by Richard Stuebi
Something grand is emerging on the vast dusty plains of West Texas and Eastern New Mexico.
Tres Amigas is an ambitious scheme to interconnect the three primary power grids in the U.S. — the Western grid known as WECC, the Eastern grid known as the Eastern Interconnection, and the Texas grid known as ERCOT.
As profiled in an article called “A Highway for the 21st Century” in the recent edition of Energy Biz magazine, Tres Amigas aims to incorporate high-voltage direct current (HVDC) and grid-scale energy storage technologies to enable synchronization and massive power transfer capability across the three grids — which are almost completely separate today.
Although it might seem straightforward to tie together three power grids, this is actually a very challenging technological problem. AC to DC to AC converter stations are required at the interfaces, relying upon HVDC technologies that, while beginning to be more commonly employed, have never been deployed at the scale — 5 gigawatts initially, up to 30 gigawatts eventually — contemplated by Tres Amigas. And, to absorb the large swings in generation provided by wind and solar projects in the Great Plains, Texas and the Desert Southwest, Tres Amigas aims to install utility-scale batteries, a still-developing area of technology.
Not surprisingly for a large and first-of-a-kind project, it’s not cheap. Tres Amigas is forecasted to require up to $1 billion in capital. The question will be whether the investors in Tres Amigas can make good returns.
Presumably, the business model is based on a combination of wheeling charges (revenues from renewable energy project developers seeking to move power from source to load centers) and ancillary service fees (charges to the three grid operators to keep each of them more stable in the face of shifting supply and demand conditions). A “merchant project” of this type and magnitude has never been tried. No doubt, it’s a very risky bet.
Not surprisingly, American Superconductor (NASDAQ: AMSC), whose technologies are at the core of Tres Amigas and who would stand to benefit big-time from its success, is an investor sponsoring the development team. It wouldn’t surprise me to see the battery supplier, when chosen, also joining the mix.
The upside of Tres Amigas to renewable energy interests is big. If the project is completed, works well, and remains financially solvent, it will de-bottleneck many limits to adding further wind and solar projects in the Southwestern U.S. There’s plenty of sun and wind out there, but the constraining factor in tapping it has been the ability of the power grid to cope with the inherent fluctuations in power output.
With its energy storage capability and linkage across three grids, Tres Amigas would be big and bold enough to enable many heretofore thwarted renewable project developers West of the Mississippi to effectively reach a broader spectrum of potential customers from L.A. to Dallas to St. Louis, while mitigating the operational problems — such as those at the infamous congestion point near McCamey TX – that grid operators and other skeptics use as a basis for criticizing or objecting to renewable energy development.
Disclosure: No positions