WIND

FERC moves to unlock US grid investment

The US Federal Energy Regulatory Commission published new rules on 13th May that are designed to accelerate investment in the country’s transmission network. But while the order aims to support the expansion of US wind, solar and energy storage, it also faces criticism for the powers it takes away from states.

RICHARD HEAP

May 16, 2024

  • On 13th May, FERC published its plan to accelerate grid development
  • Order No. 1920 supports long-term grid planning and transparency
  • However, critics have warned it is likely to face legal challenges

 

On Monday 13th May, the US Federal Energy Regulatory Commission announced big changes to the way grid upgrades in the US are planned, financed and delivered.

FERC’s three commissioners passed Order No. 1920 by a majority of two to one. This order requires transmission providers to carry out long-term planning for regional grid projects in the US and determine how to pay for them, so that essential grid upgrades can be built. These projects are intended to support the expansion of wind, solar and battery storage on the US grid, and thus help the US to transition to renewable power.

These regulations have been a long time in the making. FERC has been working on this order for two years, and said it has received at least 15,000 pages of comments from around 200 organisations with interests in how the US grid is structured.

But the new rules have not met with universal approval. Critics have claimed that the order removes important powers from US state policymakers, including the potential for states to opt out of paying for transmission projects; and that the order is intended to facilitate the growth of renewables at the expense of other power sources.

 

What the order says

In its summary of the regulations, FERC highlights the following specific requirements.

  • Long-term transmission planning: Transmission operators have to…
    • Produce regional transmission plans for 20-plus years every five years.
    • Include processes to identify long-term transmission facilities that can go into regional plans; and re-evaluate those with delays or cost overruns.
    • Consider grid-enhancing technology in their plans, including dynamic line ratings, advanced power flow control devices, and advanced conductors.
  • More transparency and coordination: Transmission operators have to…
    • Be transparent with stakeholders in the transmission planning cycle.
    • Give incumbent transmission owners right of first refusal to replace any outdated transmission assets.
    • Revise existing interregional transmission coordination processes.
  • Clarity over who pays: Transmission project applicants will have to…
    • Engage with state entities for six months before submitting compliance filings related to transmission projects.
    • Propose a default method for cost allocation for how to pay for facilities.

 

FERC said the order takes effect within 60 days of publication in the Federal Register, and compliance filings must be submitted within 10 months of it coming into effect.

For wind and solar developers, the order represents a small step towards an efficient transmission system. These companies have long complained about how long it takes for them to connect projects to the grid, and last month Lawrence Berkeley National Laboratory reported there are 2.6TW of power projects stuck in grid queues. This is a rise of 27% year-on-year, and renewables projects make up 95% of that capacity.

There are many reasons for these queues, but one of the main ones is that the US has not been able to unlock the construction needed in high-voltage backbone grid links in the last decade while renewable energy development activity has soared. According to a report by US law firm Troutman Pepper in November, which we discussed here, the pressure has been worsened by support for renewables in the Inflation Reduction Act.

That report argued there are four reasons the US needs major grid upgrades:

  1. To relieve congestion and save customers money;
  2. To enhance resilience and reliability of the US grid;
  3. To open remote areas to renewable energy; and
  4. To meet long-term US decarbonisation goals.

FERC hopes Order No. 1920 can play an important role in facilitating cooperation on transmission projects between federal and state policymakers, and other bodies. This can particularly help areas of the US electricity system were planning is non-existent.

However, measures to support the expansion of renewables and the delivery of major transmission project will always face criticism, and this order is no exception. We need only look at how the three FERC commissioners that passed judgement on the order couldn’t agree: Allison Clements and chair Willie Phillips, both Democrats, both voted in favour while Republican Mark Christie voted against.

For example, critics have argued that this order hands state responsibility to plan and approve transmission projects to the federal government, and will therefore be subject to legal challenges. Christie also said that supporting the growth of renewables meant that the rules will facilitate a “massive transfer of wealth from consumers to for-profit special interests” including wind and solar developers, transmission firms, and major corporations that want to transition their operations to run on ‘green’ power.

He said it was particularly controversial that states would not be able to opt out from funding grid upgrades because transmission providers held power of cost allocation.

 

The bottom line

Long interconnection queues and a lack of resilience in parts of the US grid are huge challenges that have been decades in the making, so wind and solar developers will welcome FERC efforts to resolve the problems. But just as the problems have been a long time in the making, so there are also no quick fixes to the current situation – and the negative reaction to some parts of Order No. 1920 give us a tiny taste of the legal challenges and political rancour that will follow.

We think the order is positive, and so is the intent behind it. But many won’t.