By Gillian Giannetti and Christy Walsh
This week the Senate voted to confirm three new three new commissioners to the Federal Energy Regulatory Commission (FERC:) Judy Chang, David Rosner, and Lindsay See. This means that, once these three are sworn in, FERC will be restored to full capacity. And it couldn’t come a moment sooner.
FERC is at the center of the clean energy transition and carries tremendous power to make sure we can take advantage of all of the benefits of new energy resources and paradigms while maintaining reliability and affordability. With a full Commission, we now need to focus on the hard work ahead. Here are a few of the areas in need of critical attention:
Gas & Environmental Justice
Under federal law, FERC cannot approve any gas infrastructure that is inconsistent with the public interest. This federal mandate notwithstanding, since 1999, FERC has approved nearly every pipeline and liquefied natural gas (LNG) terminal application it has received, often ignoring or marginalizing evidence that a project is unneeded or harmful.
Over the past several years, FERC has repeatedly attempted to bring its reviews in line with the law. Sometimes, these efforts have been on its own volition; other times, changes have been forced by federal courts. But every time, the gas industry has used its power and influence to keep climate and environmental justice on the sideline. Which begs the question, what is the industry so worried about? If expanded gas and LNG infrastructure serves the public interest, it should be able to withstand a thorough review of its impacts on climate, environment, and public health.
In caving to pressure from industry, FERC has continued to ignore communities in the shadow of gas infrastructure, specifically Southeast Texas and Southwest Louisiana. The overwhelming majority of LNG export projects are based in these two regions, which are disproportionately low-income, non-English speaking, communities of color. For example, NRDC is currently litigating the Commonwealth LNG project proposed for Calcasieu Parish, Louisiana, despite it being next door to an environmental justice community.
FERC has never credibly analyzed the true social costs of gas development, a point highlighted by outgoing Commissioner Allison Clements. The new Commission must make this an urgent priority.
Transmission
The power grid serves as the backbone of a system that has underpinned economic activity by delivering energy to homes, businesses, and industry. But the network was designed in a bygone era to deliver energy from large, fossil fuel generators to nearby cities and towns, and we’ve failed to upgrade and modernize the system. After decades of neglect, the U.S. power grid is struggling to integrate hundreds of billions of dollars’ worth of new wind, solar and battery power. As a result, the power lines and components that once bought prosperity to far-flung rural communities and illuminated modern cities are simply not up to the job of managing the surge of new renewable energy or batteries consumers are demanding.
We’re in the midst of a historic transformation in how we plan, pay for, and permit transmission to ensure that we can double or triple the capacity of the grid to meet our clean energy goals, increase reliability, and ensure Americans have access to new sources of affordable power. We’re on our way, but we can’t slow down now.
Regional Transmission: Implementing Order No. 1920
Just a month ago, FERC announced its historic and long-awaited regional transmission rule – Order No. 1920 – ensuring that transmission providers do sufficiently long-term, forward-looking, and comprehensive regional transmission planning to meet the future’s transmission needs. This rule will ensure that new transmission planned and developed to improve reliability and affordability as the energy mix changes. The rule also includes rules on how utilities – working with their states – can allocate the costs for these new transmission projects, which often cross state lines and grid regions.
We need to build a lot of transmission, and we need to do so quickly. Order No. 1920 brings all the nation’s grid operators to the starting line. But the rule is just the first step. Now FERC needs to ensure that the utilities fully implement the Order as we set out on the race to build this critical infrastructure.
The comprehensive nature of the rule puts us in a great position. The order requires grid operators to consider scenarios that look at the real drivers of transmission, then do a cost-benefit analysis of potential transmission lines using 7 key benefits. This will help ensure a transmission system that meets our changing supply of and demand for electricity.. The rule also offers clear standards on cost allocation which will be essential for states to all pay a fair share of the costs of needed upgrades and projects.
Expand interregional transmission
Unfortunately, the FERC rule did not address interregional transmission. But time after time, we see that interregional transmission is critical to keeping the lights on during extreme weather. Once again, summer is here, and as the last several years have proven, extreme heat is here to stay.
When extreme weather events occur, grid reliability can become a matter of life-and-death. Weather systems are getting larger, and many parts of our country are at risk of overlapping extreme weather events. Because of this our ability to keep the lights on, heaters and air conditioners running, and our hopes of reducing greenhouse gas emissions hinge on the construction of new power lines. Put simply, we need a grid bigger than the weather. And in the race to build transmission, interregional lines that can carry large amounts of electricity over long distances are king.
But right now, there is no real process to plan for interregional transmission and building it simply take too long. Since 2014, North America has built just 7 gigawatts (GW) of large-scale interregional transmission, compared with 44 GW in Europe and 260 GW in China. Congress and federal regulators are weighing measures that would reform interregional transmission planning and encourage power line construction, yet meaningful regulatory or legislative action remains elusive.
