Proposed FERC Rules Aim to Accelerate Grid Decarbonization
In recent years there has been a dramatic increase in the number of proposed clean energy projects in the United States. In fact, the amount of clean energy that’s waiting in line to connect to the nation’s electric grid is greater than the total installed generating capacity on the grid today.
The prospect of so much clean energy in waiting is a bright spot in the larger effort to decarbonize and address climate change. Yet proposed clean energy, and actual clean energy, are two very different things, and the fact is that a number of policy barriers stand in the way of turning so many clean energy proposals into reality.
Shelley Welton, a Presidential Distinguished Professor of Law and Energy Policy with the Kleinman Center, discusses proposed policy reforms from the nation’s electricity regulator, the Federal Energy Regulatory Commission, that aim to remove these barriers to the greening of the electric grid. Welton looks at rules that seek to speed the process for connecting clean energy to the grid, and ensure that the grid is ready to handle all that new clean power. She also discusses the Supreme Court’s recent ruling that narrows the Environmental Protection Agency’s ability to limit greenhouse gas emissions from power plants, and implications the ruling might have for the FERC’s ability to regulate on issues relating to climate change.
Andy Stone: Welcome to the Energy Policy Now podcast from the Kleinman Center for Energy Policy at the University of Pennsylvania. I’m Andy Stone.
In recent years, there has been a dramatic increase in the number of proposed clean energy projects in the United States. In fact, the amount of clean energy that’s waiting in line to connect to the nation’s electric grid is greater than the total installed generating capacity on the grid today. The prospect of so much clean energy and waiting is a bright spot in the larger effort to decarbonize and address climate change. Yet proposed clean energy and actual clean energy are two very different things. And the fact is that a number of policy barriers stand in the way of turning so many clean energy proposals into reality. On today’s podcast, we’re going to take a look at proposed policy reforms from the nation’s electricity regulator, the FERC, that aims to remove these barriers to the greening of the electric grid. Here to discuss the proposed reforms is my guest, Shelley Welton. Shelley is a presidential distinguished professor of law and energy policy with the Kleinman Center and the Penn Carey Law School. She’ll discuss rules that seek to speed the process for connecting clean energy to the grid and ensure that the grid is ready to handle all that new clean power. She’ll also discuss the Supreme Court’s recent ruling that narrows the Environmental Protection Agency’s ability to limit greenhouse gas emissions. Shelley will look at what implications the ruling might have for the FERC’s ability to regulate on issues relating to climate change. Shelley, welcome to the podcast.
Shelley Welton: Thanks so much for having me.
Stone: And welcome as the newest faculty member at the Kleinman Center.
Welton: Thanks. I’m really excited to be joining you all.
Stone: So let’s jump to today’s topic. We are seeing a big wave of new clean energy projects lining up to connect to the grid. Tell us about the magnitude of this shift and the implications for grid decarbonization.
Welton: Yeah, I think you kind of alluded to this in your introduction. That interconnection, getting these resources up on the grid is a big problem, but it’s a good problem. We’re just really seeing renewable energy proposals at least booming across the United States. And this is exactly what we need to have happen if we’re going to have a chance of hitting both federal and state climate change goals, particularly because it might be helpful just to contextualize this by pointing out that electricity really is the key to cleaning up the climate. Because our plan for cleaning up a lot of other sectors, things like our cars, a lot of heavy industry is to turn to electricity. So if we can figure out how to both grow the electricity grid and make it clean at the same time, we will have unlocked a lot of potential solutions to climate change.
Stone: Now, these are proposed projects, as you just mentioned. In reality, they face many barriers to implementation. How material are these challenges?
