Brattle Economists Develop Recommendations to Better Assess Long-Term Economic Benefits of Transmission Projects in Texas Electricity Market
Prepared for ERCOT
Economists at The Brattle Group recently authored a report that outlines recommendations for enhancing the Electric Reliability Council of Texas’ (ERCOT) long-term transmission planning process. The recommended improvements will enable ERCOT to more effectively identify economically-beneficial long-term transmission investments, and to use that information in the evaluation of projects within its near-term Regional Transmission Plan (RTP) process that is used to create their actionable transmission plans.
Brattle was commissioned by ERCOT to review the current process for screening economic transmission projects in its Long-Term Study (LTS) process, prepare recommendations on how to better estimate the economic value of projects from a societal perspective, and present before the Long-Term Study Task Force recommendations to improve the “Business Case” for economic transmission investments. The recommendations focus on how ERCOT can more accurately and thoroughly assess the wide range of economic benefits that new transmission projects can provide to the system.
After a thorough review of ERCOT’s long-term transmission planning process and the findings obtained throughout the study, the following recommendations were developed:
- Link near- and long-term planning processes to increase the consistency in modeling assumptions and results across the two planning processes, avoid overlapping modeling efforts, and allow the effective use of results from long-term studies to inform near-term planning efforts
- Evaluate economic projects based on their Net Present Value (NPV) or a comparison of levelized benefits and costs
- Expand the range of benefits and costs considered and estimated in the evaluation of economic transmission projects
- Improve the use of scenarios and sensitivities to better recognize future uncertainties from a long-term perspective
- Enhance economic project and benefits/costs identification process, and consider establishing a structured process that allows market participants to propose candidate economic projects
The report, “Recommendations for Enhancing ERCOT’s Long-Term Transmission Planning Process,” was authored by Brattle Principals Judy Chang, Hannes Pfeifenberger, and Sam Newell, Senior Consultant Bruce Tsuchida, and Associate Mike Hagerty. It can be downloaded below.