Unfortunately, FERC has yet to initiate a rulemaking on interregional transfer capability, a required step before it can mandate changes. The new Commission should begin this rulemaking, and consider a few key policy specifics to catalyze greater interregional transfer capabilities, fair cost allocation, and comprehensive planning to make sure this expansion improves reliability and efficiency.
Accelerate interconnection
We also need to add new generation and storage capacity to the grid to ensure reliability and resource adequacy. As of 2022, there were about 2,000 gigawatts (GW) of new resources—primarily renewables and storage—waiting to connect to power grids across the country. That’s more than the combined output of all power plants operating in the United States today. The U.S is adding generation, mostly solar, but at a rate far too slow. According to FERC, four times as many interconnection requests were waiting in line at the end of 2023 than in 2019.
FERC has made progress here, too, with the issuance of Order No. 2023 and the recently filed compliance filings. Order No. 2023 is the first overhaul of national interconnection standards in two decades, updating an outdated system that has slowed the adoption of clean energy to a crawl. An important feature of the initiative is to require accountability among grid operators for bringing new generation online. These new rules, once implemented, will speed the addition of new resources by standardizing the interconnection process across all grid regions. It’s a change that will pay off in new clean energy technology and improved grid efficiency and reliability. FERC now needs to ensure robust compliance.
Grid-Enhancing Technologies
FERC also needs to look at its authorities to make the existing transmission system more efficient. Higher-capacity conductors, dynamic line ratings, and other grid enhancing technologies can increase power flows over existing transmission lines, allowing existing generation to access more load and new generation to come online much more quickly. Using these technologies could double the amount of interconnection capacity in the wind-rich Great Plains alone. While FERC Order No. 2023 affirms that advanced transmission technologies “could reduce or even eliminate the need for the future construction of new transmission assets,” the order requires only that ISOs and RTOs “evaluate” these technologies, not that they use them even when they are demonstrably superior in meeting grid needs. Similarly, Order. No 1920 only requires that transmission planners “consider” the use of grid-enhancing technologies. Grid operators should fully take advantage of advanced transmission technologies and maximize the capacity of the existing transmission system.
Markets
One of FERC’s core responsibilities is ensuring that wholesale rates are just and reasonable and not unduly discriminatory. Driven by dramatic cost reductions, solar, wind, and battery power are increasing rapidly, while old fossil plants are closing at a record pace. Just 15 years ago, coal power made up nearly half of the electricity produced in this country. It’s now down to less than 20 percent and forecast to be just 15 percent next year. These changes are happening, and FERC needs to ensure that its market rules evolve with the market itself. A diverse resource mix and non-discriminatory practices make our grid stronger. Without continuous policy innovation and adaptation, consumers will lose out on the reliability and affordability benefits of new resources coming online.
One issue that all of the market operators are grappling with is how to determine how much capacity a particular energy resource can be expected to deliver. Old assumptions about fossil plants being infallible and wind + solar underdelivering have been proven wrong. Failing to recognize this is a recipe for disaster. As our colleague Tom Rutigliano so eloquently said “Poor performance doesn’t cause blackouts. Poor performance that wasn’t planned for does.” FERC needs to ensure that the markets fairly and accurately accredit capacity.
Second, FERC needs to make sure that all resource types can participate in markets to their fullest extent. For example, increasing demand response and other energy efficiency resources can quickly reduce power demand during extreme weather events, decrease dependence on vulnerable fossil fuels, and avoid the need for some grid buildout. Battery storage can also be a huge game changer for the grid, particularly if the markets can capture the full potential of these flexible resources. But these resources can’t provide these services if the tariffs don’t let them. Inaction and artificial barriers to entry or participation should not keep consumers from gaining the benefits of new resources.
Most generally, the high-renewables grid is going to be different than the one we’re used to. For example, the grid will be often be oversupplied with low cost or free power—a problem that market designers twenty years ago never thought about. On the other hand, some services that traditional power plants provide automatically will now need to be explicitly priced and purchased. FERC needs to take a good look ahead and begin work on how to adjust markets to keep up with these changing circumstances, all while maintaining its traditional vigilance against market manipulation and other exploitive practices.
There is also a lot going on in the West. CAISO’s Extended Day-Ahead Market has been approved, SPP Markets+ has been filed with the Commission, and the Western Pathways Initiative is well on its way to toward independent governance for a West-wide market. FERC will need to pay close attention to the West as these initiatives develop.
Conclusion
In short, there is a lot going on in the energy sector, and FERC is squarely in the middle of it all. With FERC now up to full capacity, we look forward to seeing it move forward on all of these important initiatives.
