NextEra and EDF tell two very different smart grid stories in turbulent US

Just as NextEra announced the largest hybrid renewable project in the USA, for the Western Farmers Electric Cooperative (WFEC), Ameren Missouri pulled the plug on its deal with EDF Renewables to build a 157 MW wind power project, citing unacceptably high transmission upgrade costs. The two cases paint very different pictures, and illustrate the highs and lows of the smart grid and renewable energy business.

Embracing distributed energy resources (DERs) like solar and wind, as well as the battery storage arrays that enable them to be used in optimum fashion, requires upgrades to electricity distribution infrastructure. A very rough comparison is that it is like converting a one-way boulevard into a two-way street, so that you can transition from the centralized production model to one that can receive energy from the DERs out in the field.

Of course, such upgrades require investment, and we might have more sympathy for utilities like Ameren if they had a track record of making such investments ahead of the curve. Ameren should be praised however, for its decision to not go ahead with the project because it didn’t want to pass the increased costs on to its ratepayers, but one wonders whether that’s an entirely altruistic endeavor, or if it is more concerned about customer churn and drawing the wrath of the regulators.

Based on the plan that Ameren filed with Missouri, it seems that the transmission upgrades are around 5x the cost of the DER being added to the mix. In the plan, $1bn was allocated for wind projects, while $5.3bn was set aside for infrastructure upgrades.

Now, the canceled project in Atchison County is off the table, but Ameren does have two other wind projects in the pipeline, which amount to 700 MW of generation capacity. These are valued at $1.2bn, and Ameren is just waiting the Certificates of Convenience and Necessity (CCN) from the Missouri Public Service Commission. Notably, Ameren says that the transmission costs for these two project were in-line with expectations, so the 157MW project that has been scrapped might just be an outlier.

Still, the bigger lesson to take from this is that there appears to be a 5:1 ratio on the costs of integrating a DER project and the cost of the DER installation itself. It seems fair to deduce that the cancelled project exceeded this ratio, but Ameren has said it has no further comment to make beyond the initial announcement.

“While we’re focused on incorporating more renewable energy, we also have to be good financial stewards for our customers,” Michael Moehn, chairman and president of Ameren Missouri, said in a statement. “While it is disappointing we will not be moving forward with this project, we remain focused on seeing our other, larger projects through to the finish line.”

The other side of the DER coin is seen in NextEra’s deal, to build what is being called the largest hybrid renewable project in the USA. The 700 MW Skeleton Creek installation in Oklahoma will consist of 250 MW of wind generation, 250 MW of solar array, and a 200 MW (800 MWh) battery to help optimize output from the project. This is larger than the deal with Portland General Electric that NextEra announced in February, which consisted of 300 MW wind, 50MW solar, and a 30 MW (120 MWh) battery.

WFEC is the customer, and will be using Skeleton Creek to serve the 21 utility members, as well as other regular customers. This ‘triple-hybrid’ approach is cheaper than a gas peaker plant, according to Phillip Schaeffer, the principal resource planning engineer for the project.

Speaking to Greentech Media, Schaeffer said “”It’s actually cheaper, economically, than a gas peaker plant of similar size, particularly with the tax credits that are available right now. Prices have fallen significantly over the last several years.” So instead of a gas peaker plant that gets fired up to meet shortages between supply and demand, Skeleton Creek should be able to offer a cheaper and more environmentally beneficial alternative.

Sure, beneficial regulatory and tax policies are not indefinite, and are subject to the whims of the current government (local or national), but if the money is on the table, customers like WFEC and developers like NextEra would be stupid not to take it. However, the need to understand the total cost of ownership, and in particular the costs of hooking it up to the existing infrastructure, remains key.