Clean Line Energy Partners was back in Hannibal, Missouri, last week, where "Development Director" Mark Lawlor continued his desperate courtship of the Hannibal Board of Public Works.
The goal of the evening was an "agreement that would commit the BPW to nothing accept [sic] 'being a good witness' in front of the PSC and being willing to work toward a final arrangement."
The goal of the evening was an "agreement that would commit the BPW to nothing accept [sic] 'being a good witness' in front of the PSC and being willing to work toward a final arrangement."
This wasn't about cheaper energy for Hannibal, it was about Clean Line using Hannibal as a witness at the PSC. What are the qualities of a "good" witness, I wonder? Does a "good" witness represent the interests of the citizens of Hannibal, or does a "good" witness represent the interests of Clean Line?
Clean Line made several presentations to Hannibal. One of the presentations cooked up by Clean Line was a table showing "wind options" for Hannibal. The table compared 4 wind power purchase agreements with Clean Line's Grain Belt Express project and came to the conclusion that GBE was the cheapest "wind option" for Hannibal. But, how does the information in this table compare with previous claims made by Clean Line?
The first project in the table is an "unnamed" Westar wind project located in Kansas, part of the Southwest Power Pool (SPP) transmission region. The energy was priced at $22.70/MWh, but transmission costs to move it through the SPP region into the neighboring MidContinent Independent System Operator (MISO) transmission region to deliver it to Hannibal were pegged at $10/MWh, bringing the total cost of the Westar option in at $32.70/MWh.
The second option was Apex Clean Energy Ford Ridge project located in Illinois, part of the MISO transmission region. Price for the generation was quoted around $40/MWh. Because the wind project in Illinois and Hannibal are both located within the MISO region, the transmission cost is estimated at only $2-4/MWh, much less than paying transmission through two transmission regions. This brought Apex's total in somewhere in the mid $40s/MWh.
The third option was EDF Red Pine located in Minnesota, also part of the MISO region. The energy price was quoted in the mid $30s/MWh, with transmission costs at $4-6/MWh. EDF's total was quoted at "High $30s/MWh."
The fourth option presented was an Iberdrola project located in Iowa, also in MISO. The energy cost was quoted at $30-33/MWh, with transmission costs of $2-4/MWh. When Clean Line added up this option, they used their highest estimates, instead of the lowest, or even splitting the difference with an average, to come up with a price in the "high $30s"/MWh. However, using the lowest costs presented here, Iberdrola could come in at $32/MWh, not the $37/MWh quoted by Clean Line.
Apparently that high quote was necessary because Clean Line's estimate of its Grain Belt Express project came in at a remarkable $30-34/MWh. Using the lowest Iberdrola figures would have made it competitive with Clean Line's quote.
Let's look at Clean Line's quote for using its Grain Belt Express as a wind option for Hannibal. While the other 4 options were 20-year power purchase agreements with actual wind generators at a set price, Clean Line's option includes only the transmission price and locks Hannibal into a contract to purchase that amount of capacity for the life of the Grain Belt Express project. A typical transmission line has a life of 40-50 years.
Clean Line's presentation included a line about whether the quoted project is eligible for the federal production tax credit. Clean Line claims its project is eligible for the credit. That's just not true. The production tax credit is available for generators, not transmission lines. There is no guarantee that any future wind farms that may use the Grain Belt Express would be eligible for the credit. While existing wind generators are most likely taking advantage of the $23.00/MWh credit, recent action by Congress to phase out the credit lowers it beginning in January, 2017:
Clean Line made several presentations to Hannibal. One of the presentations cooked up by Clean Line was a table showing "wind options" for Hannibal. The table compared 4 wind power purchase agreements with Clean Line's Grain Belt Express project and came to the conclusion that GBE was the cheapest "wind option" for Hannibal. But, how does the information in this table compare with previous claims made by Clean Line?
The first project in the table is an "unnamed" Westar wind project located in Kansas, part of the Southwest Power Pool (SPP) transmission region. The energy was priced at $22.70/MWh, but transmission costs to move it through the SPP region into the neighboring MidContinent Independent System Operator (MISO) transmission region to deliver it to Hannibal were pegged at $10/MWh, bringing the total cost of the Westar option in at $32.70/MWh.
