The Federal Energy Regulatory Commission (FERC) has implemented a set of sweeping reforms to facilitate interconnections between the US power grid and clean energy projects, as the nation grapples with a considerable backlog that threatens its climate goals.
The Federal Energy Regulatory Commission (FERC) has implemented a set of sweeping reforms to facilitate interconnections between the US power grid and clean energy projects, as the nation grapples with a considerable backlog that threatens its climate goals. FERC's unanimously approved Order 2023 imposes stricter deadlines and penalties for project developers who fail to secure necessary financing and land rights for proposed projects in time. The order also introduces penalties for grid operators and utilities failing to complete critical interconnection studies within the set timelines.
By the end of 2022, more than 2,000 gigawatts (GW) worth of projects, primarily wind, solar, and battery storage, were seeking grid interconnection. Some regions have been experiencing wait times of over five years, with average projects not set to begin construction until 2028.
The Order 2023 reforms also require grid operators to adapt long-standing processes that have hindered battery and hybrid projects from securing interconnection approval. It encourages the use of advanced transmission technologies to augment existing grid capacity.
While clean energy groups have generally praised FERC's reforms, they assert that much more is required to resolve the country's grid backlog issues, including speeding up the construction of new transmission lines. Furthermore, they underscored the necessity for the implementation plans to be carried out effectively by the regional transmission organizations and independent system operators, who now have 90 days to comply with FERC's new rules.
Overall, FERC’s new order is expected to standardize interconnection processes, stimulate the use of new clean technology, improve grid efficiency and reliability, and demand accountability for bringing new energy sources online.
FERC's actions to reform grid interconnection, although important, is just the first of many steps required to address the lack of sufficient transmission for increasing clean energy adoption.
As reported by Canary Media, with U.S. power grids becoming increasingly constrained, organizations like the U.S. Department of Energy, Princeton University, and think tank Energy Innovation have called for the U.S. to 2x or even 3x its pace of transmission buildout to meet the Biden administration's zero-carbon power grid goal by 2035. The significant clean energy incentives made available through last year's Inflation Reduction Act can only be utilized fully through such an expansion.
Despite having abundant energy resources like geothermal, solar, and wind, the U.S. grid lacks capacity to deliver this energy nationwide. For example, we previously reported on FERC's attempt to seek reforms to enhance interregional transfer capacity and reduce grid congestion to streamline renewable energy integration. Transmission infrastructure expansion could alleviate this.
Cheap energy often gets "trapped" due to lack of transmission capacity, leading to energy being sold at negative prices. Building more transmission infrastructure would allow cheap power to flow to consumers, driving down power prices and encouraging more investment in energy development.
"Transmission" refers to the process by which electricity is transported over long distances, and transmission as a concept (as well as transmission lines as a physical entity) are the conduit that brings electricity from the generating plants where it's produced to the distribution systems that deliver power to individual consumers and businesses.
The U.S. electrical grid is segmented into three supergrids (East, West, and Texas/ERCOT), which further divide into 11 regional grids and then into local grids. Transmission forms the high-voltage backbone of the power grid, as it acts like the expressway that enables electricity generated by a wind farm in the Plains or a hydroelectric dam in the Rockies to reach homes and industries thousands of miles away.
After being generated, electricity is "stepped up" to high voltage levels for efficient long-distance transmission with minimal energy loss. The electricity travels through an interconnected network of high-capacity lines, often seen as steel-lattice towers or poles marching across the landscape.
Once it reaches the vicinity of its ultimate users, the high-voltage electricity is "stepped down" via substations to a lower voltage suitable for distribution to homes, offices, and factories. This entire journey, from power plant to plug, represents the essential role of transmission in electricity.
Currently, the U.S. significantly lacks transmission infrastructure, leading to vulnerabilities to power outages, increased costs, and hindrance to the growth of domestic energy sources and related jobs.
One problem is that the country lacks sufficient high-capacity interregional lines, affecting the reliability and affordability of electricity.
Since more than 83% of power outages since 2000 were caused by weather-related incidents, absence of adequate transmission lines leaves many Americans susceptible to long-lasting blackouts during severe weather conditions.
For example, during the Texas deep freeze, the state's isolated grid and inadequate transmission connections resulted in more than 246 deaths, over 4.5 million people without power, and estimated damages exceeding $195 billion.
It's not just about safety, though. It's been argued that building more transmission lines can offer economic benefits, including increased job opportunities, economic growth, and cost savings for American families.
