best wind resources in the country and deliver into a network of extra high voltage transmission lines that serve Illinois and much of the Midwest and Mid-
Atlantic.
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Figure 1: Rock Island Clean Line Project
The region from which the Rock Island Clean Line will source its energy contains the best average wind speeds along the eastern edge of what many call the “Wind Belt.” Large areas of the resource area (circled in Figure 2) have average 80-meter wind speeds of 8 meters per second
(about 18 miles per hour) or greater. Working with the meteorology firm AWS Truepower
(“AWS”), the National Renewable Energy Lab (“NREL”) published the map of average wind speeds at 80 meters in Figure 2 below.
Source: US Department of Energy, National Renewable Energy Laboratory
Figure 2: USA Wind Speeds at 80 M Hub Height
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The potential power generated by a wind turbine is proportional to the cube of wind speed
(among other factors such as air density and swept area of the blades); as a result, relatively small differences in average wind speed can result in dramatic disparities in wind power potential. NREL and AWS have published a ranking of wind capacity potential at or above a 40% gross capacity factor by state, referenced in Table 1. As a testament to their superior wind resources, three of the four states from which the Rock Island Clean Line is likely to draw wind power—Iowa, Nebraska and South Dakota — are ranked in the top ten in wind potential. Each state has significantly more potential than the capacity of the Project. This suggests that it is feasible to fill the Rock Island
Clean Line with an abundance of high capacity factor wind energy.
Table 1: Wind Capacity Potential by State Windy Land Area >= 40% Gross Capacity Factor at 80 m Wind Energy Potential Ranking (by Total Excluded Available Available Installed Capacity Annual Generation Capacity Potential) State (km2 ) (km2) (km2) % of State (MW) (GWh) 1 Texas 180,822 15,426 165,397 24% 826,983 3,240,930 2 Nebraska 165,445 10,012 155,433 78% 777,165 3,084,090 3 South Dakota 163,281 10,004 153,277 77% 766,383 3,039,460 4 Kansas 163,170 11,105 152,065 71% 760,324 3,024,280 5 North Dakota 160,497 21,932 138,564 76% 692,821 2,728,620 6 Montana 98,309 18,737 79,571 21% 397,857 1,529,560 7 Iowa 72,119 8,400 63,719 44% 318,595 1,232,860 8 Wyoming 70,268 17,787 52,482 21% 262,410 1,043,890 9 Oklahoma 55,593 6,038 49,555 27% 247,773 952,687 10 New Mexico 39,574 2,425 37,149 12% 185,745 712,877
Source: US Department of Energy, National Renewable Energy Laboratory
In fact, as shown in Figure 3, AWS and NREL slate Iowa’s high capacity wind potential at 28 times
Iowa’s current annual energy consumption, again supporting significant wind export opportunities for the state.
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Source: NREL, EIA. High capacity factor defined as >40% CF at 80 m hub height.
Figure 3: Iowa high capacity wind potential vs. electric demand
Developers are advancing projects totaling tens of thousands of MW in the resource area.
Over 51,000 MW of active wind projects are in the MISO Interconnection Queue, of which over
31,000 MW are located in Iowa, Minnesota, Nebraska or South Dakota. In addition to those projects in the interconnection queue, there are many wind projects with meteorological data and land options that have not yet submitted a queue request due to a backlog of similar requests and inadequate transmission infrastructure. In spite of its wind potential, much of the wind resources in northwest Iowa and the surrounding region are yet to be developed and will likely remain in such a state; a lack of transmission infrastructure leaves the wind resources in this region electrically constrained from markets that have a large demand for clean, cost-effective, renewable energy.
B. Market
The Rock Island Clean Line will deliver energy into the PJM grid at the 765 kV Collins substation in Grundy County, Illinois. The PJM market is a competitive electric market with both merchant power sales and long-term contract possibilities. The Project serves a need for renewable
-5- energy resources in the PJM footprint, whose renewable demand far outstrips its supply in the near future. As shown in Figure 4 and Tables 2 and 3 below, based on state-level renewable energy mandates there is huge demand for renewables in the delivery area and farther east.
