Transmission week: how to start building more big power lines

Welcome back to Transmission Week here at Volts!

In my previous post, I explained why the US needs lots of new high-voltage power lines. They will help stitch together America’s balkanized grids, connect remote renewable energy to urban load centers, prepare the country for the coming wave of electrification, and relieve grid congestion. And oh yeah — we won’t be able to decarbonize the country without them.

Nonetheless, they are not getting built! It’s a problem.

Today, we’re going to walk step by step through the process and show why they’re not getting built. At each stage, we’ll look at what Congress can do — and what Biden can do without Congress’ help — to get the process moving. This is some wonky stuff, but I’ve tried to keep it as simple as possible.

Before we start …

Transmission-related acronyms

This post will involve numerous acronyms, so to make things easier, I’ve put together a little acronym guide here at the beginning for you to check as needed. If you’re already an electricity system wonk, you can skip this.

* DOE: The Department of Energy. The federal agency responsible for, among many other things, energy research.

* FERC: The Federal Energy Regulatory Commission. The federal agency that regulates interstate transmission of, and bulk sale of, electricity and natural gas.

* IOU: Investor-owned utility. Privately owned companies acting as public utilities. Excepting some federally owned and municipal utilities, most utilities in the US are IOUs.

* ISO: Independent System Operator. For our purposes here, you can think of these as the same as RTOs (see below). This is why you constantly hear people in this field using the unwieldy phrase “RTOs and ISOs.”

* NIETC: A National Interest Electric Transmission Corridor, designated by DOE as an area in particular need of new transmission to ease costs or congestion.

* NREL: The National Renewable Energy Laboratory, a DOE-run research lab.

* PMA: Power Marketing Administration. Federal agencies that operate electric systems and sell the electrical output of federally owned hydroelectric dams in 33 states. They are: Bonneville Power Administration (BPA), Western Area Power Administration (WAPA), Southeastern Power Administration (SEPA), and Southwestern Power Administration (SWPA).

* RTO: Regional Transmission Organization. Non-governmental organizations (which nonetheless have government-like powers) that oversee transmission planning and wholesale energy markets in areas of the country that have been “restructured,” i.e., where generation, transmission, and distribution are owned by separate utilities. RTO membership is composed of the utilities in a particular region.

Here are the US RTOs and ISOs: CAISO, ERCOT, SPP, MISO, PJM, NYISO, and ISO-NE.

All right, let’s get to it!

There’s still not much inter-regional (much less national) transmission planning

For most of the history of the US electricity system, up to the 1990s, almost all utilities were “vertically integrated,” meaning they owned the whole electricity value chain in a given territory, from generators to transmission and distribution. They built large central-station power plants close by to population centers and then ran transmission lines out to them. There was neither much need nor much appetite for building longer regional or inter-regional lines.

Over all that time, states developed a persistently parochial lens and tight control over transmission planning.

Two things have changed in recent decades.

One, renewable energy expanded rapidly and got really cheap, which is why solar and wind are the fastest growing sources of new electricity capacity. However, as we saw in the previous post, the most intense sun and wind in the US are distant from population centers. This suggests the need for a wider scope of planning.

Two, a wave of reforms in the 1990s and 2000s led to “restructuring” in regions containing around half the nation’s electricity ratepayers. Vertically integrated utilities were broken up: generation owners were separated from transmission owners and both were separated from distribution-system operators (i.e., the local utility that sends you a power bill). Transmission planning in these restructured regions was given over to RTOs and ISOs.

This suggests there ought to be capacity for a wider scope of planning.

Indeed, FERC has acknowledged the need for larger-scale, regional and inter-regional transmission planning for decades, and attempted to make it happen through orders 888 (1996), 2000 (1999), 890 (2007), and 1000 (2011).

I won’t get into all those orders other than to note that order 2000 created RTOs (membership in which was voluntary for utilities) and was explicitly meant to encourage (though not mandate) broader regional transmission planning. Part of the idea was to create competitive regional markets for transmission, similar to wholesale markets for generation, in which merchant (non-utility) projects would compete on a level playing field with IOU projects.

As Ari Peskoe of the Harvard Electricity Law Initiative writes in a recent paper, “FERC was optimistic that [the IOUs’] central-planning development model would be replaced by ‘well-defined transmission rights and efficient price signals’ that would facilitate market-driven expansion.”

When it didn’t quite work out that way, once again, in order 1000, “FERC employed several mechanisms to pry control over regional transmission development from IOUs and break the IOU-by-IOU planning model,” Peskoe writes.

The general consensus is that, despite its best efforts, FERC has failed to bring IOUs to heel and produce truly regional transmission planning and markets. Local IOU transmission plans still serve as the foundation of regional planning. There is still virtually no transmission built through competitive bidding. In practice, IOUs still build virtually all the lines in and between their territories and have deliberately made it difficult for merchant projects to get sited and financed.

IOUs have engaged in a “shift away from regional projects, which must be developed competitively, to smaller or supposedly time-sensitive projects that IOUs build with little oversight and without competitive pressures,” Peskoe writes, and RTOs have implicitly or explicitly supported them in this shift.

These local IOU processes are often opaque, closed to journalists and public interest groups, but the broad shift is clear. Utilities in PJM, for instance, tripled spending on local transmission projects since order 1000 was issued. In MISO, spending on regional projects shrank from nearly $6 billion to just $300 million from 2014 to 2019. Not a single transmission project in NYISO has been built on the basis of reg