Welton: Yeah, I would say they’re extremely material. So maybe it’s helpful to break down some of the challenges that we face in terms of getting these resources connected to the grid to begin with, and then building the kind of grid that can support a system that runs largely on clean energy. So first to talk a little bit about getting these resources connected, it’s kind of intuitive why this is important, right? Like you need resources as they are gearing up, figuring out their financing, figuring out whether or not they have a viable chance of actually building and making money over the long haul to know where it is they can build and whether or not they’re going to be able to sell their electricity into the grid. And so interconnection policy is really critical for helping these projects plan out their financing, get the backing they need to actually get built. And just to throw out one other statistic, one recent study from Berkeley Labs finds that only 23% of the resources that are in line to get built, that have put in an application to interconnect to the grid, are actually getting built in recent years, and resources are also waiting longer to get built. So a decade ago, the wait time was 2.1 years. Now the average wait time in this queue to get connected to the grid is 3.7 years, which when we’re talking about trying to effectuate a very rapid transition to clean energy, this is not a helpful burden to place on these resources. When it comes to transmission, with the grid growing and turning more to renewable energy, most experts think we’re going to need a lot more transmission and potentially a lot more big inter-regional transmission to help integrate all these resources while preserving the reliability of the grid. So transmission allows sun and wind to move from resource dense areas to population centers. It smooths out variations. It lowers costs of the clean energy buildout. So transmission is a really important piece of this clean energy equation. So maybe I’ll offer three broad reasons why I think it’s been quite challenging to get the policy right on both interconnection and transmission, and then maybe we can talk through a few of the details as we get more into the reforms. But three big reasons I would say we’re finding it challenging to get the policies right. First is that all of these issues involve multiple players and they involve split legal authority. So oftentimes you see the interests of federal regulators and regional grid operators and individual utilities and states not always coming into alignment. And to make it even more complicated, a lot of states don’t agree on the goals of the system. Some states want a lot of clean energy. Some are interested in preserving fossil fuel jobs. And states are given by law control over their generation mix. So you just see a lot of friction in the system among all the different players. The second reason I think both of these are challenging issues is that they’re really technically complex and it really is quite challenging to figure out exactly who benefits from a transmission line and should pay for it, or exactly who causes particular costs when they enter the system. There’s a huge interconnected grid, the largest machine on earth it’s been described as. And a lot of times single projects have multiple benefits for various parties in figuring out exactly who should pay what is just not an easy task. And then the third sort of big challenge that I’ll highlight is more grounded in political economy. And that’s that when we see all of these new resources enter this line up to enter the system, this really poses a threat to industry incumbents. Incumbents largely control the current system. And in some cases, what we may be seeing is a bias against connecting potential competitors or letting other companies come in to build infrastructure that these incumbents have traditionally controlled.
Stone: So to reiterate here what you’re talking about, the challenge on the transmission planning side is that you have so many players that have to be accommodated. You’ve got states with their different policy goals and perspectives. You’ve got many companies involved. They all have to be herded, herding the cats to make sure that they’re all on the same page, jumping to the delay in the interconnection of these resources. And you said only 23% of these resources that are in line are actually getting connected. What exactly has caused the increased delay in getting these resources on the grid? What has changed in the last few years that’s just made it so much harder to get new requests processed?
Welton: So the way that interconnection works now under the system that FERC has set up is basically this – I’m going to oversimplify, but basically this. A generator wants to get connected to the grid. They file an application with their transmission provider. There’s a big study done to see what it’s going to take to add this resource to the grid and whatever the results of that study, the new generators asked to pay the cost of the network upgrades necessary to connect to the grid. This worked pretty well when it was big generators doing big projects that were mostly connecting to the grid. But it’s a process that’s not well suited to the dynamism of the current system, where you have lots of smaller renewable energy projects, all wanting to connect to the grid. These are resources that can be constructed more quickly. They’re more scattered throughout the grid, and this process is just bogging them down. And it also means that where you are in line can often dictate very much what the costs of connection are. So you might get an unlucky place in line where the projects ahead of you didn’t cause any big network upgrades, but they’re going to have to change the system more in order to accommodate your addition, and so it’s tens of millions of dollars more than you expected to connect to the grid. And this isn’t, just really isn’t a very tenable way to go about trying to connect thousands and thousands of smaller resources to the grid. One of the things that I’ve heard people say recently is all the easy spots are taken. Right, so we’re at a place where it’s now more complicated to figure out exactly how to calibrate these networks, to support all of these new resources. And doing this on an application by application, your costs just kind of vary depending on where you fall on the queue is not a very good system wide way to plan.
