Transmission owners, regulators and stakeholders face a massive task in planning for new transmission as they attempt to modernize the grid and prepare for an influx of renewable resources.
That was the key takeaway of a panel at last week’s Energy Bar Association annual Fall Conference entitled “Looking into the Transmission Crystal Ball: What are the biggest issues facing the transmission industry in the next five years?”
A diverse cross-section of stakeholders from around the country working in various aspects of the energy industry quizzed a panel of transmission experts on their outlook for the grid.
Jason Stanek, chairman of the Maryland Public Service Commission, said transmission assets built to meet delivery needs almost 100 years ago are reaching the end of their useful life and are being slated for replacement. At the same time, states like Maryland are advancing clean energy policies like offshore wind that will require transmission upgrades.
Stanek said the delivery systems were originally planned under an “umbrella approach” that considered the “interplay of regulatory policies and customer needs in a just and reasonable manner.” Planning for grid upgrades has become more complicated now that transmission planning today is primarily the responsibility of RTOs and ISOs, along with the growing state-federal conflict over energy and environmental policies, Stanek said.
In his question to the panelists, Stanek asked how regulators and stakeholders can “reopen the umbrella” to have coordinated and cost-effective transmission planning to achieve a clean energy future.
Beth Emery, senior vice president and general counsel for GridLiance, said she is seeing major pushback from RTO/ISO stakeholders over what some claim to be “the spiraling cost of transmission.” Emery said most of the current costs for transmission are tied up in reliability projects, in which cost-benefit analyses are not typically done, adding to the skepticism about costs.
Unless stakeholders, including state regulators, have open and transparent access to what projects are being proposed, planning estimates and the actual costs, Emery said, it will be difficult to convince ratepayers that the transmission projects have value.
Emery said FERC’s push toward forward-looking transmission formula rates seems to have made the transparency problem even worse, encouraging new transmission builds but making it even less clear on the costs.
GridLiance has a published white paper proposing FERC require RTOs to collect and publish consistent data on transmission investment, Emery said, which some RTOs already do, but the information can be difficult to find.
“It’s almost impossible for customers to get useful project-by-project information in the formula rate protocol process,” Emery said. “I think TOs need to be able to plan and make prudent decisions for local reliability, and they absolutely need to maintain their existing assets. But plans should be transparent and costs discoverable.”
Valerie Teeter, senior manager of federal regulatory affairs at Exelon, said Stanek’s question addressed an important trend. In states that have restructured transmission planning, Teeter said, there has been a move away from integrated resource planning between utilities and the states to determine the needed resources to meet environmental goals and the role transmission will play.
Teeter said broader regional planning creates some “disconnects” between the utilities and states, with utilities waiting to see what projects get into the generation interconnection queue. She encouraged state regulators to think about how they could play more of a role in planning because they have the clearest vision of state energy goals.
“States have clean energy goals; they have ideas of what they want their future to look like,” Teeter said. “They understand the resource mix they’re hoping to see to lead them to their clean energy future.”
Lisa McAlister, senior vice president and general counsel for American Municipal Power, said customers are experiencing “sticker shock” as TOs continue to replace aging infrastructure across the country. McAlister agreed that greater transparency in the planning process and rate structures would help customers better understand the projects and help TOs better justify the projects that are most cost-effective.
McAlister said efforts currently underway in PJM, ISO-NE and CAISO by TOs to remove projects from the regional transmission planning processes and make themselves solely responsible for planning will “balkanize the transmission grid,” increasing costs and customer complaints.
“That’s going to make achieving a clean energy future more challenging,” McAlister said.
5-year Discussion
John Moura, NERC director of reliability assessment, said he views the changing resource mix as one of the most important reliability issues to tackle over the next decade. Moura said industry-supported studies have determined that an extra-high-voltage network from Wyoming to Ohio will be needed to achieve carbon-reduction goals.
Moura asked how to start difficult conversations about transmission among stakeholders in the next five years.
Customer demand is driving the development of renewable resources and carbon pricing, McAlister said, and having discussions with a focus on meeting mandated or voluntary objectives, whether carbon-reduction goals or planning for the grid of the future, will require a coordinated approach between consumers, load-serving entities, distribution and transmission utilities, the RTOs, FERC and Congress.
“Now, more than ever, we need to develop a collaborative and a consensus-based approach to building transmission that spans multiple states to connect these renewable resources to the load pockets,” McAlister said. “The most effective pathway forward will be through the RTOs because they have the most comprehensive information regarding new generation and the interconnection queue, congestion and other market data.”
Emery said stakeholders involved in the planning process understand the steps needed to be taken to build a consensus, but reaching that consensus is difficult. Consensus is built by making people comfortable and helping them understand the costs of projects and what the benefits will be once they are completed, she said.
She said she believes federal legislative action is needed to make interregional planning successful and that states will not be able to do the necessary planning without a prompt from Congress. There must also be a mechanism for everyone involved in the planning process to benefit in some way, she said.
Emery pointed to the creation of the interstate highway system as a federal model to strive toward.
“We need to figure out how we take that model and apply it in the context of transmission where there’s a cooperation between the federal government and the state governments and all the consumers because people see both local and national benefits from what we’re doing,” Emery said.
Federal Policies
Rob Gramlich, president of Grid Strategies, said modeling shows the need for larger regional and interregional transmission, but the regulatory structure is not in place to effectively facilitate for planning. Gramlich said FERC Orders 890, 2000 and 1000 all attempted to address some of the regional transmission planning, but a gap exists between what needs to be done and where the process currently stands.
Gramlich asked how policies can be put in place through FERC or Congress to make regional and interregional planning happen more often and more smoothly.
Jennifer Curran, MISO’s vice president of system planning, said when the conversation of interregional planning comes up in the RTO, there are three conditions that take precedent in transmission building: “policy consensus, robust business case and fair cost allocation.”
Curran said policy consensus does not mean all stakeholders are pursuing the same goals, but it does mean that stakeholders have decided transmission is a way to help meet renewable goals and bridge the diversity among state goals. She said her expectation is that a federal policy to provide for regional and interregional transmission planning would have to be “pretty extreme” because many states will want to go faster in the planning process, while others would continue to be resistant to change.
“If we can get to a place where everybody understands transmission is part of the answer, then I think that’s helpful,” Curran said.