Figure 4: Renewable Energy Supply and Demand in PJM States
Demand for renewable energy in PJM states ramps up significantly by 2016 and continues to climb through 2025. For the PJM states to reach their renewable energy procurement goals and mandates, they will need a dramatically increased ability to access cost-effective renewable energy resources. Rock Island will help meet RPS mandates and goals by delivering over 15,000 gigawatt- hours (“GWh”) of wind energy to PJM states each year, beginning in mid-2016. Renewable demand in PJM states and renewable demand for which Rock Island is eligible are shown in Tables
2 and 3, respectively.
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Table 2: Total Renewable Demand—PJM States
Renewables Wind Required at 40% RPS Mandate/Goal requirement (GWh) NCF (MW) PJM States 2016 2025 2016 2025 2016 2025 Delaware 14.50% 25.00% 1,739 3,193 496 911 Illinois 10.45% 22.71% 15,361 36,082 4,384 10,297 Indiana 3.22% 8.05% 3,478 9,268 992 2,645 Kentucky 0.00% 0.00% ‐ ‐ ‐ ‐ Maryland 15.20% 20.00% 10,134 14,202 2,892 4,053 Michigan 10.00% 10.00% 10,558 11,409 3,013 3,256 New Jersey 14.10% 22.50% 11,385 19,345 3,249 5,521 North Carolina 6.00% 12.50% 8,151 18,498 2,326 5,279 Ohio 3.97% 11.04% 6,326 18,731 1,805 5,345 Pennsylvania 13.80% 17.49% 21,131 28,529 6,031 8,142 Tennessee 0.00% 0.00% ‐ ‐ ‐ ‐ Virginia 6.02% 12.90% 6,949 16,221 1,983 4,629 West Virginia 9.94% 24.84% 3,273 8,723 934 2,489 DC 13.50% 20.00% 1,754 2,768 501 790 Total 100,239 186,969 28,607 53,359
Table 3: Rock Island Eligible Renewable Demand—PJM States Renewables Wind Required at 40% RPS Mandate/Goal requirement (GWh) NCF (MW) PJM States 2016 2025 2016 2025 2016 2025 Delaware 13.25% 21.50% 1,589 2,746 453 784 Illinois 9.82% 21.35% 14,439 33,917 4,121 9,680 Indiana 1.61% 4.02% 1,739 4,634 496 1,322 Kentucky 0.00% 0.00% ‐ ‐ ‐ ‐ Maryland 12.20% 18.00% 8,134 12,782 2,321 3,648 Michigan 0.00% 0.00% ‐ ‐ ‐ ‐ New Jersey 6.90% 14.52% 5,573 12,482 1,591 3,562 North Carolina 1.26% 2.87% 1,718 4,252 490 1,213 Ohio 1.91% 5.30% 3,036 8,991 867 2,566 Pennsylvania 5.55% 7.29% 8,492 11,887 2,424 3,392 Tennessee 0.00% 0.00% ‐ ‐ ‐ ‐ Virginia 6.02% 12.90% 6,949 16,221 1,983 4,629 West Virginia 9.94% 24.84% 3,273 8,723 934 2,489 DC 10.68% 17.50% 1,387 2,422 396 691 Total 56,330 119,057 16,076 33,978
C. Technology Specific Information
Historically in Iowa, the transfer of electricity from generator to consumer has been over high-voltage alternating current (“AC”) transmission lines. While AC transmission is the best technology for gathering and distributing smaller amounts of power over shorter distances, direct
-7- current (“DC”) transmission is the technically and economically desirable solution for delivering large amounts of power over long distances and for integrating that power into the existing grid. As such, AC and DC technologies are complementary: AC feeder lines will help to deliver wind power to the converter station at the western terminus of the Rock Island Clean Line and to distribute that power to homes and businesses after it has arrived at the eastern terminus of the Project.
Over the past 40 years, several direct current transmission lines have been constructed that augment the existing grid to offer significant electrical, economic, and environmental advantages over AC transmission lines for long distances. Among those direct current lines is the Pacific DC
Intertie, which has been in operation for over 30 years. Operating at ±500 kV, the line is capable of transmitting up to 3,100 MW of power. In terms of operating voltage and capacity, the Pacific
Intertie is not dissimilar to the approximately 500-mile Rock Island Clean Line, which will operate at ±600 kV and deliver up to 3,500 MW of power.
When transporting large amounts of power over long distances, DC transmission has three major advantages over AC transmission:
More efficient transfer of energy;
Smaller footprint and less extensive facilities; and
Controllability of power flows.
