What’s Stalling the Transition to a Modern Electricity Grid

Much of our electricity system is 50 to 70 years old, yet current plans for domestic manufacturing, electric vehicle fleets, community solar gardens and more clean energy all depend on a modern grid. New demands for electricity and the need to reduce climate-changing emissions are driving new grid planning efforts. The obstacles to new technology and more effective investments need to be addressed. How we do this, and how well it happens, depends on planning and collaboration across local, state and federal government.

First, the demand

The ability of the current US power grid to handle growth in electricity demand is in doubt. We are already having blackouts in extreme cold-weather, due to electric supplies dependent on an antiquated gas industry. Local supply limits on the grid are causing delays for big new users of electricity, such as data centers and new US manufacturing. Internet communications, AI services and cryptocurrency mining, create city-sized demands for electricity. Smaller, decentralized growth in electric heat pumps for buildings, and electric transportation replacing fossil fuels also require more access to electricity and a modern grid.

Add the supply

We have more energy-producing facilities than ever before, and the United States is producing record levels of energy. The problem is that energy needs to be distributed. New solar production on landfills, over parking lots, and in wide open spaces need to be able to transmit the electricity they generate. Lots of planned new windfarms, even offshore, also need transmission from the windy places to consumers. Even new gas drilling uses electric power. All these new supplies depend on the grid to operate and produce. Today, inadequate grid facilities and slow-motion planning are blocking the addition of new electric generators, especially new clean supplies. Many new projects are stuck for years waiting just to learn grid connection costs and then learn that the costs and delays are too great for the projects to bear.

Now, collaborate

It is widely agreed that electric reliability is in everyone's interest. The current difficulties in getting the grid improvements we need stem from insufficient collaboration at the local, state and federal levels. Planning rules at every level emphasize reliability, but the rules differ over changes in energy supplies and how to count benefits. Proposed reforms aim to address those differences. A recent review of over 1,300 proposed transmission lines shows the regional differences in approach are inhibiting planning for new supply and consumer cost savings in PJM grid region (Illinois to North Carolina) and the Southeast United States.

As we work toward collaboration to help speed a modern grid, here are some recommendations:

• At the local level, developers and utilities must recognize the impacts from building new infrastructure are unequal in the way they impact different communities. UCS pushes for real engagement with real concerns from neighbors to create an equitable build-out of the power grid. That means more than a flashy campaign from developers is needed; meetings with stakeholders should be held to discuss mitigation measures and ways to bring benefits to impacted communities, and follow-up is needed to make sure promises are kept.

• At the state level, governments need to do more to facilitate new transmission lines. State leadership can bring public attention to the need and opportunity to improve energy efficiency of homes, and simultaneously accommodate growth of renewables and new uses. In some states, when the legislature created new clean energy goals they also started transmission planning to help meet those goals. Texas went first in 2005, with a law called SB 20. The law authorized the creation of new transmission to serve "renewable energy zones" and a process to identify and select such zones. That became a model used in the Illinois Clean Energy Jobs Act (CEJA), which also combined new clean energy goals and state designation of renewable energy zones and related transmission. Nevada adopted a law called SB 448 in 2021, directing utilities to build transmission that meets state goals.

• States can include more perspectives from the public and consider more policies related to energy, justice, the environment when convening this kind of planning. The example set by the California Renewable Energy Transmission Initiative demonstrated how state-led efforts can be collaborative, transparent and far more inclusive than typical transmission development efforts. When states are in charge, state priorities and participation standards will be included. Typical utility planning is often opaque, despite the involvement of independent grid operators.

States and Federal system align, maybe

Where state laws, such as Illinois's CEJA, require new discussions and actions for grid modernization and decarbonization, leadership can promote collaboration and more open process. The Illinois law calls for the state, not the utilities, to create an Illinois "Renewable Energy Access Plan" every two years to achieve clean energy goals. The first draft plan includes new collaborations with regional planners, and the local utilities, to discuss transmission plans before they are finalized and difficult to change. UCS promoted this as a way to make the best use of the mix of authority and responsibility for grid reliability, energy policy, and new investment. This can be especially helpful in planning proactively for transmission fixes needed to close old power plants.

States have only a few means to work with the federally-regulated regional grids to expand the transmission system, but regional and federal bodies are gradually adopting new approaches for state-led efforts. California ISO has a newly approved rule for state-sponsored transmission (which builds on cooperative agreements between the California ISO and the state) and the New England grid governance process is taking initial steps to support the states' needs for transmission following years of advocacy by states. In the past, the provision in the PJM grid for a state agreement approach was a means to bypass regional attention to policy impacts on the grid.

While we wait to see how proposed but yet-unfinished new rules on transmission from the Federal Energy Regulatory Commission (FERC) will change practices, the US Department of Energy has been approving new money to help build multi-state transmission. Cost-sharing is a common snag for such transmission. The guiding principle is "beneficiary pays," but the utility industry has a horrible record at defining benefits from transmission. The default has been, whoever asks for transmission must pay the whole cost. This isn't the approach to any other infrastructure. Reform around this is a huge and active policy debate.

Federal rules expand planning with states

In 2021, FERC opened two related initiatives: formal convenings with state regulators in a transmission task force and comprehensive review of rules for transmission and grid connection of new generators. Both of these are still in progress, with a new federal-state collaboration on broadly defined issues and imminent decision on transmission planning reforms.

FERC's greatest impact will come from finishing and enforcing the proposed new rules for transmission planning. These can provide clear guidance and re-establish the balance of authority between utilities and public policymaking. FERC's draft rule requires that transmission planning include the state, and local laws that affect future energy supplies, such as clean energy goals and renewable energy standards. FERC sees ignoring these laws, and also state approvals of utility supply plans, in transmission planning as bad for reliability and ripe for reconciliation with explicit new rules.

In a significant accommodation of states' roles, the draft calls for providing state regulators with a formal opportunity to affect planning, cost-sharing and long-term transmission needs. The draft rules from FERC also encourage utilities to work with state officials to identify renewable energy zones. This insistence on power-sharing reflects the divided political opinions in government today, and may actually be the path forward.

Time is now for transmission reform

FERC Chairman Phillips frequently points to the importance of ongoing transmission reforms. As he put it recently, "There is no single action that the Commission can take that will contribute more to enhancing the reliability, resilience and affordability of our electric grid than to facilitate the development of needed electric transmission at just and reasonable rates."

UCS began pushing for strong planning with new rules as early as 2009. Unfortunately, FERC's currently proposed rules allow most reforms to be optional. FERC also decided to delegate decisions on two fundamental things blocking investment in transmission: the recognition that new transmission widely benefits many users, and the allocation of costs in exchange for receiving the benefits of new transmission. Despite the fact that the proposed FERC rules include much discussion of benefits, they once again defer to utilities the task of defining benefits and beneficiaries. The FERC draft rules also fail to address the issue of cost sharing, other than the general instruction for utilities to find some agreement with the state or states where they operate.

To be successful, grid expansion will require collaboration. State government roles, economic considerations, and local interests all must be recognized. So far, the details of how that collaboration will work have yet to be decided by states, grid planners, or the soon-to-be released final FERC rules.

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