Economic methodology
ATC will conduct appropriate economic analyses when evaluating transmission additions, replacements and modifications. The criteria to be used in such economic analyses for purposes of system planning will include the following:
- In developing screening level capital cost estimates for transmission lines and substations, terrain, geology and land use will be considered.
- In conducting the economic analysis of changes in transmission system losses, hourly line flow data and associated area Locational Marginal Prices (LMPs) for the entire analysis year from PROMOD will be used to analyze the potential savings from reduced transmission line losses associated with a new project (or package of projects).
- The reduction in the need to build additional generation to serve the peak load will be calculated by comparing the losses from the power flows for the peak load hour with and without the project. To correctly do the accounting, the reduction in the generation needed to serve the peak load will be increased by the MISO planning reserve margin. The dollar value of this savings will be based on the construction cost of a combustion turbine.
- The LMP market simulation tool, PROMOD, will be the primary tool used to analyze the economics of projects in the energy market. ATC’s Customer Benefit Metric will typically be used to analyze the energy market savings of projects. Generally PROMOD will be run with and without the project, or package of projects, to determine the energy market savings. Other energy market economic benefits may also be calculated, such as the “insurance benefit” associated with having a more robust transmission grid to respond to low probability, but high impact transmission and generation outages, which can cause energy market prices and costs to spike.
All transmission projects have both reliability and energy market economic impacts. In certain cases, energy market economic benefits may be the primary driver of a project. In addition, energy market economic analysis of projects may be used in the prioritization and staging of projects. In this effort, an attempt is made to capture all relevant factors in determining the energy market economic benefits of a project. Stakeholder input is utilized by ATC for this purpose. Various tools are also utilized by ATC, including the PROMOD software; however, other methods and tools are open to consideration.