The second option was Apex Clean Energy Ford Ridge project located in Illinois, part of the MISO transmission region. Price for the generation was quoted around $40/MWh. Because the wind project in Illinois and Hannibal are both located within the MISO region, the transmission cost is estimated at only $2-4/MWh, much less than paying transmission through two transmission regions. This brought Apex's total in somewhere in the mid $40s/MWh.
The third option was EDF Red Pine located in Minnesota, also part of the MISO region. The energy price was quoted in the mid $30s/MWh, with transmission costs at $4-6/MWh. EDF's total was quoted at "High $30s/MWh."
The fourth option presented was an Iberdrola project located in Iowa, also in MISO. The energy cost was quoted at $30-33/MWh, with transmission costs of $2-4/MWh. When Clean Line added up this option, they used their highest estimates, instead of the lowest, or even splitting the difference with an average, to come up with a price in the "high $30s"/MWh. However, using the lowest costs presented here, Iberdrola could come in at $32/MWh, not the $37/MWh quoted by Clean Line.
Apparently that high quote was necessary because Clean Line's estimate of its Grain Belt Express project came in at a remarkable $30-34/MWh. Using the lowest Iberdrola figures would have made it competitive with Clean Line's quote.
Let's look at Clean Line's quote for using its Grain Belt Express as a wind option for Hannibal. While the other 4 options were 20-year power purchase agreements with actual wind generators at a set price, Clean Line's option includes only the transmission price and locks Hannibal into a contract to purchase that amount of capacity for the life of the Grain Belt Express project. A typical transmission line has a life of 40-50 years.
Clean Line's presentation included a line about whether the quoted project is eligible for the federal production tax credit. Clean Line claims its project is eligible for the credit. That's just not true. The production tax credit is available for generators, not transmission lines. There is no guarantee that any future wind farms that may use the Grain Belt Express would be eligible for the credit. While existing wind generators are most likely taking advantage of the $23.00/MWh credit, recent action by Congress to phase out the credit lowers it beginning in January, 2017:
For wind facilities commencing construction in 2017, the PTC amount is reduced by 20%
For wind facilities commencing construction in 2018, the PTC amount is reduced by 40%
For wind facilities commencing construction in 2019, the PTC amount is reduced by 60%
It's doubtful that any wind farms will be built to provide energy for Grain Belt Express before the PTC starts being reduced. The current $23.00/MWh credit is going to be cut by 60% before Clean Line's proposed in-service date of 2019. Without the sweet taxpayer subsidy provided by the PTC, wind farm operators will have to add the additional subsidy cost onto their energy price. Clean Line's quoted energy price doesn't reflect this reality.
And while Clean Line told Hannibal that it was not receiving any government subsidies, the quoted energy price included the production tax credit, which is a 10-year taxpayer-funded subsidy for wind generators.
The Grain Belt Express energy prices of $20-24/MWh quoted by Clean Line are in line with Westar's Kansas project, however Clean Line cannot guarantee or write a contract for those energy prices. Clean Line can only sell transmission capacity, not energy. Hannibal would be on its own to negotiate energy prices with any future wind farms that might connect with Clean Line's future Grain Belt project. And Hannibal would be locked in to receiving its energy from Kansas via Grain Belt Express for 40-50 years, no matter what cheaper options may become available in the future.
Clean Line claims the transmission cost for Grain Belt Express will be approximately $10/MWh, bringing the total cost of the Grain Belt Express option in at $30-34/MWh. Except that can't be right.
In 2014, Lawlor told Midwest Energy News the price of energy delivered by Grain Belt Express was between $40 and $45/MWh.
And while Clean Line told Hannibal that it was not receiving any government subsidies, the quoted energy price included the production tax credit, which is a 10-year taxpayer-funded subsidy for wind generators.
