Subscriber Login

Spotlight

Enhancing Grid Connectivity in North America: Expanding power trade [free access]

May 10, 2017

The three North American countries – USA, Canada and Mexico – are working together to integrate their electricity grid networks and enhance power trade opportunities. The increasing grid integration is being driven by the clean energy commitments of the North American countries; Mexico’s transformational energy reforms in the oil, gas and electricity sectors; Canada’s string commitments and framework on green infrastructure development; and USA’s shale gas boom, which presents new opportunities for natural gas generation. Further, in 2016, USA and Canada signed a statement to collaborate on cross-border transmission projects in order to achieve the mutual goal of advancing clean and secure power. Mexico is also working closely with the North American Electric Reliability Corporation (NERC) to achieve well-interconnected, secure and stable electricity grids, as well as with the staff of the USA’s Department of Energy (DoE), the Federal Energy Regulatory Commission (FERC) and the Western Electricity Coordinating Council (WECC) to ensure consistency with other specific power trade agreements.

 

Presently, nine cross-border projects are at various stages of development in North America and are likely to go online by 2020. In addition to these, the countries are working on identifying more cross-border interconnection opportunities.

 

Regional variation in North America grid integration

The North American electricity system is heterogeneous, where operations and planning primarily take place through regional entities, and every part of the system has evolved with different characteristics and structures. Integration of the power systems of Canada, Mexico and the US has historically occurred by gradual, ad hoc and regional adjustments implemented by an array of regional, public and private stakeholders, reflecting the complex and fragmented jurisdictions in all countries.

 

Presently, the border areas of the US are connected with Canada and Mexico via various interconnections. Its Pacific Northwest, Midwest and Northeast regions are connected with Canada; while the states of Arizona, California, New Mexico and Texas have established cross-border power interconnections with Mexico. These integrations range from physical, asynchronous interconnections for emergency trade [such as Electric Reliability Council of Texas (ERCOT)–Mexico cross-border interactions], to extensive, synchronous interconnections to enable Canadian cross-border participation in the US’ competitive electricity markets.

 

US-Canada Integration

Since the early 1900s, when electricity trade between the two countries was initiated, Canada’s private hydropower generators have prioritised exports to the USA over pan-Canadian trade. The existing policy and regulatory framework governing the Canadian electric industry makes the USA a more attractive destination for power trade than undertaking inter-provincial trade in Canada. Canadian provinces have near-complete authority over their individual electricity systems with many hydropower-producing provinces (such as British Columbia and Quebec) dominated by vertically integrated utilities with regulated pricing structures. Markets with more diversified generation mixes (such as Ontario and Alberta), however, have implemented varying levels of restructuring, resulting in a system in which neighbouring provinces often host asymmetrical market structures that aren’t conducive to trade. This, along with the fact that 75 per cent of the Canadian population lives near the US border, makes investment in cross-border interconnections more attractive to investors.

 

With years of experience and efforts, the US and Canada have established a well-functioning, extensive, mature, efficient and coordinated cross-border integration system, which has led to economic and reliability benefits on both sides of the border. As a result, electricity trade between the countries has been growing since 2005. In 2015, 77 million MWh of electricity worth USD2.6 billion was traded between the US and Canada. With the notable exception of trade in the Pacific Northwest, which continues to be bidirectional, in all other regions, Canadian exports to the US have significantly overtaken power inflows to the country. Presently, the Pacific Northwest region of the US is connected with British Columbia; Midcontinent Independent System Operator (ISO) is connected with Manitoba; Ontario’s grid is integrated with New York ISO system; and Quebec’s grid is connected with the ISO New England system.

 

Electricity imports serve as a cost-effective solution for wholesale power markets in the US as well. As per the estimates of the External Market Monitor of ISO New England, importing electricity from Quebec and New Brunswick has reduced wholesale power costs for electricity consumers in New England. Similarly, a New England States Committee on Electricity study on incremental hydroelectric imports from Canada found that the average annual economic benefits associated with reduced electricity prices in New England were in the range of USD103 million to USD471 million.

