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.
Courtesy of Harbinger