The major advantage of DC transmission lines is their efficiency—less energy is lost as it is transmitted and there is no need for reactive compensation along the line. Because DC flows steadily through the wires without changing direction many times each second and through the entire conductor rather than just at the surface, DC transmission lines typically lose less power than
AC transmission lines. Figure 5 shows a comparison of losses in various AC and DC configurations.
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Figure 5: Line loss comparison for 3,500 MW across voltage levels and technologies
DC transmission requires, at a minimum, around one-third fewer conductors and insulators than AC transmission (a bi-pole HVDC line has two electrical polees whereas an AC transmission line has three phases). Furthermore, as previously noted, DC transmission is more efficient and also makes more complete use of the available conductor material than AC transmission (AC does not utilize the interior portion of the conductor material). As a resullt of all of thhese factors, the towers used to support DC transmission lines generally can be constructed on narrower strips of land than AC transmission lines of similar voltage or power. Figure 6 shows a comparison of ROW required to move between 3000 and 4000 MW on three 500 kV AC lines versus one ±500 kV HVDC line.
Figure 6: AC vs. DC Right-of-Way Comparison
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In addition, HVDC provides a number of reliability benefits, including controllable power flows. Compared to an equivalent AC solution, HVDC can link distant parts of the electric grid more reliably. DC transmission lines can improve the electrical reliability of AC power systems by efficiently connecting portions of the electrical grid that may differ in frequency. Unlike AC lines,
HVDC lines will not become overloaded by unrelated outages since the amount of power delivered is strictly limited by the DC converter. This can reduce the likelihood that line outages will propagate from one region to another.
One drawback of DC transmission is the cost of converting AC power to DC power at the resource end and then converting DC power back to AC power once it reaches its destination.
Since the short-haul transmission grids and distribution systems that deliver electricity to homes transmit AC, all power transmitted as DC must ultimately be converted to AC. The economics of this drawback are overcome, however, when a large amount of power transmitted over a very long distance. In this case, the cost savings associated with lower construction costs, the lack of a need for additional reactive equipment, and the reduced power losses over long distances more than offset the cost of the converter stations.
Converter stations will be located at both ends of the Project. Each converter station will require approximately 45-65 fenced acres. The exact size could be smaller depending upon requirements for filter banks and other equipment. In order to accommodate the HVDC technology used for the Rock Island Clean Line, the western converter must have a strong connection with the existing grid for the conversion process. A 345 kV transmission line—to which the Project will be connected for voltage support in Iowa—runs Northeasterly from the Raun substation near Sioux
City to the Lakefield Junction substation just over the Minnesota border. Wind energy from the resource area identified above will be delivered to the western converter station via dedicated AC
-10- radial lines. That energy will be converted from AC to DC and sent across Iowa and Illinois along the HVDC transmission line. At the eastern converter the energy will be converted back from DC to AC. The eastern converter station will be located in Grundy County, Illinois, such that the
Project will be integrated into the existing AC system and will deliver energy to homes and businesses in Illinois and points farther east. Figure 7 conceptually shows how the process will work.
Figure 7: Rock Island Project Facilities Schematic
Clean Line spent the past year working to advance the technical aspects of the Rock Island
Clean Line and has made progress in the interconnection process for the terminals at both ends of the line. At the eastern end of the Project, Clean Line has several merchant transmission interconnection requests pending with the regional transmission operator PJM. Engineering studies are currently underway pursuant to these requests. At the western end of the Project, Clean Line began discussions with the Midwest Independent System Operator (“MISO”) to ensure that electric reliability is maintained. More information on the regional transmission planning process can be found below under Question 3. Clean Line has also engaged leading environmental and technical firms to conduct the necessary environmental, technical, and routing studies necessary for the development of the Rock Island Project.
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In June 2011, Clean Line reached an agreement with Siemens, a global leader in HVDC transmission technology, to provide HVDC technology solutions for the Rock Island Clean Line. In addition to providing detailed technical expertise to the development team, under the agreement,
Siemens will work with Clean Line to develop, design, and implement the HVDC converter stations.
D. Project Timeline Overview
Clean Line is currently working to finalize routing and engineering sufficient to support regulatory filings with the Board, the Illinois Commerce Commission, and the Army Corps of
Engineers to occur in the first half of 2012. Clean Line also expects to file with the Federal Energy
Regulatory Commission (“FERC”) for negotiated rate approval in late 2011.
