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The country’s chief energy regulator issued major updates to the transmission planning process.
On the two ends of the energy transition, public policy is working to encourage more non-carbon-emitting electricity generation (think wind, solar, and batteries) and convert what was once powered by combustion in electric power (think electric cars and heat pumps). But then that leaves the middle.
The solar arrays and wind farms that the federal tax code and many state policies promote and subsidize can’t serve all that new electric demand from cars and heat pumps (not to mention existing demand for electricity) if they can’t connect to the grid. That’s where the Federal Energy Regulatory Commission steps in — not by funding or mandating the construction of new energy transmission infrastructure, but by laying out the rules for planning it.
On Monday, FERC unveiled and approved a rule overhauling regional transmission planning to take into account the ongoing and planned transformation of the electric grid. Since 2010 at least, energy planning and construction has been motivated almost solely by incremental need, i.e. the only things that got built were those deemed necessary to keep the literal lights on. A Department of Energy report released last year showed that overall transmission investment and construction has slowed down since the second half of the 2010s. That’s led to a “queue” of projects waiting to connect that’s around 90% renewables.
All of this is especially distressing as the energy transition will require a vast expansion of our transmission capacity. Increased demand from electrification, new manufacturing, data centers, state policies that mandate the use of renewable energy, federal policies like the Inflation Reduction Act, and corporate policies that mandate the procurement of non-carbon-emitting power is transforming the grid.
While the 1,300-page rule has not yet been released, FERC commissioners and staff described new requirements that regional transmission organizations adopt the long view, extending their planning horizon over a 20-year period and calling for updates every five years. This means grid planners will have to take into account factors making the grid cleaner, including corporate commitments to purchase clean energy, public policy pushing renewables, the retirement of fossil fuel plants, and utilities’ own designs for the future.
But that’s just the planning process. When it comes to actually building — and paying for — new transmission, FERC is requiring regional transmission planners to consult a specific set of economic and reliability benefits like reducing congestion on the grid and resilience against extreme weather and lower costs when selecting projects.
Many would-be transmission projects founder on how to split up costs between the various regions and utilities any new infrastructure will serve. Transmission planners, therefore, often prefer local projects that serve the existing grid and can thus avoid the tricky business of how to split the bill. Within the PJM Interconnection, the country’s largest regional transmission organization, about six times as much local transmission was approved from 2014 to 2022 compared to regional transmission, according to research by Massachusetts Institute of Technology economists.
It’s easy to see why the regional planning process can be contentious and complex. There’s no one set way to do it because there’s not always agreement on who benefits and to what extent from any given project. This has only gotten more true as some states have passed decarbonization or renewable energy mandates as others have resolutely not. Under the new rule, transmission planners will have to come up with a default method for allocating costs associated with new projects as a fallback in cases of disagreement.
Senate Majority Leader Chuck Schumer, who has pushed FERC to make transmission planning easier, claimed victory in a press conference following the announcement. He described the new rule as a “missing piece to the puzzle” of the IRA that could help jumpstart a transmission buildout. That will be especially key in the absence of Congressional action. Though hopes were once at least moderately elevated that Congress would take steps to accelerate the complex permitting process for large-scale energy projects this session, any sense of possibility seems to have disappeared.
“I’ve told Joe Manchin, it's going to be virtually impossible to get something done,” Schumer told reporters, referring to the barnstorming West Virginia senator and chair of the Senate Committee on Energy and Natural Resources, who’ll be retiring in January, when his current term expires.
While FERC cannot wave a magic wand and fund transmission projects or get agencies to speed up environmental reviews, it can focus and direct transmission planners to figure out what kinds of transmission needs to be built and how it will be paid for. In another corner of the executive branch, the DOE recently designated 10 “corridors” where the need for new transmission is particularly acute. Projects in these areas could be eligible for additional financing and bypass certain permitting hurdles.
Environmental groups like the Sierra Club, the Natural Resources Defense Council, and the Environmental Defense Fund, as well as Senate Democrats almost immediately hailed the FERC decision. Ray Long, president of the trade organization the American Council on Renewable Energy, said in a statement that the rule will “enable the delivery of power from cleaner and more affordable electricity generation that will benefit consumers all across America.”