The Grain Belt Express energy prices of $20-24/MWh quoted by Clean Line are in line with Westar's Kansas project, however Clean Line cannot guarantee or write a contract for those energy prices. Clean Line can only sell transmission capacity, not energy. Hannibal would be on its own to negotiate energy prices with any future wind farms that might connect with Clean Line's future Grain Belt project. And Hannibal would be locked in to receiving its energy from Kansas via Grain Belt Express for 40-50 years, no matter what cheaper options may become available in the future.
Clean Line claims the transmission cost for Grain Belt Express will be approximately $10/MWh, bringing the total cost of the Grain Belt Express option in at $30-34/MWh. Except that can't be right.
In 2014, Lawlor told Midwest Energy News the price of energy delivered by Grain Belt Express was between $40 and $45/MWh.
Lawlor said the line can at current prices deliver wind energy to Missouri at between 4 and 4.5 cents per kilowatt-hour.
(Editorial note: 1,000 kWh = 1 MWh, however I am presenting these quoted figures in MWh for uniformity).
And also in 2014 Grain Belt Express witness David Berry, Clean Line's Executive Vice President of Strategy and Finance, told the Missouri Public Service Commission in his sworn testimony that it would cost $15 to $20/MWh to transmit energy via Grain Belt Express.
And also in 2014 Grain Belt Express witness David Berry, Clean Line's Executive Vice President of Strategy and Finance, told the Missouri Public Service Commission in his sworn testimony that it would cost $15 to $20/MWh to transmit energy via Grain Belt Express.
The cost of delivered energy is equal to the cost to generate wind energy in western Kansas (2.0-2.5 cents) plus the cost to move power on the Grain Belt Express Project, which we estimate at 1.5-2.0 cents per kWh.
In 2013, Clean Line told MISO that its transmission costs for the Clean Line projects were $20 to $25/MWh.
Even when a transmission charge of $20/MWh to $25/MWh (based on Clean Line estimates for a 500 mile to 700 mile HVDC facility) is included, the delivered cost of heartland-region wind would be below both in-state wind and in-state solar PV price estimates in the Eastern U.S.
So what happens when we substitute these previously quoted transmission figures for the transmission figure in Clean Line's "Wind Options" chart? Grain Belt Express' cost balloons to $45 to $49/MWh, the highest priced "Wind Option" on the chart!
We all know that estimates can vary, but how is it that Clean Line's estimated transmission costs keep getting cheaper and cheaper over time? It's still the same project. It's still got the same price tag. Clean Line is still promising to use the same "local" vendors to supply parts and labor. Where is Clean Line planning to cut costs?
Clean Line's falling prices also overlook increased project costs over the years. Time is money on a project like Clean Line. As a start up with no functioning product, Clean Line has no revenue. Early time estimates by Clean Line had the projects going on-line by now. However, due to overwhelming opposition and permitting issues, Clean Line is years behind schedule in generating revenue. Each year the company operates without revenue adds to the final cost of its product. Each permitting hurdle costs more money. Clean Line's first application for a permit in Missouri likely cost several million dollars. A second application will double that cost. Every penny that Clean Line spends on unforeseen development costs must get added to the ultimate cost of its product. Clean Line's $10/MWh transmission cost could be completely cooked in order to make it appear that Grain Belt Express is the cheapest option for Hannibal.
And if Clean Line fudged its own numbers, how much liberty did it take with the numbers from the other projects it included in its "Wind Options" table? The quoted prices from the other wind options have no validity unless quoted by the companies that own them. Hopefully Hannibal will request proposals from all these companies before committing to "being a good witness" for Clean Line at the MO PSC.
Is this how Hannibal purchases the cheapest energy for its ratepayers? By receiving quotes from one company that takes the liberty of quoting for other companies in order to make its own quote the cheapest?
Going back to the "Wind Options" table, take a look at the transmission prices across the board. Clean Line's cost is one of the highest. Why is that? Because all the other transmission prices quoted use existing transmission that is paid for by all ratepayers in the region. The MISO region includes 42 million ratepayers. In contrast, Grain Belt Express will be paid for only by the users of this particular transmission line, a much, much smaller population. Spreading costs over a larger population results in cheaper pricing. Grain Belt's customer base is limited by the size of its project -- it can only sell a fixed amount of capacity. Therefore, Grain Belt's costs can do nothing but go up. Grain Belt's transmission cost is so high because it is user-financed by a smaller group of consumers.
