In recent years, building transmission projects has become increasingly challenging for various reasons, including permitting challenges, NIMBYism, disincentives to build projects between utility territories, and a lack of coordination between states. As a result, there is now more proposed generation capacity and associated projects in the interconnection queues of independent system operators than ever before. The vast majority of those are wind and solar projects, but part of the reason for the delay is insufficient transmission capacity in the areas where those projects are being proposed.
Ari Peskoe, director of the Electricity Law Initiative at Harvard Law, offers two suggestions to resolve these issues. One is to give states more authority over transmission planning and promote greater competition in the transmission rather than continue to let incumbent utilities build it themselves. The second is to establish a minimum set of benefits for transmission projects to be approved rather than just a single reason. Those benefits could include reliability, emission reductions, resiliency, and greater grid flexibility.
Another potential solution proposed by Michael Giberson at Texas Tech University is to establish an entity exclusively responsible for transmission infrastructure in a state or region. That way, utility companies can focus on the distribution systems that will be increasingly important as more distributed energy resources (DERs) are added to the grid, resulting in bidirectional power flows and increased demand due to electrification of the transportation, heating, and other systems.
Implementation of the Federal Energy Regulatory Commission’s Order 2222 will accelerate the deployment of DERs in parts of the country with wholesale energy markets by removing the barriers preventing them from competing on a level playing field in the organized capacity, energy, and ancillary services markets run by regional grid operators.
The transmission system is increasingly becoming constrained despite the declining production from and eventual retirement of older power plants (primarily coal plants), which has made it increasingly challenging to develop wind and solar projects, especially in rural areas that often have the highest potential for wind and solar generation.
An entity exclusively responsible for transmission would be incentivized to build new transmission lines and expand the capacity of existing ones to those areas so that more renewable generation can be developed without the risk of being curtailed due to a lack of transmission capacity to urban areas. Conversely, incumbent utilities are incentivized to develop small transmission projects exclusively within their service territories rather than work with neighboring utilities to provide greater regional interconnection. That is especially true in monopoly areas not covered by independent system operators.
“For FERC’s rules to be successful, they must overcome utility incentives to overlook cost-saving technologies, prioritize local projects over regional investments, and thwart development of projects that might threaten their generation interests,” Giberson wrote in May.
A new paper by Dr. Carl Pechman, director of the National Regulatory Research Institute, on the growing importance of public utility commission oversight of anti-competitive behavior by electric distribution utilities as they transform from simple providers of homogeneous distribution services to integrators and gatekeepers of new service opportunities.
“The nature of the electric distribution utility is changing rapidly. It is increasingly taking on the role of integrator of different services provided by a wide array of market participants. Designing that new role will require determining whether services are provided by the electric distribution company as a monopoly or by competitive market entities and whether the incumbent utility can participate – and on what terms,” Dr. Pechman concludes. “Because the new technologies may compete with but also rely upon traditional distribution utility functions, principles of antitrust law cannot be ignored by state regulators.”