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FERC's Chatterjee: Grid buildout is key even as pandemic drags energy demand

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Essential Energy Insights - January 2021


FERC's Chatterjee: Grid buildout is key even as pandemic drags energy demand

There is a clear need to move toward the power grid of the future as demand for clean energy grows and technology advances, but those trends can only continue if the U.S. transmission system is up to the task, Federal Energy Regulatory Commission Chairman Neil Chatterjee said at a virtual industry forum on July 30.

Chatterjee's keynote address to the summer meeting of WIRES, a trade group focused on promoting transmission network investment, honed in on his vision of FERC's role in accelerating the buildout and modernization of the country's transmission system as well as potential impacts of the coronavirus pandemic.

"It's clear to me that we need to move toward a grid of the future that is reliable and flexible enough to withstand our rapidly changing energy landscape," Chatterjee said, noting the increasing cost-competitiveness of renewable and zero-emission resources, growing consumer demand for cleaner sources of energy and rapid technological advances in energy storage, distributed generation and grid-enhancing technologies.

"This pace of change shows no signs of slowing down, and that is a good thing," he said, pointing to benefits such as low U.S. electricity prices and declining power sector emissions while maintaining grid reliability.

For those trends to continue, he said it was incumbent on FERC to do its "part to make sure we are creating the right ecosystem for the necessary investment and innovation in our transmission system."

He continued that ensuring that the right transmission infrastructure is in place to usher in a grid that is able to keep up with the pace of change was "a tall order for long-lived assets like transmission projects" so it would "take both investment and forward-thinking ideas" to achieve.

To that end, he noted FERC's efforts to update transmission return on equity policies; revamp incentives so the most beneficial projects — rather than the riskiest — are pursued, and convene technical conferences to gain a better understanding of the issues.

Coronavirus impacts

Turning to the pandemic, Chatterjee suggested that the recent rebound in demand for electricity, natural gas and oil, brought on by a hotter-than-usual summer peak season, could be fleeting.

"Ultimately, we don't know yet where these trends are heading in the coming months and how they will affect infrastructure planning and development," he said. "From the early days of this crisis, I've made clear that I want the commission to get in front of these issues as much as we can and to think proactively about how we can respond in the coming months and even years."

Discussion during a panel on coronavirus impacts that followed Chatterjee's remarks expressed a similar degree of uncertainty as to what the new normal would hold for the energy sector and how that might influence infrastructure planning and buildout.

Joseph McClelland, director of FERC's Office of Energy Infrastructure Security, said the pandemic had "changed the game."

"It shifted the demand initially way down, and it shifted the load centers, and the demand curve looked a lot different," McClelland said. These conditions, he said, beg the question as to whether the transmission system that was designed and built to serve the pre-coronavirus load centers can serve the current and potentially changing load centers, and if planning decisions should be adjusted based on today's conditions.

McClelland called on grid operators "to really look at where the demand has shifted and whether or not the transmission that's in place now is adequate if these load centers were truly moved because, in some cases, we may not see the load return to normal."

Long-term plans unfazed

Zachary Smith, the New York ISO's vice president of system and resource planning, agreed, adding that the nature of demand shifts must be evaluated with regard to the ability of transmission and the resource mix to serve that load "not just under nice, calm conditions, but all kinds of conditions."

But Smith saw the coronavirus outbreak having a lesser impact on long-term transmission plans.

"There is a strong demand for renewables and emission-free resources, and those resources are going to significantly drive the need for transmission planning and development throughout New York State, and I expect that that's true throughout a lot of regions of the U.S., given all of the different policy goals and general demand from consumers … for that emissions-free resource to supply their power," Smith said. "I think that that's really going to drive a lot of transmission needs in the future."

Smith added that those transmission needs exist regardless of how load behavior shifts as a result of the pandemic.

Smith noted that NYISO has been forecasting a roughly two-year recovery period based on typical recessionary trends seen in the past, but that assumption may falter.

"The problem with that is typical recessionary trends had economic issues driving that recession, whereas here it's kind of an externality that's been forced upon the economy," he said. "So there is a real debate about what that recovery is going to be, and … it's really kind of a huge question mark as to how this energy demand is going to recover in terms of societal behavior but also in terms of the economy as a whole."

Jasmin Melvin is a reporter for S&P Global Platts. S&P Global Platts and S&P Global Market Intelligence are owned by S&P Global Inc.