The policies that govern U.S. transmission grid planning and investment can’t support the country’s need for an unprecedented expansion of clean energy. Federal regulators need to declare the current paradigm “unjust and unreasonable,” and implement a new one to spur hundreds of billions of dollars of investment in a nation-spanning transmission build-out over the next decade.
That’s the stark conclusion of Planning for the Future, a new report sponsored by clean-energy groups that have been demanding a major overhaul of federal transmission policy for years and see the Biden-Harris administration and a Democratic-controlled Congress as offering a pathway to get there.
The fundamental premise of the report — that the country needs large-scale, interregional transmission to meet its future energy needs — is also supported by seven former commissioners of the Federal Energy Regulatory Commission, the key government agency that can get the job done.
“Not only yes, but hell yes,” James Hoecker, FERC chairman from 1997 to 2001, said of the need for major new transmission investment in a Wednesday webinar introducing the report. Beyond the need to absorb the country's growing share of wind and solar power, the grid will likely “need to double in size to support the electrification of transportation, heat and other industrial processes,” all of which are needed to decarbonize the U.S. economy.
Hoecker’s view was echoed by former FERC chairs Elizabeth Anne Moler, Pat Wood III, Joseph Kelliher, Jon Wellinghoff and Norman Bay, plus former FERC commissioners Nora Mead Brownell and Phil Moeller.
“There is no climate plan that is serious if it does not anticipate a significant regional transmission upgrade,” Pat Wood III, CEO of Hunt Energy Network and FERC chair from 2001 to 2005, said in Wednesday’s event.
The 92-page report comes amidst a major shift in federal energy policy. President Joe Biden’s broad-ranging climate and energy executive order signed Wednesday directs federal agencies to “accelerate clean energy and transmission projects under federal siting and permitting processes in an environmentally sustainable manner," with FERC and the Energy Department the pertinent federal agencies overseeing transmission. Richard Glick, the newly named Democratic FERC chairman, has highlighted transmission policy as a key focus for the agency this year.
That could set the stage for reforming a transmission paradigm, evolved over two decades of FERC policy, that is failing to keep up with existing renewable growth, let alone that anticipated under the Biden-Harris administration’s goals to decarbonize the electricity sector by 2035.
“Ten years after FERC’s last major transmission policy action, there are known successful practices to emulate and pitfalls to avoid,” said Rob Gramlich, report co-author and CEO of sponsor Americans for a Clean Energy Grid.
The problems with transmission today
Those pitfalls include “projects that address only local needs, that address reliability without more broadly assessing other benefits, or that simply replace old retiring transmission assets with the same type and design,” Gramlich and report co-author Jay Caspary state in the document.
Over the past decade, only a handful of grid operators have taken on the complicated process of aligning multiple states and utilities to build regional transmission capacity to support large-scale wind and solar from the remote areas where it’s most cost-effective to the population centers where the power is most needed.
As those efforts have run their course, standing policy has forced new wind and solar projects to take on the grid upgrade costs of interconnecting to transmission networks themselves. Those upgrade costs have risen to levels that have pushed more and more developers to abandon their plans, and stymied grid planners with a constant shuffling of their interconnection queues.
Meanwhile, FERC Order 1000, passed in 2011, has failed in its goal of creating workable policies to enable transmission to be built between the country’s regional transmission organizations (RTOs) and independent system operators (ISOs). Instead, it has created a structure where would-be RTO-spanning projects must cross a "triple hurdle" of planning processes, one for each RTO and a third developed for the purpose of Order 1000 compliance, and which has proven too complex to successfully navigate.
“I say ‘hell yes’ as well; we need to do more interregional transmission,” Wellinghoff, former FERC chairman from 2009 to 2013 and current CEO of GridPolicy, said at Wednesday’s event.
“Order 1000 has fallen short on its vision, certainly short on my vision of it."
