A project that would transform the U.S. grid’s three isolated segments into a national transmission system could be financed and working on construction by the end of 2014.
“It’s a really bold idea,” said former FERC Chair James Hoecker. “But interconnecting the country’s three major grids seems like the logical step toward a national bulk power network.”
Tres Amigas will be the first interconnection of the Eastern, Western, and Texas grids. Sited on 14,400 acres in Clovis, New Mexico, at the edge of the three systems, it will modernize the carrying capacity of the world’s biggest machine, the 120-year-old U.S. transmission system.
“Tres Amigas will allow power transactions that are not now available,” Stidham said. “A wind project typically requires a power purchase agreement [PPA] to obtain bank financing. But if the developer could sell into any of the three markets, and sell at the highest price available, the concept of a merchant project becomes financially attractive.”
A national marketplace opens the opportunity to sell midday Southwestern solar into the East Coast’s late afternoon peak demand period and to sell pre-dawn Western wind into the East Coast’s midmorning peak. Merchant projects become potentially more profitable than projects with PPAs when those higher per-kilowatt-hour peak demand opportunities are available.
The immediate obstacle now is completing financing. Using state-of-the-art power electronics, the interconnection will allow power trading with price differentials that justify Tres Amigas’ $1.8 billion cost, explained Tres Amigas Chief Operating Officer David Stidham.
Construction is expected to take 33 months, Stidham said. The project is almost completely permitted. What is left will be in New Mexico, where Tres Amigas has access to County rights-of-way, and in Texas, where the CREZ process established streamlined procedures.