➤ President Joe Biden's 100%-clean-by-2035 target for the power sector is achievable, a federal energy regulator said.
➤ The Western U.S. needs to form a regional transmission organization to improve grid reliability.
➤ The Federal Energy Regulatory Commission lacks the authority to set a greenhouse gas price.
FERC Chairman Richard Glick
Source: Federal Energy Regulatory Commission
In July, the Federal Energy Regulatory Commission announced a new rulemaking proceeding aimed at boosting U.S. electric transmission construction at the pace and scale needed to avoid the worst effects of climate change. Commissioner Richard Glick, who President Joe Biden appointed as chairman of the commission in January, is focused on using existing FERC authority to decarbonize interstate energy infrastructure and improve planning for severe weather threats.
S&P Global Market Intelligence recently spoke with Glick for its latest Energy Evolution podcast about the rulemaking and electric transmission infrastructure needs. The following conversation is edited for length and clarity.
S&P Global Market Intelligence: Studies estimate that the U.S. will need to double or even triple its electric transmission capacity to decarbonize the economy by mid-century. Since siting and permitting major high-voltage lines takes around eight to 10 years, how confident are you that we can achieve that goal?
Richard Glick: I'm very confident. We certainly feel a sense of urgency here at FERC. The energy transition that is underway is certainly leading to a significant demand for additional transmission, and a lot of that transmission is going to get built. We just want to make sure it gets built the right way and in the most cost-effective way, and that there's a connection [between] the way transmission is built [and] where transmission is needed.
Those are certainly things FERC has authority over, but there are a lot of other things that we're taking a look at. For instance, making more efficient use of the existing grid.
How realistic do you think President Biden's 100%-clean-by-2035 target is for the U.S. power sector?
We've had these targets over time [where] everyone says that we could never do it, and every time we achieve those targets, and achieve them actually on a much quicker scale than people had predicted. So I'm confident the same is going to exist here today.
If you look at the technological innovations that are underway with regard to energy storage, with regard to more efficient use of the existing transmission system, with regard to other technologies related to both electric generation and transmission, I'm confident that we'll be able to get there. Is it going to be easy? No, but I think there is significant willpower … around the country right now, and there is significant innovation that is occurring today. And I'm very confident that not only President Biden's goals but also the goals set by a number of governors in terms of clean energy by 2035 will be met.
Cost allocation is one of the biggest obstacles to grid buildout at the pace and scale needed to avoid the worst effects of climate change. What specific areas on that front need to be changed to ensure a project's full range of benefits are accounted for?
Under court order, we are required to allocate costs in a manner that's "roughly commensurate with benefits," and obviously it's in the eye of the beholder. But essentially the way costs have been allocated on transmission for the most part is those consumers that access the power that's transported over a particular transmission line are considered the beneficiaries, and they pay for that. That makes a lot of sense in some ways, but there are other benefits that we're seeing transmission create that aren't necessarily accounted for.
For instance, when the transmission system is upgraded, there are increased reliability benefits. You may not be getting power from a particular line, but a particular transmission investment may actually be leading to reduced congestion and reduced bottlenecks. It also helps consumers access cheaper power. That's not necessarily taken into account today when costs are allocated. The commission is considering ... whether to expand our notion of what benefits are and who the beneficiaries are when we allocate the cost of transmission.
What are some of the unique challenges and potential solutions you see in terms of grid reliability in the Western U.S.?
We have vast expanses of land. We have federal utilities in the region. We have certainly significant challenges brought about by climate change, whether it be extreme heat … [or] the wildfires. They pose significant challenges as well, for instance, in terms of taking out electric transmission. We saw just a couple weeks ago a major fire in Oregon that took out the California-Oregon Intertie, which reduced the ability of the Northwest to transport up to 4,000 MW of power to California.
The West certainly recognizes that they need to prepare for this increasing frequency of extreme weather. And FERC actually just a couple weeks ago held a technical conference on the subject of resource adequacy in the West … and I think the good news is there are folks that working together the Northwest.
The region needs to work together even better … because it's not just a single state problem, its an entirely regional problem. In my opinion what is needed is a regional transmission organization. We are certainly encouraging the utilities in the region [and] other stakeholders in the region to come together and work more quickly together to get an RTO up and running.
Congress' bipartisan infrastructure package would clarify uncertainty over FERC's backstop siting authority for new projects in national interest electric transmission corridors. Can you envision a future when FERC overrides state-level permit denials for these types of projects?
The states have had a preeminent role in terms of siting transmission, even across state lines where FERC has had a backstop authority.
If Congress gives us increased backstop siting authority, we'll certainly consider it and utilize it. But right now, I'm focused on what authorities FERC has regardless of whether Congress moves forward with this bipartisan infrastructure legislation or not.
What else can Congress do to make sure FERC has the tools it needs to tackle the transmission challenge?
I think we generally have the authorities that we need today. We have significant authority over cost allocation. We have significant authority over planning. And through our advanced notice of proposed rulemaking that we issued a couple of weeks ago, we have initiated a process that I think is going to lead to substantial reforms in terms of the way we plan and allocate the cost of transmission.
To the extent Congress would clarify how we allocate or how we consider benefits in terms of our cost allocation approach, that would be helpful as well.
A bill was recently introduced in the U.S. House of Representatives saying FERC should declare wholesale power rates to be unjust and unreasonable if the rates do not account for the impacts of related greenhouse gas emissions. Do you think FERC has the power to do this?
I don't think FERC has the current authority to establish a greenhouse gas price. We did several months ago issue a policy statement in which we announced that if a state or a group of states were to develop a carbon pricing regime, we would use our authority over wholesale markets to accommodate those pricing regimes and the wholesale electric markets around the country.