Clean Line has been "developing" its numerous transmission projects for 7 years now. Seven years! And not one of the projects is approved and ready for prime time.
As a "merchant" transmission company, Clean Line has no captive customers from which to collect its costs. Clean Line must shoulder all financial risk of its own projects. Unlike other transmission projects ordered by regional planning authorities that collect their costs from regional ratepayers, Clean Line may only collect its costs from customers who sign contracts to use its project capacity through negotiated rates. This means that even if Clean Line gets a project approved, it still must find customers to financially support its construction and operation.
Initially, Clean Line's business plan depended on big utilities to sign contracts to use its capacity. In the past, Clean Line made much of a Memorandum of Understanding it signed with government power marketing authority Tennessee Valley Authority. Clean Line liked to pretend this MOU meant TVA was a confirmed customer. However, the MOU simply indicated that TVA might be interested in using the project in the future. It was not a contract. But it was an indication that Clean Line was depending on large utilities in "states farther east" to buy huge chunks, or the entire amount, of its capacity.
As a "merchant" transmission company, Clean Line has no captive customers from which to collect its costs. Clean Line must shoulder all financial risk of its own projects. Unlike other transmission projects ordered by regional planning authorities that collect their costs from regional ratepayers, Clean Line may only collect its costs from customers who sign contracts to use its project capacity through negotiated rates. This means that even if Clean Line gets a project approved, it still must find customers to financially support its construction and operation.
Initially, Clean Line's business plan depended on big utilities to sign contracts to use its capacity. In the past, Clean Line made much of a Memorandum of Understanding it signed with government power marketing authority Tennessee Valley Authority. Clean Line liked to pretend this MOU meant TVA was a confirmed customer. However, the MOU simply indicated that TVA might be interested in using the project in the future. It was not a contract. But it was an indication that Clean Line was depending on large utilities in "states farther east" to buy huge chunks, or the entire amount, of its capacity.
"We think we can provide green power at an attractive, fixed-rate price for TVA and other utilities in the region," said Jimmy Glotfelty, executive vice president for Clean Line Energy.
Clean Line's initial efforts to secure customers focused on big utilities.
But when TVA studied the Clean Line proposal in its Integrated Resource Plan, it found it did not need Clean Line's transmission capacity to provide its customers with the most economic and reliable energy in the immediate future. And Clean Line stopped talking about the TVA. In addition, no other big eastern utilities signed up or showed much interest in the capacity Clean Line is selling.
Next, Clean Line advertised two of its projects in an "Open Season" in order to find potential customers with which to negotiate rates. All interest in its projects came from wind generation companies in Midwestern states at the source ends of the lines.
Clean Line's secondary efforts to secure customers focused on wind generators.
But none of these wind generators had customers to buy the power they generated, therefore, they could not sign contracts for Clean Line capacity. The wind generators were speculative -- as yet unbuilt -- and the generators need customers to raise money to build their projects. However, no user utilities showed interest in buying generation from non-existent generators. How do you price something like that? How do you set delivery amounts and dates? It's a fungible commodity. Depending on generators to buy its capacity, Clean Line stands at one end of a string of dominoes that may or may not topple in line. Too much uncertainty and too much risk for utilities, who can instead purchase a known quantity of renewable generation, at a set price, with a set delivery date, from an existing generator and shipped via existing transmission lines. The price just isn't that good to take on Clean Line's kind of risk, if it's even possible to sign a contract to purchase energy from a non-existent generator delivered via a non-existent transmission line that may or may not ever be built.
Clean Line is not an energy generator. It can't sell energy. It is only the extension cord proposed to bring future generation to customers at a set price. It's an extension cord that isn't plugged into anything. Buying capacity on Clean Line commits utilities to purchasing energy from future generators in a set geographic area at an unknown price. If the generators aren't built, or their generation costs are higher than anticipated, the purchaser of Clean Line capacity would be locked into purchasing energy at whatever price is offered by the generators. The generators would have market power over the captive customers to charge whatever they want. If a captive utility customer chooses not to buy energy after all, it's still on the hook to pay for the capacity on Clean Line's extension cord, whether it uses it or not.