E. Project Timeline Details
The Clean Line team has spent more than 18 months, conducting almost 300 stakeholder meetings—of which 212 were in Iowa—collecting feedback from interested parties on routing options. Clean Line has met with government agencies, conservation and agricultural organizations, elected officials and other community leaders to discuss routing options across the project area to better understand potential routing opportunities and constraints. As a result of this process, the Project’s database now contains more than 40,000 information points related to routing criteria. The routing criteria include many important factors, such as residences, agricultural lands, state and federal lands, recreational areas, water resources, known cultural resources, sensitive habitats and protected species, airports, land use, development plans, cemeteries, school and churches, community feedback, agency and stakeholder feedback, legal requirements, and engineering constraints.
Clean Line has analyzed data specific to the routing criteria in several stages, conducting an iterative process, moving from the evaluation of a broad project area to the development of study
-12- corridors (typically 3-mile-wide to 10-mile-wide areas, all evaluated by stakeholder groups and at open houses), and then to the development of alternative routes. In June, Clean Line held a series of
26 open houses to which 42,484 landowners were invited. 2,001 invitees attended the open houses and recorded 1,421 mapping comments. Comments from the June open houses were incorporated into the routing database and used to determine route alternatives, the next step in the routing process. Clean Line currently is in the process of reviewing the route alternatives with local and state agencies and non-profit organizations and also is performing engineering and field review.
Late this year or early next year, Clean Line will coordinate with state regulatory bodies to host additional informational meetings and invite all stakeholders within preferred route(s) to attend.
In addition, Clean Line has advanced discussions with the U.S. Army Corps and United
States Fish and Wildlife Service concerning permits for crossings of navigable rivers along the projected route. Clean Line has also conducted briefings for FERC staff on the Project, on our proposed application to FERC for negotiated rate authority for the Rock Island Clean Line, and on plans to file that application later this year. In 2012, after receiving and evaluating public input,
Clean Line will submit preferred routes to the Board and the Illinois Commerce Commission
(“ICC”), the primary siting authorities in the respective states. Following the regulatory approvals,
Clean Line can complete the process of securing customers and finalize construction finance and land acquisition. Clean Line anticipates beginning construction in 2014 and the Project is expected to achieve commercial operation in 2016. A project timeline is shown below in Figure 8.
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Figure 8: Rock Island Clean Line Schedule
2. The project's current status in the regulatory process. Please indicate when
filings were made or are anticipated to be made with:
Table 4: Regulatory Process Timeline Agency Date Action
IUB 1st quarter 2012 Hold Board Sanctioned Informational Meetings
IUB 1st half 2012 File Franchise Application
FERC 4th quarter 2011 File for negotiated rate authority
ICC 1st half 2012 File for Certificate of Public Convenience and Necessity
Army Corps 1st quarter 2012 File for Section 10 and 404 permits
3. What is the status of the project in the regional transmission planning
process? Please indicate when requests were or will be made with:
A. MISO (Stage 1 planning, Stage 2, Stage 3, Stage 4)
Clean Line has made progress in the interconnection process for the terminals at both ends of the line. At the western end of the Project, Clean Line began discussions with MISO in February of 2010 regarding necessary studies to ensure that electric reliability is maintained. We expect that
-14- the Rock Island Clean Line will be studied in MTEP 2012 under a “no harm study.” The Project is not in an interconnection queue within MISO; therefore the stages of the MISO planning process detailed above may not be applicable to this Project. Interconnection studies that have progressed within PJM will require coordination with MISO and these discussions will ultimately lead to the
“no harm study” as discussed above.
B. PJM
In January 2010, at the eastern end of the Project, Clean Line submitted a merchant transmission interconnection request with PJM that has queue position V4-058. The feasibility study for this position is underway. In addition, Clean Line recently acquired three merchant transmission interconnection queue positions (S57, S58, and U3-026) dated from June 2007 and
October 2008 that will expedite study of the desired interconnection and have more fully developed cost estimates. Feasibility and system impact studies for these positions have been completed and facilities studies are underway. Table 5 shows the status for each of the queue positions mentioned above.
Table 5: Rock Island interconnection requests with PJM Total Project Capacity System Queue Date Feasibility Facilities Output (Firm Impact Position Filed Study Study (MW) MW) Study
S57 6/11/2007 1,500 300 Completed Completed
S58 6/11/2007 2,000 400 Completed Completed
U3-026 10/9/2008 NA* 492 Completed V4-058 1/7/2010 3,500 3,500
*U3-026 is an increase in capacity for queue position S57.
