Low-Energy Fridays: What the FERC is happening with all the new electric transmission rules?
They say that when it rains, it pours—and that certainly seems true when it comes to electricity policy. Last week, the U.S. Department of Energy (DOE) unveiled 10 “national interest” corridors, which are designated geographical areas in which transmission lines and other projects could be expedited. This week, the Federal Energy Regulatory Commission (FERC) issued two major rules regarding transmission permitting, siting, regional planning, and cost allocation. The rules are complicated (one rule alone runs 1,300 pages), and the policy community is still digesting the details. In the meantime, our crack squad of electricity experts here at Low-Energy Fridays decided to provide a broad summary of these different rules so that you, dear readers, can keep track of all the activity.
The DOE’s corridor designations aim to smooth the transmission expansion process in critical areas. Ranging from New York State and New England to the Southwest and Northern Plains, these corridors represent areas where a lack of sufficient transmission is expected to increase electricity prices the most and where extreme weather could threaten electric reliability. Projects within the corridors can be eligible for federal loan programs, and the designation grants FERC additional authority over permitting and siting to help accelerate project completion. This expansion of federal authority makes the corridors controversial; nevertheless, it is the law of the land.
FERC Order 1977
As a follow-up to the DOE’s announcement, FERC released Order No. 1977 this past Monday. The order takes advantage of their additional permitting and siting authority. Ordinarily, permitting and siting decisions for transmission projects are made at the state level; however, federal law now gives FERC the authority to make these decisions for certain interstate projects if the state doesn’t act within a certain timeframe. Order 1977 establishes the ground rules for exercising this authority, including laying out protections for landowners and dealing with environmental concerns. This action comes while prospects for broader permitting reform look increasingly dim.
FERC Order 1920
Finally, the big one. Also released Monday, FERC Order No. 1920 reforms regional transmission planning and provides a roadmap for allocating costs from such projects among consumers (see our initial thoughts on this). Previously, planning was done on a short-term basis, using incomplete measures for cost-benefit analysis. Order 1920 remedies these deficiencies by requiring a 20-year planning horizon, which is reasonable given transmission’s half-century lifespan. The rule also clarifies transmission benefits categories, which should usher in more economical transmission development through higher quality cost-benefit analysis. As we’ve noted in the past, “A common thread across interregional, regional and local scales is that stakeholders struggle to agree on how to define, measure and apply transmission benefits in regulatory processes.” Order 1920 also contains various lesser provisions, such as greater transparency around local transmission projects (because more clarity around complex issues is always a good thing). Despite a couple of warts and missed opportunities, the order’s foundation improves economic policy overall.
Future of the Electrical Grid
All of this matters because the nation’s electric grid will change drastically in the coming decade. It has to adapt quickly in order to handle the expected growth in demand coming from the electrification of heating and transportation and the need for power-hungry data centers that power artificial intelligence. The types of energy generated are also changing—more renewable options, for example. But this increase in generation mix also requires more transmission to link these resources with the places that need. If transmission projects are not built quickly, increased congestion and decreased reliability will cost consumers billions of dollars. If built inefficiently, as the majority of transmission is today, consumers will also pay through the nose. Reforms have the potential to unlock as much as $100 billion in consumer savings and unleash massive emissions reductions.
FERC has had a busy few weeks, but these transmission-planning inefficiencies needed to be addressed. There is reason to believe that Order 1920’s reforms will go a long way toward addressing those inefficiencies and charting a productive path forward.