So, we've yet to see any contracts for Clean Line's capacity from wind generators.
Clean Line's latest quest for customers focuses on municipal public power entities that provide power at cost to their own cities and towns. These are much smaller chunks of each Clean Line's 3500 MW capacity, coming in at 25 or 50 MW each. It's going to take a whole lot of municipal customers to make a Clean Line financially feasible.
But not only is Clean Line trying to sell municipalities on future energy prices it cannot guarantee, it's also "offering" the municipalities the "opportunity" to invest municipally-astounding sums of money into its project and take on the risk of losing the municipality's investment in the project in its entirety if the project is never built. Clean Line's proposals are being reviewed by municipal power employees that may not understand its merchant transmission business model and wrongly believe their investment would be "guaranteed" to produce a return, or be refunded if the project goes belly up. It just can't happen -- Clean Line has no customer base from which to produce a return on equity, and no bond in place to guarantee a refund of investment if the project doesn't pan out. In addition, the municipal contracts must be approved by city council or other elected officials who have no knowledge base about electricity or power purchases. Whatever Clean Line tells the city about its proposal could be bought hook, line and sinker, without independent expert review.
So far, Clean Line has convinced the City of Tallahassee to "buy up to 50 MW of wind power from its wind transmission project." I highly doubt that. The only thing Clean Line can sell is capacity on its proposed transmission line, not energy. If the City of Tallahassee thinks it's bought a certain amount of wind power from Clean Line, delivered on a certain date at a certain price, it needs to think again. Who knows what Tallahassee committed to do -- the actual agreement hasn't been published, and the press release was obviously less than honest.
Clean Line has also attempted to sell the City of Hannibal energy at a quoted price, or an investment in its project. The City has tabled the issue for the time being, but municipal power employees vow to come back with the plan at a later date.
Word is that Clean Line is courting numerous municipal power agencies to sign up for similar deals.
What Clean Line is doing is essentially transferring its project risk onto the backs of struggling municipalities by signing them up for capacity commitments or "investments" in its projects. If the project is never approved and built, the cities end up holding the bag.
Clean Line's whole business plan is based on transferring its corporate risk of project failure onto the backs of potential customers. First, it was big utilities. The utilities, no strangers to the power purchase game, did not become customers. Next, it was future wind generators, who would, in theory, sign up to purchase capacity which they would wrap into their delivered price of energy. That didn't pan out because the generators had no customers upon whom to transfer the risk. Now it's municipalities, who struggle to find economic and reliable energy sources for their citizens. If the big utilities and the energy generators didn't want to shoulder Clean Line's brand of risk, why would a municipality want to carry the company's water? I think it's because they don't know any better. And that makes me sad.
So, in Clean Line's honor, I'm going out this afternoon to give $20 to the first panhandler I see. Maybe he'll offer to sell me some energy at a mind blowing price!
But when TVA studied the Clean Line proposal in its Integrated Resource Plan, it found it did not need Clean Line's transmission capacity to provide its customers with the most economic and reliable energy in the immediate future. And Clean Line stopped talking about the TVA. In addition, no other big eastern utilities signed up or showed much interest in the capacity Clean Line is selling.
Next, Clean Line advertised two of its projects in an "Open Season" in order to find potential customers with which to negotiate rates. All interest in its projects came from wind generation companies in Midwestern states at the source ends of the lines.
Clean Line's secondary efforts to secure customers focused on wind generators.