4. Whether the project has financing, with an explanation of the answer.
The majority owner of Clean Line’s parent, Clean Line Energy Partners LLC (“Clean Line
Energy Partners”), is ZAM Ventures, L.P. ("ZAM Ventures"), which is the principal investment
-15- vehicle for ZBI Ventures, L.L.C. ("ZBI Ventures"). ZBI Ventures is a subsidiary of Ziff Brothers
Investments, L.L.C. Additional equity investors in Clean Line Energy Partners include Michael
Zilkha of Houston, Texas. The initial equity investors are providing capital to enable Clean Line
Energy Partners to undertake the initial development and permitting work for its transmission line projects, including the Rock Island Clean Line. Regulatory approvals will be critical to Clean
Line’s ability to secure the additional capital to allow Clean Line to construct the Project. The initial equity investors could participate in the project financings by making debt or additional equity investments, along with new lenders, investors and/or partners.
Many successful transmission projects have followed the same model of initial equity investors funding development and a later project financing funding construction. Recent experience shows that large amounts of liquidity exist in the capital markets for transmission projects that have reached an advanced stage of development. The capital markets have a substantial history of supporting transmission projects, including merchant transmission projects, through debt and equity financings. As previously noted, a number of transmission line projects have entered into project finance arrangements to fund their construction. For example, in 2003, the
Path 15 project, an 83-mile stretch of 500 kV lines in Southern California, closed $209 million in debt financing spread across the bank and bond markets. In 2005, the Neptune Project, a ±500 kV
HVDC submarine line, raised $600 million in a private placement at a competitive spread to the
London Interbank Offered Rate (“LIBOR”). In early 2008, Trans Bay Cable LLC successfully closed an approximately $500 million transaction in the project finance market to fund a 53-mile underwater HVDC merchant transmission project. In September 2008, the TransAllegheny
Interstate Line project closed a $550 million senior secured loan, and in January 2010 the project closed an additional $800 million of financing, comprised of $350 million in floating bank debt and
$450 million in fixed coupon bonds.
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The year 2011 has seen a rise in financing activity for independent transmission projects, largely due to the Competitive Renewable Energy Zone (“CREZ”) build-out in Texas. Sharyland closed a $727 million debt financing for its CREZ project, with pricing at 200 basis points over
LIBOR, stepping up every three years. The Sharyland CREZ project also featured an approximately $300 million equity contribution from the sponsors, Hunt Power, Marubeni
Corporation, John Hancock Life Insurance, TIAA-CREF, and OPTrusts. LS Power closed its
CREZ financing of about $300 million at pricing of 225 basis points over LIBOR, stepping up every three years. In addition to the CREZ financings, in 2011, Hudson Transmission Partners successfully placed an almost $700 million debt financing for a 660 MW underwater project linking
New Jersey and New York City. Pricing on the Hudson financing is not publicly available. EIF
Group and Starwood were the equity investors in Hudson Transmission Partners.
Similar to lenders, equity investors have shown considerable enthusiasm for transmission.
Private equity funds such as ArcLight Capital Partners, EIF Group, Energy Capital Partners, and
Starwood Energy have all made substantial transmission investments and have raised funds specifically devoted to transmission and other electricity infrastructure investments.
5. Whether the project has a transmission contract, whether it is firm or non-
firm and the scale of the contract, along with any other details that may be
available.
Pursuant to Section 205 of the Federal Power Act (“FPA”), sales of transmission for the project will be regulated by the FERC. Clean Line intends to seek negotiated rate authority from
FERC under which it can sell transmission service at market driven rates. Contracts will be for long-term, firm service; however, Clean Line will offer both firm and non-firm transmission service and facilitate a secondary market. We believe we will secure the most efficient commercial
-17- arrangements by having key permits in place before transmission service agreements are signed. It is difficult to provide cost and schedule certainty until major approvals are obtained.
6. The current projected impacts of the proposed project.
A. For Ratepayers, including:
Reduced congestion and energy costs, shown as dollars per year for specific customer classes. Congestion and constraint relief, comment on MISO’s analysis. Effect on reliability (for example, reduced loop flows). Explain.
