by Jeff St. John
January 24, 2020

The U.S. transmission grid is facing a moment of reckoning. 

The gap is growing between the country’s aging and congested transmission infrastructure and what is needed to meet the country’s clean energy and decarbonization goals.

U.S. transmission investments have quadrupled over the past decade to more than $20 billion per year, driven by both economic and reliability needs of the grid, as well as by the ponderous, nearly decade-long process typically required to build new transmission corridors.

But those rising investments don’t appear to be solving the problems caused by a lack of transmission capacity. 

Transmission congestion costs have been rising for the country’s regional transmission organizations (RTOs) and independent system operators (ISOs), increasing from about $3.7 billion in 2016 to more than $5 billion in 2018, according to a report from Grid Strategies. 

Likewise, instances of negative grid pricing have also been on the rise, according to a recent study from Lawrence Berkeley National Laboratory, particularly in the wind-power-rich Midwest but also in sunny, solar-rich California. 

So what’s driving this grid disconnect?

This week, to mark the 20-year anniversary of the creation of the ISO/RTO system, four former chairs of the Federal Energy Regulatory Commission discussed on a webinar the major changes that the transmission system has undergone since then and what needs to change now.   

FERC’s efforts to transform the transmission planning process are rooted in several key orders, said James Hoecker, FERC chairman from 1997 to 2001. That includes Order 679 in 2006, which created transmission pricing reforms and incentives, and Order 1000 in 2011, which was meant to create a new process for coordinated transmission planning and cost-sharing between states, grid operators and utilities. 

“I would love to have the commission sit down and think about how we can take all these wonderful precedents a step further, a major step further, in terms of promoting a truly national electric transmission policy and a robust grid,” Hoecker said.

Almost no inter-regional transmission projects

But these orders haven’t brought the changes they were meant to, said Jon Wellinghoff, FERC chairman from 2009 to 2013.

That’s mainly because their goals — fostering cooperation between different states and regions, and opening the transmission system to competition — have run up against the industry’s institutional barriers to progress on these fronts, he said. 

For example, FERC’s orders call for competitive bidding and review of alternative technologies for transmission projects in ISO/RTO territories. But FERC data shows that virtually none of the ISOs have selected anything but traditional powerline projects to be built by incumbent providers, with California ISO being a notable exception.

And that’s just for building transmission within ISO regions. Order 1000 also called for systems to support “inter-regional,” trans-ISO transmission projects — critical to linking renewables-rich regions to load centers that might not otherwise be able to access that new renewable energy. 

“But that coordination can really be fairly minimal,” Wellinghoff, now CEO of Grid Policy, said in a separate interview this week. “As a result, we have not seen any significant inter-regional projects since I was chairman of FERC in 2009.” 

While there have been several attempts, such as Tres Amigas in New Mexico, the Atlantic Wind project off the East Coast, and Clean Line Energy’s plans for transmission corridors across the country, none have succeeded, he said. FERC “did nothing to support those projects in any meaningful way, and they should have." 

FERC’s push to reduce costs by fostering competition and technological innovation, meanwhile, has run up against the system’s existing biases toward traditional, capital-intensive transmission projects.

Transmission project developers earn money through returns on equity compensation models that encourage projects to be as expensive as possible without being denied by regulators. And ISOs and RTOs, which are primarily tasked with keeping the grid reliable, are under pressure to accept these projects in lieu of novel lower-cost or technology-based alternatives.

Viable grid technologies going unused

That’s too bad, because “there are technologies that can be integrated into the grid fairly inexpensively [and] that can relieve significant amounts of this congestion,” Wellinghoff said.

In particular, proven dynamic line rating technologies that can determine the actual carrying capacity of transmission lines based on real-world conditions, rather than engineering estimates, can unlock “a much wider bandwidth” to carry renewable energy to markets, particularly in the wind-rich Midwest, he said.

Power flow control technologies, like those from California startup Smart Wires, now being deployed in the U.K. and Australia, can also help transmission operators gain more control and flexibility over their systems, with significant reductions in congestion possible as a result.

Technologies like these are “being adopted around the world,” with analysis indicating they’re having the intended effect. “But they’re just not being adopted around the U.S,” Wellinghoff said.

An August report from Grid Policy and the Center for Renewables Integration lays out the case for policy changes to force grid operators and transmission developers to consider these kinds of “advanced transmission technologies” as an integral part of every new transmission plan.

In fact, under the 2005 Energy Policy Act, Congress defined a wide array of technologies as viable, including batteries, demand response systems, distributed solar, and software and control systems.

The 2005 law also ordered that FERC "shall encouragethe deployment of these technologies, Wellinghoff noted. But the incentives and planning processes that FERC has put in place to do so haven’t overcome the institutional inertia against including them. 

In recent months, opportunities to change this situation have emerged. In November, FERC held a technical conference to seek input on how it could increase its support for what it called grid-enhancing technologies,

And earlier this year, FERC opened a notice of inquiry on Order 679, asking stakeholders for suggestions on how to reform its transmission incentive programs. 

At November’s conference, Wellinghoff laid out a proposal for a shared savings mechanism to help drive investment in advanced transmission technologies that could become part of Order 679’s portfolio of incentive programs. That would allow transmission owners to earn a return on an investment they would otherwise have little incentive to make, since “we in this country do not reward transmission developers and owners for being more efficient,” he said. 

Importantly, his proposal would apply not just to new projects in the planning stages but also to existing projects that have already locked in their compensation and thus have little reason to invest in efficiency, Wellinghoff said. “Fundamentally, we need to do something about improving the efficiency of our existing grid.”

"Time for a national transmission plan"

On a broader front, the current U.S. transmission system may well need an overhaul to allow the massive build-out of power lines from the wind- and solar-rich parts of the country to the population centers that need it, Wellinghoff said. "It is time for us to develop a national transmission plan."

Cheryl LaFleur, FERC chair from 2014 to 2015, agreed in Tuesday’s webinar. “If we were to have congressional legislation authorizing a national grid, like President Lincoln with the railroads that connected the country or President Eisenhower with the highways which connected the country — if you had something like that for the interconnected high voltage grid, that would be transformational."

Former FERC chair and and Texas utility commissioner Patrick Wood likewise noted that Congress could act to give FERC more authority over transmission routing. That could “give FERC the hammer to get parties to the table to talk about interregional” transmission, Wood said. 

Of course, in today’s political climate, this kind of ambitious energy proposal may have little chance of emerging from Congress.

Meanwhile, FERC has approved several decisions recently, including its much-maligned order for grid operator PJM to reform its capacity market, that indicate that its current two-Republican majority has little interest in aiding the integration of renewable energy and may actually be actively opposed to its growth.

That could end up worsening the disconnect between federal and state regulators on other matters, including transmission planning. 

“I think there’s a major issue between the regional transmission organizations and the state policymakers, and I think that issue will continue,” LaFleur said.