But none of these wind generators had customers to buy the power they generated, therefore, they could not sign contracts for Clean Line capacity. The wind generators were speculative -- as yet unbuilt -- and the generators need customers to raise money to build their projects. However, no user utilities showed interest in buying generation from non-existent generators. How do you price something like that? How do you set delivery amounts and dates? It's a fungible commodity. Depending on generators to buy its capacity, Clean Line stands at one end of a string of dominoes that may or may not topple in line. Too much uncertainty and too much risk for utilities, who can instead purchase a known quantity of renewable generation, at a set price, with a set delivery date, from an existing generator and shipped via existing transmission lines. The price just isn't that good to take on Clean Line's kind of risk, if it's even possible to sign a contract to purchase energy from a non-existent generator delivered via a non-existent transmission line that may or may not ever be built.
Clean Line is not an energy generator. It can't sell energy. It is only the extension cord proposed to bring future generation to customers at a set price. It's an extension cord that isn't plugged into anything. Buying capacity on Clean Line commits utilities to purchasing energy from future generators in a set geographic area at an unknown price. If the generators aren't built, or their generation costs are higher than anticipated, the purchaser of Clean Line capacity would be locked into purchasing energy at whatever price is offered by the generators. The generators would have market power over the captive customers to charge whatever they want. If a captive utility customer chooses not to buy energy after all, it's still on the hook to pay for the capacity on Clean Line's extension cord, whether it uses it or not.
So, we've yet to see any contracts for Clean Line's capacity from wind generators.
Clean Line's latest quest for customers focuses on municipal public power entities that provide power at cost to their own cities and towns. These are much smaller chunks of each Clean Line's 3500 MW capacity, coming in at 25 or 50 MW each. It's going to take a whole lot of municipal customers to make a Clean Line financially feasible.
But not only is Clean Line trying to sell municipalities on future energy prices it cannot guarantee, it's also "offering" the municipalities the "opportunity" to invest municipally-astounding sums of money into its project and take on the risk of losing the municipality's investment in the project in its entirety if the project is never built. Clean Line's proposals are being reviewed by municipal power employees that may not understand its merchant transmission business model and wrongly believe their investment would be "guaranteed" to produce a return, or be refunded if the project goes belly up. It just can't happen -- Clean Line has no customer base from which to produce a return on equity, and no bond in place to guarantee a refund of investment if the project doesn't pan out. In addition, the municipal contracts must be approved by city council or other elected officials who have no knowledge base about electricity or power purchases. Whatever Clean Line tells the city about its proposal could be bought hook, line and sinker, without independent expert review.
So far, Clean Line has convinced the City of Tallahassee to "buy up to 50 MW of wind power from its wind transmission project." I highly doubt that. The only thing Clean Line can sell is capacity on its proposed transmission line, not energy. If the City of Tallahassee thinks it's bought a certain amount of wind power from Clean Line, delivered on a certain date at a certain price, it needs to think again. Who knows what Tallahassee committed to do -- the actual agreement hasn't been published, and the press release was obviously less than honest.
Clean Line has also attempted to sell the City of Hannibal energy at a quoted price, or an investment in its project. The City has tabled the issue for the time being, but municipal power employees vow to come back with the plan at a later date.
Word is that Clean Line is courting numerous municipal power agencies to sign up for similar deals.
What Clean Line is doing is essentially transferring its project risk onto the backs of struggling municipalities by signing them up for capacity commitments or "investments" in its projects. If the project is never approved and built, the cities end up holding the bag.
Clean Line's whole business plan is based on transferring its corporate risk of project failure onto the backs of potential customers. First, it was big utilities. The utilities, no strangers to the power purchase game, did not become customers. Next, it was future wind generators, who would, in theory, sign up to purchase capacity which they would wrap into their delivered price of energy. That didn't pan out because the generators had no customers upon whom to transfer the risk. Now it's municipalities, who struggle to find economic and reliable energy sources for their citizens. If the big utilities and the energy generators didn't want to shoulder Clean Line's brand of risk, why would a municipality want to carry the company's water? I think it's because they don't know any better. And that makes me sad.
So, in Clean Line's honor, I'm going out this afternoon to give $20 to the first panhandler I see. Maybe he'll offer to sell me some energy at a mind blowing price!
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