Like it or not, the electric transmission business has been transformed into an industry-growth engine in just a few short years. Our once-static business is now enterprising and dynamic, as it has never been before.
Driving the transformation is the Federal Energy Regulatory Commission's Order 1000, which addresses three critical issues affecting transmission: planning, cost allocation and elimination of the Right of First Refusal. At the same time, the transmission industry faces the monumental tasks of modernizing an aging infrastructure and navigating significant changes in the generation landscape.
Companies confronting these tasks must be nimble, innovative, assertive and willing to reinvent themselves. Those that adopt mindsets focused on creative solutions, timely execution of projects and being the “first responders” will thrive and shape the next power grid.
There certainly is much to do. More than US$170 billion will likely be spent to upgrade 65,420 miles (105,283 km) of existing transmission line and bring renewable energy, such as wind power, into the grid before 2020, according to Atlanta, Georgia, U.S.-based C Three Group, a private company that provides strategic planning, merger and acquisition, and market development support to the energy utility industry. Global Industry Analysts reports a global increase in power consumption will drive spending on transmission and distribution equipment to $154 billion in the United States by 2017.
In response to this transformation, we have been taking steps that include the creation of transmission company subsidiaries to meet emerging business circumstances and contingencies. We understand that investors seek companies providing returns on capital investments commensurate with business risk; customers expect fast, high-quality service and problem-solving providers; and policy makers demand reliability, affordability, transport of renewable generation and equitable grid management.
Our creation of separate, wholly-owned transmission holding companies (Transcos) drives infrastructure renewal within their operating company territories. Transcos relieve the capital burdens for operating companies and provide a vehicle for the necessary investments in transmission that increase system reliability for our customers. AEP's 2012 investment will grow as more infrastructure projects get underway.
Long-term, single-project joint ventures outside the corporate footprint with MidAmerican Energy Holdings Co., Duke Energy, Exelon and Westar Energy provide reliability, and economic and public policy benefits in a cost-effective manner. The most urgent among these is our investment in the Texas Competitive Renewable Energy Zones (CREZ) project through Electric Transmission Texas, a joint venture with MidAmerican. It is the largest single transmission undertaking in our history, involving construction of 16 substations and 465 miles (748 km) of transmission lines to deliver Texas wind energy to markets in the Electric Reliability Council of Texas region. CREZ is requiring unprecedented commitments of capital, planning, labor and determination to finish by the end of 2013, the deadline established by the Texas Public Utilities Commission.
In April, AEP announced the creation of Transource Energy, LLC, a joint venture between AEP and Great Plains Energy to pursue competitive transmission projects in three regional transmission organizations. Transource provides the flexibility to explore opportunities and partnerships across service territories, without affecting other corporate affiliates.
Transmission companies also must be ready to put steel into the ground when new markets open, but we must move at a faster pace and with more innovation. Here are a few:
Drop-in control modules are a prefabricated protection and control solution that is assembled in sections at a substation based on the physical assets being placed into service during a project, saving construction time and costs (see “AEP Streamlines Protection and Control with Drop-In Module,” Transmission & Distribution World, September 2011).
Station in a box gathers all materials for station construction — steel, transformer and DICM — and places them beside a locked portable steel container that stores drawings, equipment and remaining gear. The entire standard package can be purchased in advance, stored and trucked to sites when needed.
Skid station refers to sections of a station pre-built on portable skids which can be hauled on trucks and assembled at prepared sites.
These innovations, paired with project management focused on streamlining processes and execution, whittle months and millions from construction projects.
Finally, the entire organization must pull together. AEP Transmission is cultivating a business culture that embraces competition and normalizes change without losing sight of its duties to deliver reliable and affordable electricity to customers and value to its shareholders.
Scott Moore (firstname.lastname@example.org) is the vice president of transmission engineering and project services at AEP.