The Commission’s sole Republican member, former Virginia regulator Mark Christie, was not so effusive. He issued a harsh dissent to his colleagues’ decision, likely previewing a judicial challenge from Republican-governed states. While the Commission’s chair, former District of Columbia public service commissioner Willie Phillips, and its other member, NRDC alum Allison Clements, both Democrats, largely spoke about the rule in terms of reliability and reforming the planning process, Christie made it seem like a climate change policy in disguise that would function as a “transfer of wealth” to wind, solar, and transmission developers.
“This is not about reasonable improvements to regional planning,” Christie said. “This rule is a shell game designed to disguise its true agenda that is about the money. It’s a 1,300-page vehicle to socialize the cost of the rule’s sweeping policy agenda.”
Christie also raised the prospect that consumers in states that have not adopted mandates for renewable energy could end up being forced to pay for transmission projects necessary to connect renewables to the grid, turning consumers into “involuntary beneficiaries.” While this may not sound so bad, a key principle of allocating costs for transmission is that whomever benefits — no matter how those benefits are calculated — should pay. If, as Christie argues, there’s disagreement over what counts as a benefit, being an involuntary beneficiary is no good.
While the details of the rule remain to be seen, it did not list any environmental benefit to new transmission as the type of benefit that transmission needed to tally up when considering a project; instead, it said that transmission planners should consider how public and corporate policies are affecting the mix of generation when making their long-term transmission plans.
Commissioner Clements argued in her remarks that this was a narrow perspective on transmission planning, and that “it is not the Commission’s job to try and force the genie that is the energy transition back into the bottle.” States should avoid the temptation to “get drawn into a lose-lose debate over who, precisely, caused the need for each specific system upgrade as the grid’s inadequacy festers,” she added.
Rob Gramlich, the president of Grid Strategies LLC and a leading transmission advocate, added his voice to Clements’, tweeting that the notion that “beneficiaries should get to opt out of paying for infrastructure … is counter to every lesson about how every type of infrastructure has ever been funded.”
While those celebrating no doubt disagree with Christie’s claim about cost, they agreed that the rule would spur the transition to non-carbon-emitting sources of power. Just to meet the likely increase in energy usage from existing policies like the IRA and the Bipartisan Infrastructure Law, the DOE estimates there would need to be at least 64% increase in transmission within regions — precisely the type of planning today’s FERC decision affects.
Since the beginning of the Biden administration, FERC has been a key battleground for the future of energy policy. In 2022, Manchin blocked the reappointment of Richard Glick to the Commission, even though he had been serving as its chair; another commissioner left at the end of his term last year, and their replacements have not yet been confirmed. The Commission’s number will dwindle yet again when Clements’ term expires in June, assuming the Senate hasn’t acted by the end of its current session, which would leave FERC without a quorum.
The three-member commission is therefore trying to act as quickly as it can. “This rule can not come fast enough,” Phillips said.
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Recovering from the Los Angeles wildfires will be expensive. Really expensive. Insurance analysts and banks have already produced a wide range of estimates of both what insurance companies will pay out and overall economic loss. AccuWeatherhas put out an eye-catching preliminary figure of $52 billion to $57 billion for economic losses, with the service’s chief meteorologist saying that the fires have the potential to “become the worst wildfire in modern California history based on the number of structures burned and economic loss.” On Thursday, J.P. Morgan doubled its previous estimate for insured losses to $20 billion, with an economic loss figure of $50 billion — about the gross domestic product of the country of Jordan.
The startlingly high loss figures from a fire that has only lasted a few days and is (relatively) limited in scope show just how distinctly devastating an urban fire can be. Enormous wildfires thatcover millions of acres like the 2023 Canadian wildfires can spew ash and particulate matter all over the globe and burn for months, darkening skies and clogging airways in other countries. And smaller — and far deadlier fires — than those still do not produce the same financial roll.
It’s in coastal Southern California where you find large population centers areas known by all to be at extreme risk of fire. And so a fire there can destroy a whole neighborhood in a few hours and put the state’s insurance system into jeopardy.
