How FERC Transmission Reform Can End the Delay of a Cleaner Future

Courtesy of Union Of Concerned Scientists.
By Michael Jacobs, Senior energy analyst

Transmission is to electricity what roads and highways are to cars and trucks.

Some local roads (or driveways) are built by private interests to access new real estate development, while most every major highway, bridge or mountain tunnel is built by a regional public agency. The way we plan and pay for our electric transmission follows this logic, until you look at how assumptions about future traffic are dramatically different for the new users, imposing crushing cost burdens on new renewable energy development. The transmission assumptions used for new supplies need to be re-examined so we have a realistic basis for the requirements placed on new supplies that will be competing with existing energy supplies.

Monopolies built this system

The electric utility industry was organized and dominated by monopolies for most of the past 100 years. With state regulators’ consent and approval, these monopolies built for their own needs and interests with little regard for connections to neighboring states or utilities. The logic of a monopoly does not support improving the access to new, competing supplies that a neighboring region might develop and export. All that is starting to change.

I’m going to assume you are familiar with a stack of past writings from UCS (on Order 1000, uncompetitive coal, cheaper renewables, energy storage) and others of course, about utilities and competition so I can shed light on transmission expansion, an issue soon to be gripping the Federal Energy Regulatory Commission. You might take this on its surface as a debate over who benefits and who pays. But there are structural biases that need to be understood before we can use those supposedly simple rules about costs and benefits.

The highway system has its history and flaws. Planners had neither crystal balls nor an intention to minimize impacts to some communities while creating new opportunities to others.

Today, in the effort to provide reasonable rates for electricity, we can do better. Our approach for transmission planners looking at transmission expansion uses straight-out separate rules applied to transmission that increases competition as compared with transmission that supports the reliability status quo and the (presumed) modestly growing demand for electricity.

One problem with this distinction, as we will see next in the example from Mississippi, is that the real world conditions don’t fit so nicely into these separate buckets. Another is the rules applied to new energy generation assume things that just aren’t realistic.

The muddy waters of the Mississippi Hub

First, the problem of defining reliability as separate from economics. Like a highway jam, when transmission can’t handle the flow, there are problems. During February’s Storm Uri, freezing weather to the South Central U.S. transmission limits became a critical problem. Just east of the ERCOT grid in Texas, the Midcontinent ISO (MISO) system showed supply shortages and price imbalances due to transmission constraints.

In the images below from noon and the evening of February 16, these show up first as an economic problem. As the problem persisted, imports were limited and this became a reliability problem, MISO control room ordered rolling blackouts. The stress on the ties between MISO areas with supplies to share and others can be seen in the price differences preceding the order to cut off customers. Mississippi ties were too small to help Louisiana and East Texas. Energy prices normally in the $20-$50 range spanned from negative $35 to over $1000 across the under-sized east-west path and were 10 times higher in MISO South than in the rest of MISO. See two snapshots from Feb 16, 2021.

Planning for more supply?

The unfortunate illustration from this winter is just an example. Generally, grid investment works to prevent such a situation with two responses: build more generation or build more transmission. (There are more options that are not in FERC or regional transmission organization aka “RTO” authority.) How these two choices are evaluated by the FERC-approved transmission planning practices makes a difference.

Transmission planning for reliability uses narrowly-defined inputs (load growth and predicted violations of reliability) without consideration of future changes in the energy supply. The “regional transmission expansion plan” is a centralized effort by a designated Transmission Planner, usually the RTO or the largest transmission owner in the area. Broadly, folks would agree these planning efforts are conservative. (See Ari Peskoe’s new paper for a fuller opinion.)

Modest load growth projections and weather assumptions based on past records shape the transmission plans. With little new transmission expansion, adding more supply from new generation is very difficult.

The dense center of this debate

There is a specific and separate modeling process for adding new generation. At the center of this different process is a unique view of the future. New generation is addressed through the FERC-defined Large Generator Interconnection Process (LGIP). This process presumes that when there are generators queued up, trying to get added to the energy mix, the second one in line must be studied as if the first new power plant in the queue will be built. So if the one ahead in line takes up some room on the grid, there is less room available for any that come after it. While that may not sound controversial, consider where we are today.

This conceptual frame was established less than 20 years ago to enable competing new supply proponents to understand their rights. Now, in the renewables-rich Midwest states, the MISO has seen over 600 requests to connect wind, solar and battery generation between 2016 and 2020.

In the MISO South region the active solar requests in MISO queue total 1,330 MW in Mississippi; 5,690 MW in Louisiana; 2,660 MW in Arkansas. These, plus the small portion of Texas in MISO, means there is 10,000 MW of solar in the MISO queue in this study area.

Proposed new renewable energy power plants, counted in the billions of dollars and tens of thousands of megawatts, are included in the study of each new proposal. All other regions are also suffering a clogged queue. This congested queue process is not reflected in the regional transmission expansion plan, because that process includes none of these proposed new plants.

Extreme scenario?

The LGIP transmission planning for the proposed new generation, which might compete against the existing generation, presumes 10,000 or 20,000 or 30,000 megawatts of new renewables have been added to the system in the next couple of years. The rest of the electric power system has not been built — in fact is not even modeled — to absorb that added amount. These renewable generators in the queue are faced with an extreme scenario and their studies come back with proportionately extreme results. In the LGIP process that is the admissions process for new competitors, the transmission planning process requires unaffordable costs for distant improvements to the transmission system.

This discussion could continue into the over simplification of “beneficiary pays” and the rights that are not actually secured, but let’s start by building a common understanding. When the transmission planners sit down and describe the future, we should not have two sets of assumptions as divergent as described here, used for planning the same system. Neither the assumption that no change is coming to the generation fleet, nor that every proposed plant will be built, is expected to be true. If a more reasonable, shared set of assumptions can be found, it may be that the work ahead on transmission planning for both reliability and generator interconnection can be improved.