Outlook 2023: Windy SPP looks for reliability, transmission solutions

The Southwest Power Pool could see a 2% increase in generating capacity in 2023 as the grid operator determines how to most effectively deploy electricity produced from one of the nation's largest fleets of wind farms, though little else from other renewable resources.

That means the Southwest Power Pool (SPP) has had to rely heavily on thermal power plants that have faced fuel supply issues during severe weather, prompting the North American Electric Reliability Corp. (NERC) to conclude that the grid operator, which services all or parts of 15 states in the central US, faces an elevated risk of shortfalls in extreme conditions such as the February 2021 and December 2022 winter storms.

"SPP is exposed to energy risks in ways that are similar to both Texas and the US West," NERC said in its December 2022 reliability assessment of the bulk power system. "Severe weather in SPP is likely to cause high generator outages and poses a risk to natural gas fuel supplies. In addition, the penetration of wind generation makes the resource mix variable and exposed to insufficient energy during low wind periods."

In response to such risks, the SPP is floating the development of a backstop authority that would allow it to procure capacity on behalf of utilities that fall short of reliability requirements.

"In alignment with market products or other requirements, SPP should develop and implement appropriate incentives or penalties based on performance as reasonably expected considering physical capabilities and offerings," SPP said in its Grid of the Future report, released in April.

In total, the SPP is scheduled to have a generating capacity of 98,707 MW if all new projects, totaling a net addition of 1,996 MW, connect to the grid by the end of 2023, according to an analysis of S&P Global Market Intelligence data. That includes 32,157 MW of wind, 31,916 MW of gas, 24,428 MW of coal and 9,572 MW of other types of generating capacity, a category that includes hydropower, nuclear, energy storage, biomass and oil.

Retirements

Among SPP assets to be retired this year is the 650-MW Pirkey coal-fired plant in eastern Texas. The plant, fueled by lignite, began operating in 1985 and operator and majority owner American Electric Power Co. Inc. subsidiary Southwestern Electric Power Co. (SWEPCO) said in 2020 it would shut the Pirkey plant. Northeast Texas Electric Cooperative Inc. has an 11.72% ownership interest in Pirkey, and the Oklahoma Municipal Power Authority has a 2.34% share. SWEPCO has in recent years bulked up its power supply portfolio largely with wind energy assets.

Xcel Energy Inc. subsidiary Southwestern Public Service Co. is due to retire 128 MW of 1950s-era capacity at its gas-fired Plant X facility in Lamb County, Texas, as well as a 71-MW gas-fired unit, also from the 1950s, at its Cunningham plant in Lea County, NM. OGE Energy Corp. subsidiary Oklahoma Gas and Electric Co. is set to retire a 168-MW unit, operating since 1958, at its Horseshoe Lake ST plant in Oklahoma County, Okla.

Additions

The SPP made headlines in 2020 as the US' first grid operator to have wind power at the top of its generation stack. Three years later, wind developers still prize the territory's strong and low-flying gales. Market Intelligence data shows scheduled additions of 1,649 MW of wind power capacity in the SPP in 2023, more than a 5.4% increase from a cumulative 2022 wind power capacity of 30,507 MW.

But unlike other grid operators, the SPP has struggled to attract similarly substantial investment from developers of solar farms or battery storage facilities that would give it more tools to manage the intermittency of its renewable energy generation fleet.

That is changing with increases in solar and battery storage capacity in 2023: The data shows that developers are planning to energize 989 MW of solar additions, including Invenergy LLC's 220-MW Tip Top Solar Energy Center Project in New Mexico, to bring SPP's total solar capacity to 1,437 MW. And battery storage developers plan to add 200 MW of energy storage to the grid, up from the SPP's current capacity of 13 MW.

NextEra Energy Inc. subsidiary NextEra Energy Resources LLC plans to commission the 250-MW Skeleton Creek Solar Project in Oklahoma and adjacent 200-MW Skeleton Creek Solar Battery Storage installation, in 2023. Western Farmers Electric Cooperative in 2019 agreed to purchase the energy output from the solar and storage facility, as well as from the 250-MW Skeleton Creek Wind Farm, which began operating in 2020.

Enel SpA subsidiary Enel North America's 300-MW Seven Cowboy Wind Farm is under construction in Washita County, Okla. Enel entered into a 12-year virtual power purchase agreement (PPA) with Campbell Soup Co. for a 115-MW share, an eight-year virtual PPA with Thermo Fisher Scientific Inc. for a 90-MW portion, and another long-term virtual PPA with Japanese biopharmaceutical company Takeda Pharmaceutical Co. Ltd.

Congestion concern

Ann Coultas, director of regulatory affairs for Enel North America's western and southern regions, said in an interview that wind power was important to keeping the lights on during the February 2021 and December 2022 winter storms and that the developer has had a long history of developing projects in the SPP's southern territory.

But Coultas added that Enel remains concerned about congestion on the SPP's transmission network. Congestion costs doubled last year to $1.2 billion in the SPP. FERC in April rejected an SPP proposal to allow transmission owners to self-fund grid upgrades.

"SPP is taking a pretty good approach to planning these transmission projects," Coultas said. "The bigger issue SPP has, in my opinion, is transmission execution rather than transmission planning. ... The list of projects that have notifications to construct in SPP … half of them are in a state of delay. And that's a big problem."

In a potential sign of relief to come, construction of the 800-mile Grain Belt Express high-voltage, direct-current transmission project, which would carry wind-generated power from Kansas to the Midcontinent ISO and PJM Interconnection LLC markets, is expected to start at the end of 2024.

Jessalyn Chuang, market analyst lead for the SPP at research firm Wood Mackenzie, said the SPP's wind energy helps shield from the volatility of natural gas prices. But negative pricing on wind power "is definitely a huge issue in SPP."

Colder temperatures in the northern half of the SPP footprint have driven a "huge North Hub premium over the South Hub, but we've seen that switch around" with transmission work in Oklahoma.

"Figuring out how to speed up transmission buildup is so key," Chuang said.

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