One reason why the projected economic impacts of the fires are so high is that the structures that have burned and the land those structures sit on are very valuable. Pacific Palisades, Malibu, and Santa Monica contain some of the most sought-after real estate on planet earth, with typical home prices over $2 million. Pacific Palisades itself has median home values of around $3 million, according to JPMorgan Chase.
The AccuWeather estimates put the economic damage for the Los Angeles fires at several times previous large, urban fires — the Maui wildfire in 2023 was estimated to cause around $14 billion of economic loss, for example — while the figure would be about a third or a quarter of a large hurricane, which tend to strike areas with millions of people in them across several states.
“The fires have not been contained thus far and continue to spread, implying that estimates of potential economic and insured losses are likely to increase,” the JPMorgan analysts wrote Thursday.
That level of losses would make the fires costlier in economic terms than the 2018 Butte County Camp Fire, whose insured losses of $10 billion made it California’s costliest at the time. That fire was far larger than the Los Angeles fires, spreading over 150,000 acres compared to just over 17,000 acres for the Palisades Fire and over 10,000 acres for the Eaton Fire. It also led to more than 80 deaths in the town of Paradise.
So far, around 2,000 homes have been destroyed,according to the Los Angeles Times,a fraction of the more than 19,000 structures affected by the Camp Fire. The difference in estimated losses comes from the fact that homes in Pacific Palisades weigh in at more than six times those in rural Butte, according to JPMorgan.
While insured losses get the lion’s share of attention when it comes to the cost impacts of a natural disaster, the potential damages go far beyond the balance sheet of insurers.
For one, it’s likely that many affected homeowners did not even carry insurance, either because their insurers failed to renew their existing policies or the homeowners simply chose to go without due to the high cost of what insurance they could find. “A larger than usual portion of the losses caused by the wildfires will be uninsured,” according to Morningstar DBRS, which estimated total insured losses at more than $8 billion. Many homeowners carry insurance from California’s backup FAIR Plan, which may itself come under financial pressure, potentially leading to assessments from the state’s policyholders to bolster its ability to pay claims.
AccuWeather arrived at its economic impact figure by looking not just at losses from property damage but also wages that go unearned due to economic activity slowing down or halting in affected areas, infrastructure that needs to be repaired, supply chain issues, and transportation snarls. Even when homes and businesses aren’t destroyed, people may be unable to work due to evacuations; businesses may close due to the dispersal of their customers or inability of their suppliers to make deliveries. Smoke inhalation can lead to short-, medium-, and long-term health impacts that take a dent out of overall economic activity.
The high level of insured losses, meanwhile, could mean that insurers’ will see less surplus and could have to pay more for reinsurance, Nancy Watkins, an actuary and wildfire expert at Milliman, told me in an email. This may mean that they would have to shed yet more policies “in order to avoid deterioration in their financial strength ratings,” just as California has been trying to lure insurers back with reforms to its dysfunctional insurance market.
The economic costs of the fire will likely be felt for years if not decades. While it would take an act of God far stronger than a fire to keep people from building homes on the slopes of the Santa Monica Mountains or off the Pacific Coast, the city that rebuilds may be smaller, more heavily fortified, and more expensive than the one that existed at the end of last year. And that’s just before the next big fire.
Suburban streets, exploding pipes, and those Santa Ana winds, for starters.
A fire needs three things to burn: heat, fuel, and oxygen. The first is important: At some point this week, for a reason we have yet to discover and may never will, a piece of flammable material in Los Angeles County got hot enough to ignite. The last is essential: The resulting fires, which have now burned nearly 29,000 acres, are fanned by exceptionally powerful and dry Santa Ana winds.
But in the critical days ahead, it is that central ingredient that will preoccupy fire managers, emergency responders, and the public, who are watching their homes — wood-framed containers full of memories, primary documents, material wealth, sentimental heirlooms — transformed into raw fuel. “Grass is one fuel model; timber is another fuel model; brushes are another — there are dozens of fuel models,” Bobbie Scopa, a veteran firefighter and author of the memoir Both Sides of the Fire Line, told me. “But when a fire goes from the wildland into the urban interface, you’re now burning houses.”
