Summary: FERC’s ambitious energy policy would accommodate new transmission lines serving renewable energy projects.
Although a comprehensive federal clean energy policy stalled when Congress failed to pass a clean energy bill in 2009, energy policy in America is not at a standstill. The Federal Energy Regulatory Commission’s latest order—Order 1000—is an ambitious new policy that aims to accomplish two sizable goals simultaneously. First, it encourages a more coordinated build-out of the new electric transmission lines the country needs to maintain electric reliability. Second, it aims to allow large-scale renewable energy projects to connect to the grid. Perhaps partly because of its ambitious goals, FERC’s latest order has drawn both criticism and praise.
Essentially, Order 1000 requires public transmission utilities to: (1) engage in regional and interregional transmission planning, while accounting for public policy considerations and (2) develop cost allocation methods to allocate the costs of new transmission projects among beneficiaries of the transmission line.
Since the mid-1990s, FERC has presided over an industry in transition. FERC’s groundbreaking Order 888 required open access to the transmission system. Order 890 required open and transparent transmission planning. Both orders focused on creating a level playing field to make transmission accessible to all market participants at fair prices. As a result, the industry moved from one of large, vertically integrated electric companies that generated, transmitted, and distributed power to one that also includes a plethora of specialized generators, transmission companies, distribution, and power marketing companies. This has meant increased competition and to some degree lower electric prices—particularly for large electric consumers—as well as increased selection of generation types. But this transition hasn’t overcome a Balkanized grid in regard to transmission planning and development.
Order 1000 thus moves toward expanding transmission planning from regional to interregional planning on the premise that wider planning is better planning. This is the difference between planning for New England or for New England and the mid-Atlantic region. The order also requires the cost of these interregional projects to be more broadly spread between electric consumers in both regions.
Moreover, to guide new transmission that supports the nascent renewable generation industry—large-scale wind being among the most prominent of these—Order 1000 requires transmission owners to acknowledge the public policy requirements of states. Renewable portfolio standards, which about 30 states have enacted to encourage renewable energy, are among the most salient of these requirements.
Not surprisingly, a big source of praise for Order 1000 comes from those who provide transmission capacity. Those in the renewable energy industry also voiced praise. The Energy Future Coalition, a group of companies that includes the American Wind Energy Association, Iberdrola Renewables, and the Solar Energy Industries Association, expressed in a Request for Rehearing before FERC that Order 1000 “represents a very substantial improvement over the status quo.” But some critics contend that FERC has overstepped its authority under federal law, including the Large Public Power Council, which represents 25 of the nation’s largest locally owned and controlled not-for-profit power systems.
Others question if the approach will hurt the viability of local renewable energy projects. For example, by subsidizing the transmission cost of distant renewable generators, otherwise more economic local renewable generators may seem more expensive even though that may not be the case if the costs of transmission were incorporated.
Another critic is the Coalition for Fair Transmission Policy, a group of seven geographically diverse utility companies. In a Request for Rehearing before FERC, the group said Order 1000 was overly broad in determining the benefits and beneficiaries for transmission projects, and thus spread the costs of new transmission far too widely among electric consumers who might not truly benefit. It also argued that the order replaces the traditional bottom-up transmission planning process, which allows transmission to develop as new generation develops, with a top-down approach that predetermines which types of generation will benefit and thus may end up risking the money of would-be electric consumers and preempting state prerogatives.
Order 1000 may lay the groundwork for large-scale development of renewable energy by facilitating a build out of electric transmission lines connecting renewable energy resources and load centers. But litigation may also reshape the order to make it more responsive to concerns that FERC has overreached its regulatory powers, created inequitable cost-sharing for new transmission lines, or made it harder for local renewable energy projects to be effectively planned.
