FERC passed big transmission reforms; now the hard part begins
Last week, the Federal Energy Regulatory Commission approved FERC Order 1920, a 1,300-page regulation that will transform how the U.S. power grid is planned and paid for. Now comes the hard part — turning those reforms into the thousands of miles of power lines the U.S. needs to transition from fossil fuels to clean, cheap, and reliable power. Clean energy investors, environmental groups, and grid reliability experts praised FERC’s two-member Democratic majority for crafting new rules that give the country a chance to build power lines at the rate needed to meet climate goals. Republicans in Congress — and at FERC itself — attacked the order as an attempt to force the cost of meeting clean energy policies onto unwilling states and utility customers. Legal challenges are almost certain to emerge. But supporters of FERC Order 1920 warned that roadblocks beyond lawsuits threaten the long-term benefits of the new transmission reforms. Perhaps the bigger challenge, they said, is making sure that the utilities, grid operators, and state regulators tasked with carrying out the reforms actually follow through over the coming years. “There are certainly opportunities for rehearing, and for this to be appealed in the courts, that could delay things,” Christina Hayes, executive director of pro-transmission trade group Americans for a Clean Energy Grid (ACEG), said during a Wednesday press conference. But there’s also “a lot to be worked out within states and within regions to implement it.” FERC’s order applies most directly to the country’s regional grid operators, which manage transmission networks that provide electricity for about two-thirds of the U.S. population. With the exception of the Electric Reliability Council of Texas (ERCOT), the grid operator for most of the state, all these regional grid organizations must craft plans to comply with the order and submit them for FERC review by spring 2025. NRDC Sustainable FERC project But just how each of these grid operators goes about meeting FERC’s new rules depends greatly on their individual makeup, governance structures, and preexisting regional planning expertise, said Rob Gramlich, president of consultancy Grid Strategies. Some, such as the Midcontinent Independent System Operator (MISO) and the grid operators for the states of California and New York, have already been active in long-term grid planning and may not face as many novel challenges in complying with FERC’s new order, Gramlich said. But others aren’t as well prepared. In areport last year, ACEG and Grid Strategies gave poor grades to the regional transmission planning and development structures for Independent System Operator (ISO)–New England, which includes six states, and PJM, which serves a 13-state region from the mid-Atlantic to Chicago. That report also gave low marks to the regional transmission planning structures in the parts of the country that aren’t governed by a central grid operator, including the Southeast and the West between California and the Great Plains. The mechanisms for aligning the transmission plans and investment decisions of different state-regulated utilities in those swaths of the country are far less organized than they are for those managed by regional grid operators, further complicating implementation of FERC’s mandates. But several regional grid operators “have been bolstering their transmission planning processes” in the two years since FERC began working on its reforms, Hayes said. ISO–New England submitted a proposal to FERC last month. PJM has been working on a regional transmission plan for the past year. SPP, the grid operator serving Oklahoma, Kansas, and parts of 11 other states, is working on a consolidated planning process. And the Western Power Pool, a looser organization of utilities across the U.S. West, has formed the Western Transmission Expansion Coalition to explore joint transmission planning. “There are a lot of exciting things happening in different regions around the country,” Hayes said. FERC’s new order “is definitely going to help ensure that they elevate their game.” Just how these different grid regions will gain consensus among the utilities, state regulators, and other decision-makers will depend on a lot of different factors, however — including the clean energy policies of these stakeholders. The big split over who pays — supercharged by clean energy politics Today, solar, wind, and batteries make up the vast majority of power generation projects seeking to be interconnected to transmission grids. At the same time, a growing number of coal-fired power plants are set to close in the coming years, both due to state clean-energy policies and uncompetitive economics. These two variables are vital to consider when planning regional transmission needs — but in many parts of the country, they aren’t part of the equation. In fact, the failure to build new power lines to accommodate these changes over the past decade is a big reason why so many clean-energy projects can’t connect to the grid today, and why the need for grid reliability is preventing some coal plants from being closed down. One reason the transmission buildout has been so slow to date is that it’s hard to accurately assess and apportion the costs and benefits of a given project. The costs of building regional transmission projects are assessed to utilities within these regions and eventually borne by their customers in the form of bill increases. Meanwhile, the benefits of expanding transmission — lower power costs due to less congested grids, reduced threat of grid outages, and increased capacity to bring new generators online — are more diffuse and can be harder to attribute to any one state or utility. These dynamics give utilities and state regulators an incentive to try to avoid paying for projects on the grounds that other states and utility customers might benefit more than their own ratepayers. When taken to its extreme, that causes what energy experts describe as a “free rider” problem — individual utilities and states avoiding paying for projects that do, in fact, provide them benefits. In the past decade, these cost-allocation squabbles between states and utilities have been supercharged by the politics of climate goals. States controlled by Republicans are increasingly demanding that they shouldn’t have to pay for regional transmission projects that they say are driven only by other states’ clean energy policies.
