American Electrical Power and Duke Energy said Monday they have formed a joint venture to build 240 miles of transmission lines in Indiana to ferry the growing amount of new energy generated from the region, including wind power.
The companies each own half of the joint venture, called Pioneer Transmission, and plan to invest an estimated $1 billion in the company. The utilities expect to recoup the cost over time by collecting higher electric rates from customers served by the lines, which fall under the purview of the Midwestern Independent System Operators (MISO) and PJM Interconnection (PJM).
MISO and JPM, which help manage the use of the lines to enable utilities to share them, are responsible for electrical-grid planning as well as operations and for overseeing regional electricity wholesale markets. MISO serves customers in 15 states and the Canadian province of Manitoba while PJM serves customers in 13 states and the District of Columbia.
All of the residential and business customers in the region are liable to help pay for the project, even if they aren’t Duke or American Electric Power customers, because utilities in the area will share the transmission lines to serve their customers.
The new network would stretch between Duke’s Greentown station near Kokomo, Ind., and AEP’s Rockport station east of Evansville, Ind. Charlotte, N.C.-based Duke and Columbus, Ohio-based AEP are expanding the transmission network in central Indiana to prepare for new power plants coming on line, including more than 3 gigawatts of wind-energy projects under development.
The joint venture reflects the increasing need to replace or upgrade the aging electric grid in the United States. The growing number of solar, wind and other renewable power plants – and Americans’ rising demand for electricity – has put pressure on utilities to upgrade their transmission lines if not to build new ones altogether.
But replacing aging transmission lines is expensive, and utilities, which are required to share their transmission systems, see few incentives to build or upgrade their networks (see Wind Power Waiting on Transmission-Line Boom). Most of Indiana’s transmission system was built 25 years ago, AEP said.
When Al Gore unveiled his energy plan last month, he called for building a new national electric grid to make it easier to move solar and wind power across the country (see Al Gore Sets Energy Goal). T. Boone Pickens, the Texas oilman who has won lots of media coverage lately for his championing of wind energy and natural gas projects, has said he would spend $12 billion on a 4-gigawatt wind energy project in Texas that would include building transmission lines (see T. Boone Pickens Has a Plan).
Utilities in the United States spent $6.9 billion in transmission work in 2006, according to the Edison Electric Institute (EEI), whose members represent 70 percent of the American electric power industry. EEI members plan to invest $38.1 billion from 2007 to 2010 on transmission projects, the institute said in January this year.
The transmission projects that EEI members are working on include the 250-mile new and upgraded lines in California, called the Tehachapi Renewable Transmission Project. Another project, the Southwest Minnesota Wind Expansion Project, would add 220 miles of new transmission lines and upgrade 300 miles of existing lines for transporting 800 megawatts of wind power.
Duke (NYSE: DUK) and AEP (NYSE: AEP) will need approval from MISO and PJM, as well as the Federal Energy Regulatory Commission, which regulates utilities. Duke and AEP plan to seek rate approval from FERC by the end of September.
The utilities will work with MISO and PJM in mapping the new transmission lines in 2009 and 2010 before construction will begin. The new network could come online as early as 2014 or 2015.
Duke and AEP plan to build 765-kilovolt transmission lines, which can carry more power than networks using a lower voltage technology, such as 345-kilovolt lines. The higher-voltage lines also reduce electricity losses during transmission to less than 1 percent, compared to losses as high as 10 percent with lower-voltage lines, the companies said.
The joint venture marks the first project for Duke to build 765-kilovolt lines. AEP also has 765-kilovolt projects under development in West Virginia and Maryland.