Instead, transmission has become a largely parochial affair in recent years. A Brattle Group analysis of the $70 billion in utility transmission projects in ISO and RTO regions between 2013 and 2017 showed about half of it was approved “outside regional planning processes or with limited stakeholder engagement.” A full 97 percent “was not subject to a competitive selection process, either because it was built to address a near-term reliability need, upgraded existing infrastructure, or fell below RTO thresholds.”
To fix this, FERC “has an obligation to find under Section 206 of the Federal Power Act that current tariffs are unjust and unreasonable, and must be replaced with new transmission planning, cost allocation, and review guidelines,” Gramlich and Caspary write in the report.
What a future-forward transmission policy could look like
The first step should be a “comprehensive FERC planning rule” that opens up the current limited scope of transmission planning, Gramlich said. Today, ISOs and RTOs evaluate the need for individual transmission projects in silos of solving reliability problems, yielding economic benefits, or fulfilling public policy imperatives, he explained.
But the few successful examples of forward-thinking transmission expansion over the past decade have combined these disparate valuations, he said. Those include Texas grid operator ERCOT's competitive renewable energy zones effort, Southwest Power Pool's designation of “priority” projects, and the Midcontinent Independent System Operator’s multivalue projects process.
As the name of MISO’s effort indicates, it worked to identify multiple values for utilities and states facing a predictable growth in wind power, seeking to encourage stakeholders to agree on shared costs and benefits for the transmission projects needed ahead of time to integrate it, Gramlich said.
“It was a consensus plan and FERC approved it, and we’ve got 15 gigawatts more wind than we otherwise would have had in that region,” he said.
FERC’s new rule should standardize a similar approach, combining reliability needs with economic and public policy factors in a far more expansive way, he said. That means taking renewable energy growth from state mandates, utility resource plans and corporate clean energy procurements into account, as well as the changing nature of load to come from growth in electric vehicles and building heating.
It should also shift from studying single projects to examining multiple portfolios and multiple scenarios, including those involving independent "merchant" transmission projects, he said. That’s more complicated than assessing proposed projects one at a time using limited criteria.
“Nobody likes transmission. We will always be litigating it,” Nora Mead Brownell, co-founder of energy consultancy Espy Energy Solutions and FERC commissioner from 2001 to 2007, said during Wednesday’s event. “But I think if we had a more fact-based basis for it and...more coordination between regions,” a broader planning regime could “build people’s confidence that they’re getting a fair shake.”
To measure widely varying scenarios, FERC will need to direct ISOs and RTOs to adopt revamped methodologies for assessing multiple categories of costs and benefits, he said. Some of these values can be measured in terms of dollars and cents or reliability metrics. But others will be harder to quantify and compare.
A national transmission plan?
This might require FERC’s active intervention in more local project planning to evaluate whether a regional or an interregional project would be a better fit, the report noted. That could put FERC in conflict with utilities that have traditionally held the initiative in proposing and earning rate recovery from projects that meet their own needs, while avoiding those that could force them into the more complex realm of negotiating shared costs and benefits with multiple parties.
But that’s no excuse for a system in which “so many known aspects of the future portfolio are simply ignored,” Gramlich said. In that light, the new report represents “the radical idea that planning should actually be about the future.”
The former FERC commissioners participating in Wednesday’s webinar agreed that FERC has broad authority to set much broader federal oversight over interstate and interregional transmission policy. “This is interstate commerce, these are sales for resale, and most importantly, it’s in the national interest,” Wood said.
But until recently, FERC hasn’t had specific guidance from Congress on what Hoecker described as “a real national energy policy and strategy.”
The Biden-Harris administration’s plan to create a clean energy standard might serve just that purpose, several former FERC chairs agreed. That’s because it could codify a federal grid decarbonization policy that FERC could then take up as providing the mandate to implement transmission policy to enable.
This concept of a “national grid plan” isn’t included in the long list of proposed reforms in Wednesday’s report, Gramlich said, “although we wouldn’t object to that.”
At the same time, “I think a lot of parties need to be brought along a little more gradually than that. I’d love to see some studies of national grid plans, like the NREL interconnection Seams study. I think further work on that might be very helpful and useful.”
