Grid congestion in the Midcontinent Independent System Operator (MISO) region has caused developers to cancel wind and solar projects. Wind and solar developers want ratepayers to pay for the transmission costs to relieve the congestion they are causing on the system. Some 245 renewable energy projects that had reached advanced stages of development were withdrawn between January 2016 and July 2020. According to developers, congestion and related grid upgrade costs were the main reasons for the cancellations, especially in the western region of MISO.
The 245 advanced projects represented 40 percent of the projects in MISO’s queue at that time. Projects withdrawn were concentrated in Minnesota, southern Wisconsin, southern Michigan, and in Michigan’s Upper Peninsula. Michigan and Minnesota saw the most withdrawals, representing about 5,000 megawatts in each state.
Power generators usually pay for the interconnection lines needed to get their power to the grid. But as the long-distance, high-voltage interstate power lines are too congested to serve new projects, expensive upgrades are needed on these lines. According to renewable developers, because these upgrades benefit other parties across multiple states, the costs should be passed on to a wider range of stakeholders, including ratepayers. In essence, they want subsidies for connecting their technologies to the grid—technologies that are already subsidized and mandated by governments.
When traditional technologies (coal, natural gas, nuclear) are constructed, they are sited close to load (customers), but renewable resources need to be sited where the resource is best and that is often in difficult to reach locations, requiring additional transmission lines and upgrades to the system. MISO calculated the need for about $3.4 billion in transmission upgrades for 27 projects submitted into MISO’s February 2017 west interconnection, representing 3,421 megawatts. That cost translates to about $1 million per megawatt to interconnect, or almost the cost of building the renewable technology. All but two of these 27 projects were canceled because the grid connection costs made the renewable project unprofitable, even with subsidies and mandates.
A March 2020 study by MISO showed that 60 proposed projects representing 9 gigawatts of wind would require upgrades costing over $1 billion. Prior to 2009, upgrade costs were split evenly between generators and customers. Today, generators pay 100 percent of the costs, unless the upgrades are above 345 kilovolts, in which case generators pay 90 percent.
MISO’s project queue currently consists of 50,000 megawatts of solar, wind, storage and hybrid projects that will need interconnection and upgrades, and 4,452 megawatts of natural gas projects that can be sited near load.
MISO’s Congested Network
In parts of Minnesota and Michigan where high numbers of projects were withdrawn, there are already 10,000 megawatts or more of power on the lines above what is considered ideal by the system operator. Most of Iowa, Michigan, and Wisconsin and central Illinois and Indiana are above the threshold. Congestion is also bad in MISO’s southern areas including Missouri, Arkansas, Louisiana, Mississippi and a part of Texas. Only MISO’s eastern side, including Virginia, West Virginia and the Carolinas, can add thousands of megawatts before becoming congested.
Over 20,000 megawatts of wind and over 21,000 megawatts of solar were withdrawn, along with battery storage projects. In addition to withdrawals, many proposed projects were canceled because of concerns about grid constraints. Due to the congestion, wind projects are being moved to areas with weaker wind resources but more grid capacity, making investments less cost-effective. Therefore, higher quality renewables may not be built because there is not enough room on the grid to locate solar or wind resources where conditions are best.
EDP Renewables recently withdrew a planned 100-megawatt wind farm in southwestern Minnesota from the queue for connection to the grid because the utility would have to pay $80 million for grid upgrades after paying for site control, local permits, and other development costs. The company, which was negotiating a power purchase agreement, had estimated the work would cost about $10 million and had to cancel the project due to the higher cost. Developer Invenergy has also withdrawn projects because of congestion on the MISO grid, after spending millions on the earlier stages of the process.
Transmission Costs are Massive
According to the Energy Information Administration, it costs about $1.3 million per megawatt to install wind turbines. This means a 100 megawatt facility would cost about $130 million. The additional transmission costs of $80 million are over 60 percent of the cost of building the wind turbines. State mandates push developers to build renewable units regardless of costs, and despite massive federal, state, and local subsidies that renewable developers receive, they want to make customers pay for the transmission expenses, instead of paying for them from revenues.
Minnesotans have spent over $15 billion on wind turbines, solar panels, and transmission lines, and electricity prices have increased nearly 30 percent above the national average since 2005 as a result. Wind and solar developers now want Minnesota families to pay to build transmission for renewable energy sources that do not produce power when the sun does not shine and the wind does not blow. As an example, Minnesota’s solar plants only achieved 5.6 percent of stated output in December of 2018. Consumers (and taxpayers) who pay for power expect more than 5.6 percent of the power promised to be delivered. And, as more renewable energy gets built, the facilities will need to be located further from load centers and require more in transmission expenses that are not currently counted as part of the cost to the system. It is instructive that renewable developers want consumers to saddle the costs of their projects to connect to the grid.
Biden wants this expanded across the country as his “clean energy standard” requires non-carbon electricity by 2035 throughout the United States, a full 10 years earlier than the California standard which has that goal for 2045. As noted by Minnesotans’ experience, the standard will increase electricity prices because perfectly good coal and natural gas generating technologies will need to be prematurely retired to meet the goal. That is equivalent to dismantling your home and building a new one just to meet a standard that the government has imposed upon you. Not many Americans could afford to do so, but Biden will force those changes as he implements his standard.
Conclusion
Biden’s “clean energy standard” will cost consumers much more for electricity, as Minnesotans and Californians have found with their plans. It is clear that renewable developers have not factored in the true cost of the transmission upgrades needed when a massive amount of wind and solar power need to be added to the grid—frequently located away from load centers (customers) as good wind and solar resources need to be located where the wind and sun are bested situated to be most effective. This is a very expensive proposition which calls for the overhauling of the electrical grid as well as the replacement of the chief sources of electrical generation. Even California, which has been moving slower than Biden’s plan, is experiencing problems of increased costs and unreliability.
