AEP looking at hefty transmission investments for shale gas customers
If forecasts by AEP Transmission Planning are close to the target, AEP may need to invest hundreds of millions in transmission facilities over the next five years to keep up with requests for service from natural gas and oil customers in AEP's eastern service territory where drillers and processors are swiftly expanding and intensifying their operations above the Utica and Marcellus shale deposits.
That projection does not count possible investments linked to increasing service requests in AEP's western footprint in Texas and Oklahoma, which are also experiencing booms in natural gas and oil production.
In the company's eastern territory alone cumulative long-term load requests (in-service load plus long-term potential load) stemming from the shale gas boom in Ohio and West Virginia could reach nearly 1.6 gigawatts by early 2019 (see graph), an amount representing about 35 percent of the existing load for Central Ohio. Add to that nearly 900 megawatts in long-term cumulative service requests from customers in the western territory.
Service requests on rise
"New transmission service requests continue to mount. Based upon the natural resources, market indicators and other trends, we expect shale gas expansion will continue for at least a decade," said Daniel Zambory, manager of Transmission Planning. "We are receiving many new requests because we have built a reputation for listening to customers and meeting their needs. Customers are trying to shift their operations into AEP's footprint so they may work with us. They know we will get them in service on schedule."
While electricity is needed for drilling operations, the greatest demand in the eastern Utica and Marcellus shale regions (see map) comes from customers planning to build industrial-sized natural gas processing plants in rural areas of West Virginia and Ohio. The challenge is the requests are concentrated in a region (see map) served by "light" transmission or sub-transmission infrastructures that cannot handle substantial customer load growth. Presently, capacity limitations prevent five of these customers from ramping up their industrial operations. To accommodate the anticipated extra load, the existing undersized transmission system in this area has to be fortified, Zambory explained.
"We have improved the transmission system in the area, yet we still have a long way to go to build additional infrastructure so we may continue to connect new customers to our transmission grid," he said.
The story is different in the west. Customer requests are spread out and currently do not stress the overall transmission system as severely (see map).
Expansion also creates revenue
The answer is a five-year transmission expansion plan involving construction of new stations, rebuilding hundreds of miles of transmission lines to higher capacities, re-conductoring lines, and installing switching stations and new transformers. The estimated spend through 2019 could reach $775 million in the eastern footprint.
Foregoing the investment could lead to missed transmission and distribution revenue opportunities beyond the $24.4 million a year for the five customers noted above, according to calculations done by Transmission Planning. (The figure does not count the missed millions in generation sales.)
"We've been working closely with PJM [a regional transmission organization] and the Ohio Power Siting Board, and believe most of these emerging projects will be approved as baseline upgrades," said Zambory. "Besides supporting customer needs, we have the potential to grow earnings through investment and customer connections."
Response to customers sets AEP apart
Customers choose to locate their facilities in AEP territory because it has a track record of delivering power on time, thanks to a few technological innovations (listed below) and a customer-focused culture.
"Our employees and culture differentiate us from other utilities," said Zambory. "We hear from customers all the time about how AEP is responsive to customers' needs. We have the solutions for customers whether they need power in a few weeks, a few months or in a year."
Solutions for customer service requests
The customer-focused innovations described below also demonstrate AEP Transmission's aptitude for developing new technology to address business opportunities emerging across the corporate service territory.
Skid-mounted substation – This diminutive, prefabricated substation can be built on a small lot and energized in less than 10 weeks to provide temporary service while a permanent station is constructed. It is designed for easy shipment and using multiple times.
Station-in-a-box – All material and equipment for this larger-sized station is packed in portable steel containers for transport to a permanent site. Each unit features a "drop in control module" or prefabricated control room for construction in six months, half the time for a traditional station
Box bay – This quickly installed box-shaped structure built in a right-of-way taps into an existing transmission line and runs power to nearby customer. They may be equipped with SCADA devices, meters and remote terminal units.