For example, the average U.S. electric bill is almost $137 per month, equating to 3% of the median household’s take-home pay. Greater access to cheap energy through expanded transmission infrastructure can reduce the average household’s electricity bills by $300 per year.
As as the Niskan Center writes, the TransWest Express Transmission Project is expected to generate up to $9.5 billion in the Mountain-West region over the next 50 years. Comprehensive portfolios in the Great Lakes region and along the Mississippi could generate as much as $74.8 billion in economic benefits.
And transmission line construction creates jobs: the National Renewable Energy Laboratory (NREL) found that a 20-mile line typically leads to 114 construction jobs and 2 maintenance jobs. Their analysis also indicates that a 180-mile line could create 500 construction and 70 maintenance jobs.
And when you factor in the growth of the energy sector, especially in wind and solar, job growth could reach over 1.5 million in transmission and 7.5 million throughout the entire sector by 2050.
In the United States, about 5% of electricity is lost during the transmission and distribution process annually, as per the U.S. Energy Information Administration (EIA) estimates from 2017 to 2021.
Specifically, 1-2% of energy is lost during the step-up transformer phase, which occurs from the point of electricity generation to its transmission, and another 1-2% is lost during the step-down transformer phase, which happens from the transmission line to distribution.
One recent technological breakthrough, that is seeming more legitimate by the day, is that of a room temperature superconductor. While the initial paper announcing the breakthrough has still yet to be officially peer-reviewed, the findings have since been replicated twice in preliminary testings.
The reason this is important is because if wires and transmission lines were made out of superconductive material, that ~5% transmission losses would be nearly negated.
FERC aims to undertake significant transmission reforms, including interconnection queue reform and regional transmission planning, in what is described as the greatest transmission reform effort in a generation.
While these steps are expected to expand clean energy capacity and enhance grid reliability, the commission has yet to reach a consensus on cost allocation, which could pose a challenge to quickly adding new projects to the grid.
One major area of concern is the grid capacity of the Midcontinent Independent System Operator (MISO), which is heavily constrained and needs a multibillion-dollar transmission expansion plan. The issue of cost allocation, i.e., how to divide the cost of necessary grid upgrades between utilities and project developers, is also contentious.
The existing rules place significant burdens on new project developers, often reaching costs as high as the total project cost and leading to project abandonment. As Devan Hartman writes for RealClear Energy, current regulations may actually favor wasteful spending on inefficient projects and could stifle progress. Over 90% of the annual $20-$25 billion expenditure on transmission is neither subject to competitive bidding nor a cost-benefit test.
Regulators typically rubber-stamp projects led by local monopoly utilities, with consumers shouldering the financial burden. Mark Christie, Republican Commissioner of the Federal Energy Regulatory Commission (FERC), has emerged as a champion in addressing this issue in partnership with states.
Challenges in interregional transmission, a policy area not equipped with a framework, are harder to tackle. Severe weather events and "insufficient transmission for large power transfers" are increasing the need for interregional transmission, which could be significantly more cost-effective and reliable compared to smaller projects.
Hartman argues the gas industry provides a potential model for transmission, having experienced a revolution thanks to nationwide competitive reforms. Around one-third of states have adopted similar competitive reforms in the electric industry, with retail energy providers and transmission developers seeking similar changes.
However, the majority of the U.S. continues to depend on vertically-integrated monopoly utilities, creating a financial incentive to manage costs and often prompting them to favor expensive local transmission and power plant projects over cost-effective large-scale transmission. Entergy's recent decision to undercut a $100 million transmission project in favor of a new billion-dollar power plant serves as a stark example.
To address this issue, mandatory transmission planning requirements could be one viable option to promote the least-cost transmission development. Proposals such as minimum interregional transfer requirements have been floated, with the BIG WIRES Act incorporating this idea.
Conservative thought leaders like Hartman resist a uniform requirement across all regions, as grid economics and reliability conditions vary. They suggest a tailored approach, setting transfer levels based on region-specific conditions and cost-benefit analyses, leading to a "no regrets" transmission development strategy.
The expansion of transmission infrastructure promises greater energy security, cost reductions, economic growth, and access to vast sources of clean, low-cost energy, mitigating risks of future large-scale power outages.
In an era of rising costs and worsening reliability conditions, the call to action is clear: where feasible, voluntary capital should be mobilized to invest in new transmission infrastructure. For the rest, the focus must be on cost-effective, reliability-focused "no regrets" transmission solutions, treating this as a matter of energy security, not just political convenience.
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