The current plan for the Rock Island Clean Line is for renewable energy projects to interconnect radially to the converter station in northwest Iowa. That is, newly developed renewable projects will build connections to the Rock Island Clean Line substation without interconnecting to the existing Iowa grid. This will have the effect of allowing additional renewable power development within the state of Iowa without necessitating additional transmission infrastructure to interconnect these new projects to the existing, northwest Iowa grid. The Rock
Island Clean Line will allow Iowa to maintain its leadership role in renewable power by providing the equivalent of a pipeline to export the wind power to markets with a demand for cheap, renewable power.
One variation to the baseline business plan is that some projects interconnected to the existing Iowa grid, which are either under development or currently constrained due to lack of transmission capacity to the east, can procure transmission service to the Rock Island substation in order to export the power. This would have the effect of creating a load on the Iowa grid in a location that is predominantly a generation source. This would have the impact of potentially providing counterflow on some of the 345 kV lines that are generally fully subscribed in the existing Iowa grid, which could potentially reduce congestion and be a reliability benefit.
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Clean Line expects flows along the Rock Island Clean Line generally to be west-to-east as it picks up renewable power from Iowa and delivers that power to the east. The nature of an HVDC line, however, allows flows to reverse as desired. This being the case, Rock Island could support power flows into Iowa should the local and regional grid operators require such support due to system conditions. Another inherent benefit of the Project is the fact that the line will span two market footprints that have different supply mixes and levels of capacity margin. Rock Island, in essence, provides optional capacity benefit margin (“CBM”) to Iowa customers, which could potentially lower the amount of CBM that is reserved on the existing Iowa grid for capacity emergencies and decrease the likelihood of loss of load.
B. For Landowners, including:
Projected easement revenues, if available
Pursuant to Iowa law, Clean Line cannot discuss the specifics of projected easement revenues for landowners before we coordinate informational meetings with the Board. At a high level, we believe that the total aforementioned revenues number in the tens of millions of dollars.
C. For State or County Residents, including
Income taxes [any income tax effects?]
Clean Line will pay all taxes in compliance with state and federal law.
Property taxes
In compliance with Iowa law, as a high voltage transmission line greater than 300 kilovolts, the Rock Island Clean Line expects to pay $7,000 per mile per year to the appropriate taxing districts through the replacement tax.
D. For Generation Developers and Other Shippers, including:
(1) Wind generation that could be served.
(a) How many MW?
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Although the capacity of the transmission line at the delivery end in Grundy County,
Illinois, will be 3,500 MW, Clean Line expects that total delivered costs can be minimized by gathering power from a total wind nameplate capacity in the 4,200 to 4,400 MW range. This optimization includes anticipated load losses and some level of “overbuilding” of wind projects to fill the line (because wind is a variable resource and because those resources will vary somewhat independently of each other, total transmission costs can be minimized by some sharing of capacity amongst the various customers of the line, assuming that the costs of some level of curtailment would be more than offset by the benefit of some shared access).
(b) Anticipated rate stated in dollars per MW and/or dollars per MWh?
Because the Rock Island Clean Line is an interstate line, the FERC will have oversight over the terms and conditions of service and the rates charged and will have a role in ensuring that the
Project's transmission lines are operated on an open access, non-discriminatory basis. We anticipate that the transmission tariff will be between $6.00 and $8.00 per kilowatt-month, which is approximately $15 to $20 per MWh.
(2) Other generation that could be served. (Please list):
(a) How many MW?
While Clean Line plans to fill the Rock Island Clean Line with wind generation, Rock Island
Clean Line’s rates, terms, and conditions will be subject to regulation by the FERC. For more information, please see answer to Question 6.D(2)(b) below.
(b) Anticipated rate stated in dollars per MW and/or dollars per MWh?
As stated in Question 6.D(1)(b) above, FERC will have oversight over the rates charged and will have a role in ensuring that the Project’s transmission lines are operated on an open access, non-discriminatory basis. Clean Line plans to request from the FERC the authority to allocate a portion of the capacity on the line to anchor tenants, and to subscribe the remaining capacity
-20- through an open-season process that will include weighting criteria giving a higher priority in the initial allocation of capacity for renewable energy resources. However, during the open season process, it is unlikely that the transmission tariff for any other generation on the Rock Island Clean
Line will differ from that offered to wind generation.
That being said, Clean Line Energy Partners was founded specifically with the mission of connecting the best renewable resources in the country with communities that need the power.