 

To further capitalise on the power trading options provided by Canada’s enormous hydropower capacity, various cross-border projects have been proposed by both US and Canada-based developers. These include the Northern Pass project (being developed by the US’ Eversource Energy), which will be connected with Canada-based Hydro-Québec’s (HQ) Québec–New Hampshire interconnection project. The two projects (which together form one interconnection) are aimed at delivering 1,000 MW of hydroelectric power from Québec to northern New England and will be enough to meet the power demand of about 1.1 million US homes. However, Northern Pass is facing strong opposition from local residents due to its potential visual impact. Local residents are demanding that the entire line be placed underground, which, according to the developer, would be a very expensive option. This is also delaying the regulatory approval process for the project. Eversource Energy is currently seeking approval from the New Hampshire Public Utility Commission (PUC), which has begun the final hearing for the project. The state PUC has rejected Eversource Energy’s proposal to sign a 20-year power purchase agreement with HQ to buy 100 MW of power from the Northern Pass project. These hurdles may delay the commissioning date of the project.

 

Another cross-border project currently under development is the USD1 billion Lake Erie Connector, being developed by ITC Lake Erie Connector LLC, a subsidiary of US-based ITC Corporation, to provide the first direct link between the markets of the Ontario Independent Electricity System Operator in Canada and PJM Interconnection in the US. Currently, the developer is seeking approvals from the Pennsylvania Department of Environmental Protection and the US Army Corps of Engineers. ITC anticipates receiving all state, federal and provincial permits for the project by 2017, with commencement of construction scheduled for 2017 and commercial operation in 2019 or 2020.

 

HQ has also proposed the Hertel–New York interconnection project which will be connected to Champlain Hudson Power Express project of Transmission Developers Inc. (TDI) and National Resources Energy. These projects will bring up to 1,000 MW of clean, renewable power to the New York metro area. The high voltage direct current (HVDC) cable will be placed in waterways or buried along railway routes to minimise the impact on local communities and the environment.

 

Another interconnection will be established by implementing the Manitoba–Minnesota transmission project (being developed by Canada’s state-owned Manitoba Hydro) and the Great Northern Transmission Line of US-based Minnesota Power.

 

In addition, TDI-New England (TDI-NE) is establishing the New England Clean Power Link to interconnect the state of Vermont in the US with Canada. National Grid has also proposed the Granite State Power Link (GSPL) to bring up to 1,200 MW of clean energy from Canada to the New England power grid. This project could possibly be a competitor to the proposed New England Clean Power Link of TDI. The latter project is likely to generate higher taxes and fees for Vermont than the one proposed by National Grid.

 

US-Mexico Integration

Due to a combination of historical, geographic and resource factors, the grid integration between the US and Mexico is far lower than that between the US and Canada. According to the US’ Energy Information Administration (EIA), the US and Mexico traded approximately 7.69 million MWh of power (compared to 77.2 million MWh traded between the US and Canada), with the US exporting 0.39 million MWh and importing 7.3 million MWh in 2015. Several factors explain this low level of trade, including limited power generation capacity, low population density and inadequate power transmission capacity along the border regions of Mexico and the US. Two US states – Texas and California – dominate the cross-border connections with Mexico, but have very different approaches to integration. The Electric Reliability Council of Texas (ERCOT) shares the longest border with Mexico, but all its transmission connections with the Mexican grid are asynchronous, and are primarily for emergency backup. California is connected to Baja California in Mexico, but as the latter is not connected with the rest of Mexico, the power trading capacity of the existing Baja California–California cross-border interconnections are limited.

 

The recent power sector reforms in Mexico, which focus on promoting competition and reducing costs to the consumers, open up vast investment opportunities for US players. Currently, the per MWh cost of producing electricity in Mexico is almost double than that in the US. Under the reforms, the Mexican government, along with expanding its domestic power network, is also focusing on the development of cross-border trade including the construction of a new 150-MW asynchronous connection between Nogales in Sonora, Mexico, and Arizona in the US. The government of Mexico is also studying the possibility of a larger east-west transmission line along the US border, to enhance transmission capacity in Northern Mexico and facilitate cross-border trade. Policy, regulatory, infrastructure and economic changes in Mexico may lead to several other new opportunities.

 

Issues and challenges

Cross-border trade between the US and Canada is mature, with a highly integrated grid network. However, enhancing integration — especially with the objective of increasing cross-border trade —faces various barriers. First, there are concerns among the US generators that increasing cross-border trade would have a negative impact on domestic markets and offer Canadian suppliers market power. Thus, a continued, thorough examination of the long-term implications of integration for consumers and generators is required.

