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FERC's regional grid expansion rule is 'a beginning, not the end,' experts say

The Federal Energy Regulatory Commission's new rule on regional transmission planning is a crucial step forward for US grid expansion, but the rule's impact on the US clean energy transition will likely take years to materialize, according to industry experts.

"This is really a roughly decadelong play before we're going to see actual wires coming from this rule being built," Gabe Tabak, senior counsel for the American Clean Power Association (ACP), said during a May 21 briefing hosted by the trade group.

FERC's rule (RM21-17), finalized May 13, represents the first major update to the agency's regional transmission planning and cost allocation policies in more than a decade. The final rule, Order 1920, sets out seven planning factors and benefits that must be accounted for in scenario-based regional planning efforts conducted over a minimum 20-year horizon.

Planning factors include drivers such as federal and state-level clean energy policies, trends in technology and fuel costs, generator retirements, and corporate clean energy commitments. The rule's seven economic and reliability benefits cover metrics such as access to cheaper sources of electricity, reduced transmission congestion costs and mitigation of extreme weather events.

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Implementation will be a yearslong process, experts noted. The rule requires transmission providers to establish six-month engagement periods with state regulators to develop one or more FERC-compliant cost allocation methodologies. Default cost allocation methodologies are due 10 months after the rule's effective date, with or without full consensus from states in multistate planning regions.

Selection decisions must then occur three years from the commencement of a FERC-approved regional transmission planning cycle, with new cycles required at least every five years.

"I would caution us to think about this as a beginning, not the end," Sarah Webster, senior vice president of market development for developer Pattern Energy Group LP, said during the May 21 briefing.

State-level reactions

Webster said Order 1920's success will likely hinge on how it is received by states. "We need to collectively embrace the whole range of state reactions and orient toward those who have to advance this rule at the state level, wherever they're coming from, as partners — not adversaries," she said.

Dan Scripps, chair of the Michigan Public Service Commission, noted that the final rule encourages a set of "bottom-up" best practices already used by the 15-state Midcontinent ISO. Additional planning factors that must be accounted for include utilities' integrated resource plans, which are also typically developed over a 20-year planning horizon and require approval from state utility commissions.

"That, at least in the MISO process, has proven to yield a fairly robust portfolio of projects," Scripps said May 21. The grid operator's board in July 2022 approved a $10.3 billion regional transmission plan that represents the largest portfolio of grid expansion projects in the US to date.

Brett White, vice president of regulatory affairs for developer Pine Gate Renewables LLC, added that Order 1920's implementation could also depend on how different grid regions view the rule's legal durability.

To that point, White said Pine Gate Renewables "would love" to see FERC issue a strong rehearing order by December that paves the way for future compliance filings.

Remaining grid policy priorities

While Order 1920 is an important first step, major work remains on the transmission policy front, experts said during a separate briefing hosted May 20 by the American Council on Renewable Energy (ACORE).

Ray Long, ACORE's president and CEO, cited data showing that solar and transmission projects have suffered far more delays and cancellations than other technology types, including oil and gas projects, during National Environmental Policy Act (NEPA) reviews over the last decade. "Additional actions will need to be taken, such as FERC action on things like interregional planning, as well as congressional action on permitting reform," Long said.

Order 1920 covers two of the three "Ps" associated with transmission development — planning and paying — "but permitting is still out there," J.C. Sandberg, ACP's chief advocacy officer, said during the May 20 event.

Christina Hayes, executive director of the pro-transmission advocacy group Americans for a Clean Energy Grid, commended the US Department of Energy for finalizing a new federal transmission permitting program in April that sets a two-year deadline for NEPA reviews.

Hayes said the permitting process could be further improved by ensuring a firm period of "one, no more than two years" from a record of decision to a federal notice to proceed, "where you can start turning dirt." Pattern Energy's 550-mile SunZia transmission line, for example, received its record of decision in 2015 but did not break ground until September 2023, more than 17 years after the line was first proposed.

Kristen Golden, senior vice president and chief legal officer for Grid United LLC, said FERC could help boost interregional transmission build-out by finalizing a defined cost allocation process for interstate grid projects with at least 1,000 MW of capacity. "Interregional transmission has to be addressed by FERC," Golden said during ACP's May 21 event.

FERC is exploring a potential minimum interregional transfer standard, with results from a related study on the issue by the North American Electric Reliability Corp. due at the commission by December.