Clean Line’s purpose is to bring more clean energy onto the grid and to reduce pollution in our environment. The western terminus of the Project has been sited specifically to maximize the best available wind resources. By placing the western converter in the midst of wind-rich northwestern
Iowa, clean wind-generation will have a geographical advantage over other generation types.
Recently, the FERC has signaled its openness to consider non-traditional models for transmission projects. In particular, the FERC has demonstrated its understanding that the traditional rate-based transmission model for incumbent utilities is not sufficient to bring about the interstate and interregional projects needed to integrate more renewable energy into the nation’s generation mix. While the open season requirement seeks “to provide a non-discriminatory, fair and transparent means of allocating transmission capacity,” in the past, the FERC has recognized other methods may be appropriate to allocate transmission capacity and is “willing to consider options other than open season for the initial allocation of transmission rights.”1 The FERC’s policy and precedent thus demonstrates considerable flexibility in how a transmission developer can effectuate the ultimate goals of the FERC’s open season requirement.
1 Conjunction LLC, 108 FERC ¶ 61,090 at PP 12, 14 (2004) (“Conjunction”); see also Neptune Regional Transmission System, LLC, 103 FERC ¶ 61,213 at P 18 (2009) (noting that the Commission “is willing to consider other options to assist merchant transmission providers in exploring innovative methods for adding transmission to the power grid and for securing the financing needed for such projects”).
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7. How much right of way will be required in Iowa? (Length (miles) and width,
area for substations and converters, etc.)?
Clean Line is currently securing the land in Iowa where the western converter station will be located. The general land requirements for the western converter station include 45-65 fenced acres, relative proximity to existing transmission for voltage support, and surrounding land use consistent with additional new AC radial lines leading into the facility. For the transmission line itself, Clean Line expects to acquire easements of approximately 145 to 200 feet wide (depending on engineering needs) from landowners along the approximately 500-mile route of the Rock Island
Clean Line.
8. Other impacts? (Please specify).
A. Economic Impact Study of the Proposed Rock Island Clean Line— Appendix A
Clean Line engaged professors at the University of Iowa and Illinois State University to conduct an extensive study of the economic impacts associated with the development, construction, and operation of our transmission line. The report, authored by Dr. Lon Carlson, Dr. Dave Loomis and Dr. John Solow, summarizes the estimated economic impacts of the Rock Island Clean Line, including the impacts of the construction and operation of the transmission line and the production of inputs to the line—towers, wire, real estate services—and the impacts of the construction and operation of the wind farms this transmission line would enable. The study is filed with this
Response as Appendix A.
Dr. Loomis is Professor of Economics, Director of the Center for Renewable Energy, and
Executive Director of the Institute for Regulatory Policy Studies at Illinois State University. Dr.
John Solow is an Associate Professor of Economics at the Tippie College of Business at the
University of Iowa. Dr. Lon Carlson is an independent consultant recently retired as an Associate
-22-
Professor in the Department of Economics at Illinois State University and Director of Outreach for the Institute of Regulatory Policy Studies.
B. Study of the Benefits of Delivering Mid-West Wind Energy to the PJM Market—Appendix B
Renewable energy generation decreases emissions and water consumption because polluting plants can be run less often and at lower output levels. Because thermal plants require a large amount of water to cool and power steam turbines, running thermal plants at lower levels saves a tremendous amount of water. Clean Line engaged Ventyx to estimate the emissions and water use reductions that will result from our transmission line and the renewable energy projects it will make possible. The study is filed with this Response as Appendix B.
9. What are the currently projected costs of the project?
A. Capital Cost
The current anticipated capital cost of the Project is $1.7 billion. The exact cost, along with estimates of annual costs will evolve with commodity prices, design work, and technical studies.
B. Annual Cost, including:
(1) Recovery of Capital Costs:
Later this year, Clean Line plans to file at FERC for negotiated rate authority for the Rock
Island Clean Line. Rates for transmission service will be negotiated with transmission customers.
(2) What depreciation life is assumed and salvage cost
Clean Line expects a 40-year useful life for the Project.
(3) Recovery of Annual Cost
As indicated above, Clean Line will recover its annual costs through negotiated rates and transmission service contracts.
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(4) Operating and Maintenance Costs
Operating and maintenance costs will evolve with the completion design work, and technical studies.
