.

**[Non-Wires Alternatives]{.underline}**

There are non-wires alternatives for relieving transmission congestion.
Generation, including distributed generation, can be located on the load
side of a transmission constraint; demand-side actions can reduce demand
during periods of transmission congestion; and remedial Action Schemes
(RAS) and new transmission technologies, such as flexible AC
transmission systems (FACTS), can also increase transfer capacity
without requiring the construction of new wires.

[Strategic Importance of Non-wires Alternatives to Transmission
Planners]{.underline}

The future is unknown. New technology, volatile and sustained high fuel
prices, and drought are examples of conditions that could fundamentally
and quickly change how a region chooses to meet load. During the Western
energy crisis of 2000-2001--- under conditions no one in the
interconnection foresaw -- many providers relied on emergency programs
to buy back power from customers, and customers' installed on-site
generation. While the buyback prices were much higher than the price of
power purchased from the utilities, the prices were often much less than
the market prices of the time. One lesson from this period is that
demand reduction programs can reduce demand given sufficient incentives.

A demand response package and a distributed resources strategy that are
a part of every day utility practice could be refined and implemented to
reduce the need for transmission expansion and meet demand during a
crisis. Deferring big transmission investments *without jeopardizing
grid reliability* may lower costs to consumers, as it allows more of the
unknown future to unfold itself. Capital investments in the electric
industry tend to be big, lumpy, and long-lived. There is the risk that
new technologies can turn such investments into "white elephants." New
technologies, such as economical fuel cells, could radically reduce the
presently perceived need for new transmission.

Non-wires solutions allow planners to determine, and in some cases
delay, the need for transmission construction. They also can help to
alleviate "economic congestion" at lower costs than new transmission.
However, load-based generation and demand-side actions are not
substitutes for transmission, which also allows for diversity of
generation sources and the inclusion of resources located remotely from
load centers.

By illustration, the transmission congestion studies for 2008 and 2013
in this report assume a peak load growth rate of approximately 2%
beginning today. If load growth could be reduced to 1%, no additional
transmission would be needed in 2013 beyond that assumed in the 2008
study. That is, the load in 2013 would be equal to the loads assumed in
2008[^1]. A reduction in peak load growth and local generation of the
magnitude required to halve the growth rate of power delivered through
the transmission grid is not infeasible.

The concept of non-wires alternatives is not new. FERC has recognized
the value of non-wires alternatives as complements to transmission
construction and requires equal consideration of non-wires alternatives
in its RTO orders and proposed SMD rule. The California ISO and BPA have
undertaken initiatives to consider non-wires alternatives in-lieu of new
transmission investment. Consideration of non-transmission alternatives
was part of the planning process adopted by former Western regional
transmission groups (NRTA, SWRTA, WRTA). Also, the existing WECC
regional planning process requires the consideration of "alternatives."

There are three groups of non-wires alternatives contemplated here: (1)
location of generation on the load side of a transmission constraint;
(2) demand-side actions; and (3) non-wires transmission options such as
Remedial Action Schemes (RAS) and flexible AC transmission systems
(FACTS).

New generation, including central power plants, combined heat and power
(CHP) and other distributed generation, can be located on the load side
of a constraint and thereby relieve congestion. Existing backup
generation on the load side of a transmission constraint can also be
used (e.g., PGE's Dispatchable Standby Generation Program).

There are a variety of demand-side actions that can reduce the need for
transmission, including more timely and accurate price signals to
consumers that better reflect wholesale market congestion costs, demand
buy-back programs (e.g., price-based dispatch, interruptible/curtailable
and demand response contracts), and certain measures generally
considered only as energy savers[^2].

RAS and new transmission technologies, such as FACTS, can be used to
increase transfer capacity on existing wires and thereby reduce
transmission congestion. RAS schemes are widely used in the Western
Interconnection to increase transfer capacity on transmission paths. The
cost and impacts on reliability must be considered with these
alternatives.

Non-wires alternatives to reduce transmission congestion and help manage
future risks should be considered at all levels of transmission
planning. The specificity of the analysis of non-wires alternatives
should increase as one moves from interconnection-wide planning, to RTO
or sub-regional planning, to planning by load serving entities (LSE). At
SSG-WI's high level of planning it would be very difficult to specify
each of the non-wires alternatives that might be employed to meet
transmission needs. As the planning becomes more specific to regions and
LSEs, specific measures will need to be considered.

However, even at the SSG-WI level of planning some high-level statements
can be made about the impact of non-wires solutions. For example, there
are at least two ways to model the effectiveness of non-wires
alternatives in relieving congestion and delaying construction of wires.

The impact of successful demand-side measures in reducing transmission
congestion can be estimated by extrapolating the lower load in 2008 to
the 2013 scenarios[^3]. This result can be achieved, for example, by
halving the assumed load growth between today and 2013 to 1%. (See
footnote above for calculation.) If demand-side measures were able to
hold 2013 peak load to levels forecasted for 2008, one could conclude
that the same resources[^4] and transmission system that met loads in
2008 would meet loads in 2013.

Another way to measure the effects of non-wires solutions at this high
level of analysis is to model sensitivity to load variations. For
example, one could arbitrarily drop loads by 10% or 20% in an area on
the congested side of a constraint and then estimate changes in
production costs to determine whether the availability of non-wires
solutions is practically and economically feasible. These sensitivities
have not been undertaken here. If performed, such analysis would give
planners at the subregional or LSE levels guidance as to the amount of
non-wires solutions that would have to be available to effectively
manage congestion.

The impact of RAS and FACTS could be estimated by increasing the
carrying capacity of specific paths in the 2013 scenarios that were
modeled and estimating the costs associated with those non-wires
investments.

When planning for western subregions or utilities, standards, criteria
and metrics should be developed to support analysis and comparison of
alternatives. Metrics would include discount rates, assumed facility
lifetimes, and other parameters that can be used to compare alternatives
on a standard basis. One approach to considering non-wires alternatives
on a sub-regional basis has been documented in a report prepared for
BPA, *Kangley Echo Lake Economic Screening and Sensitivity Analysis
Report*, November 8, 2002.

[^1]: Current (mid-2003) WECC peak summer loads are approximately
    138,000 GWe. Peak summer loads in 2008 and 2013 are assumed in the
    modeling to be approximately 150,000 and 167,000 GWe, respectively.
    Thus, the assumed load growth from now until 2013 is 2%. If the load
    growth instead were 1%, today's load of 138,000 GWe would grow to
    152,000 GWe by 2013, approximately the assumed load for 2008.

[^2]: For example, compact fluorescent lights reduce peak loads at a
    fraction of the cost of serving peak loads with gas-fired
    generation, and they save energy at less than a penny per kWh.

[^3]: A downside of this approach is that the difference between 2008
    and 2013 is only one possible result. Non-wires alternatives may be
    available to meet this difference and more. However, the appropriate
    level of non-wire alternatives cannot be determined in this way. At
    this high level of SSG-WI planning one can gain insight by doing
    this analysis, and possibly create a target for non-wires
    contributions between now and 2013.

[^4]: Some resources would have been retired and replaced by other,
    perhaps more efficient resources, but the total number of GWe would
    be the same.