 

Further, increasing electricity trade requires additional transmission capacity. While several transmission projects have been proposed to increase capacity in the Midwest and Northeast, the complexity of these projects raises stakeholder concerns, which leads to delays in receiving various approvals, resulting in longer development times. These concerns range from the environmental impacts of transmission infrastructure to the potential implications of greater Canadian imports on the local and regional economic development in the US. Siting and permitting decisions are made at the state and local levels, including for international transmission lines. Thus, effective siting and permitting capabilities are required at all levels of government. The recent issuance of cross-border Presidential permits for the Great Northern Transmission Line in Minnesota and the New England Clean Power Link in Vermont are examples of the application of collaborative principles at early engagement with stakeholders.

 

Increasing the grid integration between the US and Mexico is also facing various challenges. Mexico’s electricity sector continues to experience high levels of technical and non-technical losses and will require significant investments to improve system functionality to achieve greater efficiencies, especially in a scenario that includes significant increases in power trading with the US’ bulk power system. Mexico also has different norms for open access than those of the US and Canada. Additionally, both sides of the border have experienced power shortages in the past decade, suggesting that at this time, neither border region has developed significantly to support higher power trade.

 

While there exist several modelling tools to analyse the electricity sector in the US and Canadian markets, detailed modelling tools to explore the economic, social and reliability impacts of electricity trade across the whole of North America are presently insufficient to determine suitable opportunities for enhancing integration. Thus, more work is required in this direction.

 

Conclusion

The North American countries are promoting cross-border power trading to meet their clean energy targets and reduce electricity tariffs. As more interconnections are being planned and built in the region, North America’s bulk power system must not only remain secure but reliable as well.

 

High-level cooperation among the three countries on energy issues should ensure that the shared goal of a reliable electricity system for the continent remains a focus area. From coordination on high-level principles for reliability to modelling and analysis of the future bulk power system of the US, cooperation across North America on reliability will complement efforts to improve security and ensure economic competitiveness.

 

The extensive electricity integration that already exists and is planned between the US and Canada, and the potential to increase integration between the US and Mexico, suggest that North America has much to gain from collaborative planning, strategy development and cooperation in the power sector.

 

Table 1: Upcoming Interconnections in North America

Project

Country

Route

Developer

Voltage level (kV)

Capacity (km/MVA)

Date of Commissioning

Northern Pass Project

USA

Québec/New Hampshire border (Québec–New Hampshire Interconnection)–Franklin converter station–Deerfield substation, New England

Northern Pass Transmission LLC, a part of Eversource Energy

±300 kV HVDC and 345 kV AC

309

2019 or 2020

Québec–New Hampshire Interconnection

Canada

Québec/New Hampshire border (Northern Pass Project)–Des Cantons substation

TransÉnergie, a subsidiary of Hydro-Québec

320 kV AC

79

2019

Lake Erie Connector

USA–Canada

Erie, Pennsylvania–Nanticoke, Ontario

ITC Lake Erie Connector LLC, a subsidiary of ITC Corporation

±320 kV HVDC/345 kV AC/500 kV AC

US section: 69 km; Canadian section: 48 km

2019 or 2020

Champlain Hudson Power Express Project

USA

Champlain–Queens, New York (will connect to Hertel–New York Interconnection Project at Canada-USA border)

Transmission Developers Inc. (TDI) and National Resources Energy

±300 kV or ±320 kV HVDC

531

2021

Hertel–New York Interconnection Project 

Canada

Hertel substation (La Prairie)–Champlain Hudson Power Express Line (at the Canada-USA border)

Hydro-Québec

320 kV AC

58

2017 or 2018

Great Northern Transmission Line

USA

 Minnesota/Manitoba border (Manitoba-Minnesota Transmission Project)−Range substation near Grand Rapids, Minnesota

Minnesota Power

500 kV AC

354

2020

Manitoba-Minnesota Transmission Project

Canada

Dorsey station (Manitoba)–Riel station–Minnesota–Manitoba (USA) border

Manitoba Hydro

500 kV AC

213

2020

Nogales Interconnection Project

USA–Mexico

Arizona–Mexico

Arizona-based UniSource Energy Services (USE) and Texas-based Hunt Power

150 MW DC, 138 kV AC, 230 kV AC

First Phase: 8.05 km; Second phase: NA

2019

New England Clean Power Link

USA

Alburgh–Ludlowt, Vermont

TDI-New England (TDI-NE)

±300 to 320

Underwater: 159 km; underground: 90 km

2019-20

Granite State Power Link (GSPL

USA

Norton, Vermont– Monroe, New Hampshire

National Grid

NA

274

2022

Note: AC – alternating current; DC – direct current; HVDC – high voltage direct current; NA – not available

Source: Global Transmission Research