FERC Can Speed the Switch to Clean Energy with the Right Transmission Planning Rule

Finn Mund

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. Upgrading the grid with the transmission needed to facilitate these new resources will be a massive challenge, involving many stakeholders. Notably, the Federal Energy Regulatory Commission (FERC) plays a pivotal role in navigating this intricate landscape and spearheading the necessary initiatives for a resilient and modernized power grid. FERC is now tackling this complex challenge head-on and planning for the build-out of extensive new transmission infrastructure.

FERC is poised to issue a rule to improve the way we plan and build the grid

Anticipated for release next week, FERC is set to issue a pivotal final rule on regional transmission planning. The rule will require grid operators and regional transmission organizations (RTOs) to roll up their sleeves and get to work on transmission planning, which will serve as a starting pistol for a more coordinated build-out of an expanded grid. A well-crafted rule will ensure that the grid is able to accommodate the massive amount of wind, solar, and storage projects that are currently waiting to connect.

What will be in the final rule? The draft rulegives us some clues:

• Regions must adopt forward-looking planning strategies:The draft rule requires planning regionsto adopt a 20-year planning horizon and incorporate various factors, including federal, state, and local regulations pertaining to decarbonization and electrification; state-approved Integrated Resource Plans (IRPs); and generation interconnection requests and withdrawals, among others. Each region is required to develop four scenarios that envision possible futures and then incorporate transmission solutions to meet these future needs.
• Regions must consider the benefits of transmission:The proposed rule outlines 12 benefit metrics that planning regions can consider when assessing the necessity for new transmission infrastructure, with a focus on economics (like savings from lower production costs and access to cheaper generation) and reliability (like decreased likelihood of load loss and mitigation of extreme weather events).
• States must agree on how to pay for the costs of this new transmission:The draft rule mandates that planning regions must obtain state approval for cost allocations, which can be done using different methods. These methods include determining costs up front, voluntary state commitments for financing upgrades, or a combination of both. However, the rule doesn't outline a plan if states can't agree. We suggest that FERC establish a default cost allocation policy based on the "beneficiary pays" principle if consensus can't be reached.

Why this rule matters

Why does this rule matter? Because we are not good at building transmission. Researchers at Princeton University have found that the rate of transmission construction must double that of the last decade or 80 percentof the potential emissions reductions enabled by the 2022 Inflation Reduction Act will be lost by 2030. Unfortunately, the United States has a poor track record of upgrading the power grid. Since 2014, North America has built just 7 gigawatts (GW) of large-scale interregional transmission (lines that can carry large amounts of power over long distances and across state lines) compared with 44 GW in Europe and a staggering 260 GW in China. The dearth of new transmission is crimping renewable power installations, which declined in 2022, the first year-on-year drop since 2017, according to a reportfrom American Clean Power.

Meanwhile, dangerous and more frequent episodes of extreme weather-like Winter Storm Elliott in December 2022, Hurricane Ida in 2021, and heat waves in 2020and 2022 throughout the western United States-have highlighted the critical issue of moving electricity efficiently into affected areas, a challenge that compromises the reliability of the grid. The consequences have been severe, with instances of dangerous blackouts and, tragically, numerous avoidable deaths.

Previous FERC efforts to modernize and standardize transmission planning, like Order 1000issued in 2011, ultimately failed to produce the development of significant regional transmission projects. Without follow-up federal action, this kind of planning has been piecemeal and voluntary.

While some grid operators, like the Midwest grid operator Midcontinent Independent System Operator (MISO), have initiated planningand already begun work on new projects, many other regional transmission areas have lagged behind. The outcomes speak for themselves: At MISO, just the first set of new transmission projects is estimated to provide 53 GW of new wind and solar energy projects, renewable plus storage projects, and stand-alone battery projects, which is enough to power 12 million homes or every home in Illinois and then some. Building these new transmission lines and renewable projects is also expected to create around 330,000 jobs.

In contrast, other regions' attempts at planning have started on wobbly footing. At PJM (the grid operator for the mid-Atlantic and part of the Midwest), a yet-to-be-approved processwould exclude state clean energy goals from transmission planning. This miscalculation would cost the region billions through inefficient grid operations and lost Inflation Reduction Act funds. It would also raise project and ratepayer costs and possibly delay states' clean energy policies while slowing the region's transition to a low-carbon economy.

FERC must issue a strong final rule

In short, this rule is important. A strong rule will help ensure access to affordable energy for all Americans, strengthen the resilience of the power grid, and expedite the transition to clean energy. FERC must therefore rise to the occasion and issue a rule that facilitates the transition to clean energy while ensuring reliability and affordability.

Thus, a final rule must, at a minimum, encompass the following elements:

• Regions must adopt 20-year planning horizons:The final rule should include the requirement from the draft rule for regions to conduct thorough, long-term plans that span at least 20 years. These assessments will form the basis for a framework that considers important factors and inputs in different scenarios, including state clean energy laws, high renewable energy usage, and increased electricity demand due to electrification trends.
• Transmission planners must consider all the benefits of transmission:Scenarios should thoroughly evaluate the potential benefits of transmission projects and use them as key factors in selecting projects. This assessment should include a wide range of economic, reliability, and resilience benefits. While not all of the benefits identified by FERC in the draft rule need to be considered, the final rule should at least specify a minimum set of benefit metrics that all regions must include in their evaluations to determine if new transmission is needed. Without this requirement, regions may selectively choose which benefit metrics to consider, leading to a risk that necessary transmission projects may not be built in some regions.
• Cost allocation standards must be clear and certain:FERC needs to make sure that any cost allocation method approved by states follows the "beneficiary pays" idea, ensuring that all states benefiting from transmission projects pay their fair share. Also, FERC should create a standard cost allocation policy to use when states can't agree. This policy would step in if there are disputes to prevent delays in planning and building new transmission lines.

A well-crafted transmission planning rule by FERC has the potential to shape a power grid that fully optimizes the capabilities of clean energy, all while prioritizing reliability and affordability. By doing so, the commission can play a pivotal role in fostering a sustainable, resilient, and cost-effective energy system. FERC must not let this opportunity go to waste.

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