This jump from chaparral shrubland into neighborhoods has frustrated firefighters’ efforts to gain an upper hand over the L.A. County fires. In the remote wilderness, firefighters can cut fire lines with axes, pulaskis, and shovels to contain the blaze. (A fire’s “containment” describes how much firefighters have encircled; 25% containment means a quarter of the fire perimeter is prevented from moving forward by manmade or natural fire breaks.)
Once a fire moves into an urban community and starts spreading house to house, however, as has already happened in Santa Monica, Pasadena, and other suburbs of Los Angeles, those strategies go out the window. A fire break starves a fire by introducing a gap in its fuel; it can be a cleared strip of vegetation, a river, or even a freeway. But you can’t just hack a fire break through a neighborhood. “Now you’re having to use big fire engines and spray lots of water,” Scopa said, compared to the wildlands where “we do a lot of firefighting without water.”
Water has already proven to be a significant issue in Los Angeles, where many hydrants near Palisades, the biggest of the five fires, had already gone dry by 3:00 a.m. Wednesday. “We’re fighting a wildfire with urban water systems, and that is really challenging,” Los Angeles Department of Water and Power CEO Janisse Quiñones explained in a news conference later that same day.
LADWP said it had filled its 114 water storage tanks before the fires started, but the city’s water supply was never intended to stop a 17,000-acre fire. The hydrants are “meant to put out a two-house fire, a one-house fire, or something like that,” Faith Kearns, a water and wildfire researcher at Arizona State University, told me. Additionally, homeowners sometimes leave their sprinklers on in the hopes that it will help protect their house, or try to fight fires with their own hoses. At a certain point, the system — just like the city personnel — becomes overwhelmed by the sheer magnitude of the unfolding disaster.
Making matters worse is the wind, which restricted some of the aerial support firefighters typically employ. As gusts slowed on Thursday, retardant and water drops were able to resume, helping firefighters in their efforts. (The Eaton Fire, while still technically 0% contained because there are no established fire lines, has “significantly stopped” growing, The New York Times reports). Still, firefighters don’t typically “paint” neighborhoods; the drops, which don’t put out fires entirely so much as suppress them enough that firefighters can fight them at close range, are a liability. Kearns, however, told me that “the winds were so high, they weren’t able to do the water drops that they normally do and that are an enormous part of all fire operations,” and that “certainly compounded the problems of the fire hydrants running dry.”
Firefighters’ priority isn’t saving structures, though. “Firefighters save lives first before they have to deal with fire,” Alexander Maranghides, a fire protection engineer at the National Institute of Standards and Technology and the author of an ongoing case study of the 2018 Camp fire in Paradise, California, told me. That can be an enormous and time-consuming task in a dense area like suburban Los Angeles, and counterintuitively lead to more areas burning down. Speaking specifically from his conclusions about the Camp fire, which was similarly a wildland-urban interface, or WUI fire, Maranghides added, “It is very, very challenging because as things deteriorate — you’re talking about downed power lines, smoke obstructing visibility, and you end up with burn-overs,” when a fire moves so quickly that it overtakes people or fire crews. “And now you have to go and rescue those civilians who are caught in those burn-overs.” Sometimes, that requires firefighters to do triage — and let blocks burn to save lives.
Perhaps most ominously, the problems don’t end once the fire is out. When a house burns down, it is often the case that its water pipes burst. (This also adds to the water shortage woes during the event.) But when firefighters are simultaneously pumping water out of other parts of the system, air can be sucked down into those open water pipes. And not just any air. “We’re not talking about forest smoke, which is bad; we’re talking about WUI smoke, which is bad plus,” Maranghides said, again referring to his research in Paradise. “It’s not just wood burning; it’s wood, plastics, heavy metals, computers, cars, batteries, everything. You don’t want to be breathing it, and you don’t want it going into your water system.”
Water infrastructure can be damaged in other ways, as well. Because fires are burning “so much hotter now,” Kearns told me, contamination can occur due to melting PVC piping, which releases benzene, a carcinogen. Watersheds and reservoirs are also in danger of extended contamination, particularly once rains finally do come and wash soot, silt, debris, and potentially toxic flame retardant into nearby streams.
But that’s a problem for the future. In the meantime, Los Angeles — and lots of it — continues to burn.