Clean Line's "Wind Options" presentation begs the question: Is Clean Line even needed? Clean Line seemed to have no trouble presenting four other options for "cheap" wind energy for Hannibal to be delivered via existing transmission lines planned and operated by a regional transmission organization. How can we believe that "cheap" wind can't be delivered without building an expensive Clean Line? This presentation demonstrates that it can.
Regional transmission organizations exist to plan and manage electrical supply in their own regions. Each transmission organization has a robust planning process that orders new transmission to be built when it's needed, whether for reliability, economic, or public policy purposes. Clean Line is not part of this process, but is completely superfluous. No transmission organization has ordered Clean Line to be built for any purpose. Clean Line is simply a venture capitalist attempt to build an extraneous transmission line in order to make money moving power between regional transmission organizations.
Hannibal simply must do its due diligence before committing its ratepayers to 50 years of higher energy prices, or selling itself out as "a good witness" for billionaires hoping to increase their wealth building nonessential transmission lines.
We all know that estimates can vary, but how is it that Clean Line's estimated transmission costs keep getting cheaper and cheaper over time? It's still the same project. It's still got the same price tag. Clean Line is still promising to use the same "local" vendors to supply parts and labor. Where is Clean Line planning to cut costs?
Clean Line's falling prices also overlook increased project costs over the years. Time is money on a project like Clean Line. As a start up with no functioning product, Clean Line has no revenue. Early time estimates by Clean Line had the projects going on-line by now. However, due to overwhelming opposition and permitting issues, Clean Line is years behind schedule in generating revenue. Each year the company operates without revenue adds to the final cost of its product. Each permitting hurdle costs more money. Clean Line's first application for a permit in Missouri likely cost several million dollars. A second application will double that cost. Every penny that Clean Line spends on unforeseen development costs must get added to the ultimate cost of its product. Clean Line's $10/MWh transmission cost could be completely cooked in order to make it appear that Grain Belt Express is the cheapest option for Hannibal.
And if Clean Line fudged its own numbers, how much liberty did it take with the numbers from the other projects it included in its "Wind Options" table? The quoted prices from the other wind options have no validity unless quoted by the companies that own them. Hopefully Hannibal will request proposals from all these companies before committing to "being a good witness" for Clean Line at the MO PSC.
Is this how Hannibal purchases the cheapest energy for its ratepayers? By receiving quotes from one company that takes the liberty of quoting for other companies in order to make its own quote the cheapest?
Going back to the "Wind Options" table, take a look at the transmission prices across the board. Clean Line's cost is one of the highest. Why is that? Because all the other transmission prices quoted use existing transmission that is paid for by all ratepayers in the region. The MISO region includes 42 million ratepayers. In contrast, Grain Belt Express will be paid for only by the users of this particular transmission line, a much, much smaller population. Spreading costs over a larger population results in cheaper pricing. Grain Belt's customer base is limited by the size of its project -- it can only sell a fixed amount of capacity. Therefore, Grain Belt's costs can do nothing but go up. Grain Belt's transmission cost is so high because it is user-financed by a smaller group of consumers.
Clean Line's "Wind Options" presentation begs the question: Is Clean Line even needed? Clean Line seemed to have no trouble presenting four other options for "cheap" wind energy for Hannibal to be delivered via existing transmission lines planned and operated by a regional transmission organization. How can we believe that "cheap" wind can't be delivered without building an expensive Clean Line? This presentation demonstrates that it can.
Regional transmission organizations exist to plan and manage electrical supply in their own regions. Each transmission organization has a robust planning process that orders new transmission to be built when it's needed, whether for reliability, economic, or public policy purposes. Clean Line is not part of this process, but is completely superfluous. No transmission organization has ordered Clean Line to be built for any purpose. Clean Line is simply a venture capitalist attempt to build an extraneous transmission line in order to make money moving power between regional transmission organizations.
Hannibal simply must do its due diligence before committing its ratepayers to 50 years of higher energy prices, or selling itself out as "a good witness" for billionaires hoping to increase their wealth building nonessential transmission lines.
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