(5) Other Costs (Please specify)
10. Reliability and operational impacts, including:
A. Contingency Readiness
As described above in response to Question 3 above, Clean Line is coordinating efforts with
PJM and MISO to understand and prepare for contingencies on the Rock Island Clean Line— including but not limited to the evaluation of the loss of a pole(s) and operation with one pole at reduced capacity. PJM schedules reserves on a day-ahead basis in order to ensure that differences in forecasted load and that forced generator outages do not negatively impact the reliable operation of the PJM transmission system. PJM also operates in real-time to ensure that all reserve requirements are maintained. Current NERC Planning Standards consider the loss of a pole as an
N-1 contingency. At full-load, and accounting for a 10% long-term overload capability in the remaining pole, the loss of a pole would be approximately a 1,575 MW contingency (note that the line would be at full load fewer than 120 hours per year). The PJM interconnection study process and the MISO “no harm study” will include studying a pole and possibly bi-pole outages. If there are issues identified on the system, Clean Line would work with MISO and PJM to institute appropriate mitigation. Clean Line has and will continue to work with Siemens, a global leader in
HVDC transmission technology, to provide the necessary technological solutions for the contingencies identified in the PJM and MISO planning processes. Ultimately, Clean Line expects to hand functional control of the Project over to either PJM or MISO.
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B. Voltage, Frequency and Reactive Power support (explain in detail; Annual
cost is to be borne by which entities?
Rock Island will have reactive power needs fulfilled by the filters and any ancillary equipment that may be necessary to support the AC-to-DC conversion process. Studies will be conducted in the coming months in order to fully understand impacts to the existing AC grid due to contingency conditions of the Rock Island line (loss of a HVDC pole, for instance). One of these studies has been labeled a “no harm study” by MISO staff and such study will be scoped over the next several months. There will be system studies that are preformed from both a reliability perspective and a design perspective such that the system will function reliably and within all applicable standards and criteria. As a practical matter, no utility or RTO will execute a transmission interconnection agreement without a plan for addressing all reliability concerns.
11. Transmission Facility costs not recovered from transmission customers,
stated in dollars per year, to be recovered from which entities?
At the present time, due to unique characteristics of HVDC projects, and the ill-defined cost recovery mechanisms in existing RTOs for such projects, our current business plan envisions that we will recover our costs from our transmission customers, i.e., the generators and load serving entities that purchase capacity on the Rock Island Clean Line. As a transmission utility, Clean Line will not seek to be a load serving entity in Iowa and will not seek to serve any retail customers in
Iowa and therefore will not qualify for retail rates.
Clean Line plans to operate solely as a Transmission Owner, and, as noted above in response to Question 3, Clean Line will select one of the RTOs with which it will interconnect to be its designated Transmission Provider, as defined by FERC. Under this regulatory structure, as enunciated in Section 205 of the FPA, 16 U.S.C. § 824d, and Part 35 of the regulations of the FERC
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2 will proceed through the regional planning mechanisms for cost allocation. If Clean Line seeks recovery of its costs through the negotiated sale of capacity on the line, Clean Line will recover costs from transmission customers. If Clean Line seeks recovery of its costs through a given cost recovery mechanism, Clean Line will recover costs from the users of the transmission system as defined by the specific cost allocation mechanism.
CONCLUSION
Clean Line Energy Partners, LLC appreciates the Board’s interest in the subject matter of is inquiry. We will be pleased to respond to any additional questions the Board might have once it reviews these comments.
Respectfully submitted,
CLEAN LINE ENERGY PARTNERS, LLC.
By: /s/ Kathryn L. Patton Kathryn L. Patton Vice President & General Counsel Clean Line Energy Partners LLC 1001 McKinney, Suite 700 Houston, Texas 77052 Telephone: (832) 319-6330 Telefax: (832) 310-6311 E-mail: [email protected]
2 FERC Order No. 1000 requires all jurisdictional transmission providers to file compliance plans for regional and inter-regional cost allocation within 12 and 18 months of the effective date of the Order, respectively.
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BELIN MCCORMICK, P.C.
By: /s/ Sheila K. Tipton Sheila K. Tipton 666 Walnut Street, Suite 2000 Des Moines, Iowa 50309 Telephone: (515) 283-4635 Telefax: (515) 558-0635 E-mail: [email protected]
ATTORNEYS FOR CLEAN LINE ENERGY PARTNERS, LLC
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