Future efforts toward permitting reform should focus on the transmission infrastructure buildout that is needed for decarbonization of the electrical grid. A study by Princeton’s Net-Zero Lab finds that 80 percent of the Inflation Reduction Act’s (IRA) emissions reduction benefits would be lost if the growth rate of transmission capacity remains at its recent diminished rate of about1 percent per year. Transmission is vital to decarbonization, but not expanding fast enough. Without transmission, both the public and private investment dollars facilitated by the IRA will not go as far as they could. With it, IRA’s public dollars will go further and potentially increase total private investment too. Decarbonization will sharply increase electricity demand due to the advent of electric vehicles, battery charging, and electrification of appliances, heating, and other forms of end-use consumption. This will require more transmission lines just to meet load and the geographic turnover in the siting of generation.
More transmission will mean more electricity, less resource curtailment, and greater system resiliency. It is what will allow the IRA to reduce emissions so dramatically, no matter the provisions that may be necessary to help transmission reform pass. But the Federal Energy Regulatory Commission (FERC) is not in a position to facilitate rapid expansion. Multiple federal, state, or local approvals are required, creating numerous veto opportunities. Planning prerogatives are unclear and excessively focus on local needs over regional or national requirements; the interconnection process itself is cumbersome; and the US lacks an effective framework to allocate the costs of new investments with the broadest public benefits among transmission stakeholders. While FERC has published proposed rule changes tackling some of these issues, its authority and powers need statutory reinforcement.
For all the praise and criticism drawn by The Energy Independence and Security Act of 2022, the striking thing was that the climate policy space lacked a unified objective for reform. Among its provisions, the September bill contained significant changes to FERC authority, a siting backstop based on a national interest designation, a cost allocation directive, and language making FERC the lead agency for transmission environmental reviews. But while Congress argued over changes to the approval and siting processes for energy projects, it was never clear that there was consensus to discuss transmission at all. The bill soon died after succumbing to poor legislative arithmetic.
Unfortunately, transmission was not prioritized after September either. A December bill, the Building American Energy Security Act, weakened the September bill’s transmission reforms by requiring FERC to wait 1 year for all states to agree (even if such an agreement remains unlikely) before exercising a siting backstop. It also instituted a notice and hearing requirement before such authority is exercised. The benefits to clean electricity relative to fossil fuels fell. Unsurprisingly, the weakened December bill fared no better than its September counterpart.
This unfortunate experience leaves us with clear lessons. Without prioritization of transmission reform, future permitting bills will be friendlier to fossil fuel interests and set back opportunities for integrating renewable energy sources into the grid. When an opportunity for transmission reform emerges again, Congress should seize it. In the negotiations, they should prioritize three planks: an increasingly national transmission planning apparatus, a federal backstop to overcome sitting bottlenecks, and federal options for financing and de-risking transmission projects.
Increasing national transmission planning capability.
Reforms should ensure that Regional Transmission Organizations (RTOs) and Independent System Operators (ISOs) – which operate transmission and facilitate regional wholesale markets for electricity generation across the United States – can make plans for increasing transmission capacity both on a region-wide basis (as opposed to relying on individual requests for transmission lines to add up over time). Transmission reform should expedite FERC rulemaking on mandatory regional planning and cost allocation. It should fix the broken queue system for proposed interconnections and implement minimum transfer capacity requirements between regions. Finally, we must reinforce FERC’s legal authority to implement and expedite these reforms. It must be made clear that FERC is the national transmission organization overseeing mandatory regional planning processes, with powers to require RTO participation by investor-owned utilities, determine cost allocation formulas for new infrastructure, regularly update long-term plans, forecast capacity needs, and hold investor-owned utilities accountable for transmission costs.
A Federal option for transmission siting.
FERC should be both the undisputed site of transmission permitting and able to issue permits for transmission projects meeting a designated national interest standard regardless of state or local opposition. This serves two purposes: national projects can be assured a route to implementation, and the planning process will have a “fail-safe” in case other elements of permitting law are unable to facilitate a fair and efficient process. A version of this authority was available in The Energy Independence and Security Act, but was limited in the number of projects it could be utilized for. Future iterations of permitting reform should jettison those limitations where possible and instead set out unambiguous conditions for general use.
Expanded Federal options for transmission financing.
Section 50151 of the Inflation Reduction Act creates a $2 billion loan facility for projects located in a National Interest Electric Transmission Corridor (NIETC). However, no projects currently have an NIETC designation because of hesitancy at FERC to override state decision making and the limited flexibility granted by recent statutory changes to NIETC authority. It would be beneficial for all kinds of transmission projects (not just those with an NIETC designation) to receive assistance from this facility and to expand the facility’s size. Transmission buildout would also benefit from allowing FERC – or barring FERC, a green bank, or Department of Energy office with a dedicated transmission mandate – to recycle a sizable capitalized fund using securitized lending, grants, equity stakes, and other financial tools to de-risk transmission finance. Finally, buildout would benefit from a strengthening of Section 50152’s siting grants by increasing the rewards (and money appropriated) for successful state permitting, specifying and increasing the penalties for failure to allow sufficient transmission, creating a federal override option for recipient projects, and instituting a matching incentive under Section 50153 for siting processes that meet particular standards of efficiency.
References
CRS. 2022. Electricity Transmission Provisions in the Inflation Reduction Act of 2022. Available at: [LINK]
FERC. 2020. Report on Barriers and Opportunities for High Voltage Transmission. Available at: [LINK]
Murphy, S. 2022. “Modernizing the U.S. electric grid: A proposal to update transmission infrastructure for the future of electricity.” Environmental Progress and Sustainable Energy. Vol 41 (2). Available at: [LINK]
Pfeifenberger, J., J. Tsoukalis. Transmission Investment Needs and Challenges. Brattle. Available at: [LINK]
Princeton Zero Lab. 2022. Electricity Transmission is Key to Unlock the Full Potential of the Inflation Reduction Act. Rapid Energy Policy Evaluation and Analysis Toolkit. Available at: [LINK]