Last week, the Federal Energy Regulatory Commission approved FERC Order 1920 , a 1,300-page regulation that will transform how the U.S. power grid is planned and paid for. Now comes the hard part — turning those reforms into the thousands of miles of power lines the U.S. needs to transition from fossil fuels to…
Last week, the Federal Energy Regulatory Commission approved FERC Order 1920, a 1,300-page regulation that will transform how the U.S. power grid is planned and paid for. Now comes the hard part — turning those reforms into the thousands of miles of power lines the U.S. needs to transition from fossil fuels to clean, cheap, and reliable power.
Clean energy investors, environmental groups, and grid reliability experts praised FERC’s two-member Democratic majority for crafting new rules that give the country a chance to build power lines at the rate needed to meet climate goals. Republicans in Congress — and at FERC itself — attacked the order as an attempt to force the cost of meeting clean energy policies onto unwilling states and utility customers. Legal challenges are almost certain to emerge.
But supporters of FERC Order 1920 warned that roadblocks beyond lawsuits threaten the long-term benefits of the new transmission reforms. Perhaps the bigger challenge, they said, is making sure that the utilities, grid operators, and state regulators tasked with carrying out the reforms actually follow through over the coming years.
“There are certainly opportunities for rehearing, and for this to be appealed in the courts, that could delay things,” Christina Hayes, executive director of pro-transmission trade group Americans for a Clean Energy Grid (ACEG), said during a Wednesday press conference. But there’s also “a lot to be worked out within states and within regions to implement it.”
FERC’s order applies most directly to the country’s regional grid operators, which manage transmission networks that provide electricity for about two-thirds of the U.S. population. With the exception of the Electric Reliability Council of Texas (ERCOT), the grid operator for most of the state, all these regional grid organizations must craft plans to comply with the order and submit them for FERC review by spring 2025.
But just how each of these grid operators goes about meeting FERC’s new rules depends greatly on their individual makeup, governance structures, and preexisting regional planning expertise, said Rob Gramlich, president of consultancy Grid Strategies.
Some, such as the Midcontinent Independent System Operator (MISO) and the grid operators for the states of California and New York, have already been active in long-term grid planning and may not face as many novel challenges in complying with FERC’s new order, Gramlich said. But others aren’t as well prepared.
In areport last year, ACEG and Grid Strategies gave poor grades to the regional transmission planning and development structures for Independent System Operator (ISO)–New England, which includes six states, and PJM, which serves a 13-state region from the mid-Atlantic to Chicago.
That report also gave low marks to the regional transmission planning structures in the parts of the country that aren’t governed by a central grid operator, including the Southeast and the West between California and the Great Plains. The mechanisms for aligning the transmission plans and investment decisions of different state-regulated utilities in those swaths of the country are far less organized than they are for those managed by regional grid operators, further complicating implementation of FERC’s mandates.
But several regional grid operators “have been bolstering their transmission planning processes” in the two years since FERC began working on its reforms, Hayes said. ISO–New England submitted a proposal to FERC last month. PJM has been working on a regional transmission plan for the past year. SPP, the grid operator serving Oklahoma, Kansas, and parts of 11 other states, is working on a consolidated planning process. And the Western Power Pool, a looser organization of utilities across the U.S. West, has formed the Western Transmission Expansion Coalition to explore joint transmission planning.
“There are a lot of exciting things happening in different regions around the country,” Hayes said. FERC’s new order “is definitely going to help ensure that they elevate their game.”
Just how these different grid regions will gain consensus among the utilities, state regulators, and other decision-makers will depend on a lot of different factors, however — including the clean energy policies of these stakeholders.
The big split over who pays — supercharged by clean energy politics
Today, solar, wind, and batteries make up the vast majority of power generation projects seeking to be interconnected to transmission grids. At the same time, a growing number of coal-fired power plants are set to close in the coming years, both due to state clean-energy policies and uncompetitive economics. These two variables are vital to consider when planning regional transmission needs — but in many parts of the country, they aren’t part of the equation.
In fact, the failure to build new power lines to accommodate these changes over the past decade is a big reason why so many clean-energy projects can’t connect to the grid today, and why the need for grid reliability is preventing some coal plants from being closed down.
One reason the transmission buildout has been so slow to date is that it’s hard to accurately assess and apportion the costs and benefits of a given project.
The costs of building regional transmission projects are assessed to utilities within these regions and eventually borne by their customers in the form of bill increases. Meanwhile, the benefits of expanding transmission — lower power costs due to less congested grids, reduced threat of grid outages, and increased capacity to bring new generators online — are more diffuse and can be harder to attribute to any one state or utility.
These dynamics give utilities and state regulators an incentive to try to avoid paying for projects on the grounds that other states and utility customers might benefit more than their own ratepayers. When taken to its extreme, that causes what energy experts describe as a “free rider” problem — individual utilities and states avoiding paying for projects that do, in fact, provide them benefits.
In the past decade, these cost-allocation squabbles between states and utilities have been supercharged by the politics of climate goals. States controlled by Republicans are increasingly demanding that they shouldn’t have to pay for regional transmission projects that they say are driven only by other states’ clean energy policies.