“I don’t care how many resources you have; when the fires are burning like they do when we have Santa Anas, there’s so little you can do,” Scopa said. “All you can do is try to protect the people and get the people out, and try to keep your firefighters safe.”
Plus 3 more outstanding questions about this ongoing emergency.
As Los Angeles continued to battle multiple big blazes ripping through some of the most beloved (and expensive) areas of the city on Thursday, a question lingered in the background: What caused the fires in the first place?
Though fires are less common in California during this time of the year, they aren’t unheard of. In early December 2017, power lines sparked the Thomas Fire near Ventura, California, which burned through to mid-January. At the time it was the largest fire in the state since at least the 1930s. Now it’s the ninth-largest. Although that fire was in a more rural area, it ignited for some of the same reasons we’re seeing fires this week.
Read on for everything we know so far about how the fires started.
Five major fires started during the Santa Ana wind event this week:
Officials have not made any statements about the cause of any of the fires yet.
On Thursday morning, Edward Nordskog, a retired fire investigator from the Los Angeles Sheriff’s Department, told me it was unlikely they had even begun looking into the root of the biggest and most destructive of the fires in the Pacific Palisades. “They don't start an investigation until it's safe to go into the area where the fire started, and it just hasn't been safe until probably today,” he said.
It can take years to determine the cause of a fire. Investigators did not pinpoint the cause of the Thomas Fire until March 2019, more than two years after it started.
But Nordskog doesn’t think it will take very long this time. It’s easier to narrow down the possibilities for an urban fire because there are typically both witnesses and surveillance footage, he told me. He said the most common causes of wildfires in Los Angeles are power lines and those started by unhoused people. They can also be caused by sparks from vehicles or equipment.
At about 27,000 acres burned, these fires are unlikely to make the charts for the largest in California history. But because they are burning in urban, densely populated, and expensive areas, they could be some of the most devastating. With an estimated 2,000 structures damaged so far, the Eaton and Palisades fires are likely to make the list for most destructive wildfire events in the state.
And they will certainly be at the top for costliest. The Palisades Fire has already been declared a likely contender for the most expensive wildfire in U.S. history. It has destroyed more than 1,000 structures in some of the most expensive zip codes in the country. Between that and the Eaton Fire, Accuweather estimates the damages could reach $57 billion.
While we don’t know the root causes of the ignitions, several factors came together to create perfect fire conditions in Southern California this week.
First, there’s the Santa Ana winds, an annual phenomenon in Southern California, when very dry, high-pressure air gets trapped in the Great Basin and begins escaping westward through mountain passes to lower-pressure areas along the coast. Most of the time, the wind in Los Angeles blows eastward from the ocean, but during a Santa Ana event, it changes direction, picking up speed as it rushes toward the sea.
Jon Keeley, a research scientist with the US Geological Survey and an adjunct professor at the University of California, Los Angeles told me that Santa Ana winds typically blow at maybe 30 to 40 miles per hour, while the winds this week hit upwards of 60 to 70 miles per hour. “More severe than is normal, but not unique,” he said. “We had similar severe winds in 2017 with the Thomas Fire.”
Second, Southern California is currently in the midst of extreme drought. Winter is typically a rainier season, but Los Angeles has seen less than half an inch of rain since July. That means that all the shrubland vegetation in the area is bone-dry. Again, Keeley said, this was not usual, but not unique. Some years are drier than others.
These fires were also not a question of fuel management, Keeley told me. “The fuels are not really the issue in these big fires. It's the extreme winds,” he said. “You can do prescription burning in chaparral and have essentially no impact on Santa Ana wind-driven fires.” As far as he can tell, based on information from CalFire, the Eaton Fire started on an urban street.
While it’s likely that climate change played a role in amplifying the drought, it’s hard to say how big a factor it was. Patrick Brown, a climate scientist at the Breakthrough Institute and adjunct professor at Johns Hopkins University, published a long post on X outlining the factors contributing to the fires, including a chart of historic rainfall during the winter in Los Angeles that shows oscillations between very wet and very dry years over the past eight decades. But climate change is expected to make dry years drier in Los Angeles. “The LA area is about 3°C warmer than it would be in preindustrial conditions, which (all else being equal) works to dry fuels and makes fires more intense,” Brown wrote.