Stone: And a lot of these proposed projects back out of the queue when they find out, for example, that the economics aren’t favorable, which per my understanding means that the organization, the transmission organization, for example, that’s actually managing this process by which the new generators will come into the system. They have to rerun the whole study process. Right, to see what the impact is going to be now that that project A is not going to be there, the whole thing looks differently. We’ve got to restudy the whole system. Is that right?
Welton: That’s totally right. Yeah so, and I think there’s a couple dynamics at work there. One is that when you know that it’s going to be 3.7 years until you get a decision, a lot of projects are putting in interconnection requests quite early in their process before they’re sure whether or not they’re actually going to be viable or not. And at the same time, you’ve got projects that get slapped with a bill that makes them just balk. The numbers I’ve seen are that in some cases, whereas it used to be like 10% of a project cost you could count on for interconnection costs. It’s now as much as 50 to 100% of total generation cost based… are caused by what companies have to invest in network upgrades to connect to the grid. So you also see companies that have very serious projects pulling out late in the stage because they’re shocked at the sticker price of how much it’s going to cost to connect. All of which destabilizes the queue, destabilizes the studies, makes it much harder on both ends to do this well.
Stone: So FERC has tried in the past to address these issues. And in the big picture, through some of its reforms in the past, it’s actually disincentivized a new infrastructure, which is exactly opposite the outcome it had hoped for. Can you tell us about what the FERC has tried and why those rule changes didn’t really work?
Welton: Yeah. So I think this is particularly true on the transmission side where you see widespread agreement that the big steps that FERC has taken in recent years may have actually backfired. So FERC’s been trying for a long time to make transmission providers cooperate and run this grid more like an integrated system and less like sort of, fiefdoms that all happen to be connected to one another. And of course, when FERC, back in the late 1990’s and early 2000’s, created regional transmission organizations and independent system operators – this was its big step towards trying to make the grid more coordinated, operating more efficiently in concert. And since that time, it’s basically taken a series of steps to try to make these regions act more holistically, plan more holistically. The last big order that it put out in this regard is called Order 1000, which came out in 2011. And to vastly oversimplify, Order 1000 basically told regions that they needed to make a regional plan instead of just adding together all the local plans and calling that their plan. And they said that they should also come up with some sort of system for how they were going to allocate the costs of new regional lines among them. Then the last thing Order 1000 did is they also said some of these larger lines that we’re going to include in regional cost allocation, you have to open these up to competition. Right. So in technical terms, what they did is they eliminated what’s called the right of first refusal or ROFR for these bigger transmission lines and said, we think competition is a better way to ensure that the costs of these new lines are reasonable and that we’re getting the system right sized at the right price. And basically Order 1000 just hasn’t worked. Utilities have ended up turning to mostly local projects where they don’t face competition as the way to build out the transmission system in the decades since Order 1000. So this regional planning that FERC mandated just isn’t producing the kind of integrated, forward looking plans that FERC had hoped that it would. And maybe one other point that I think really ties transmission planning and interconnection together, which is that a lot of the upgrades that the grid needs right now are being identified through these interconnection queues studies, and then these interconnecting resources are being forced to bear the entirety of these network upgrade costs, even though these upgrades have wider system benefits. I pulled what I think is a really great analogy from Rob Gramlich to describe what’s going on here. He says that this approach is like trying to put the whole cost of the highway lane extension on the next car on the road, even though obviously many people are going to benefit from the highway other than the next car that enters it. So really, it’s a joint problem of transmission planning happening either far too much at the local level or through a backdoor of the interconnection process instead of in a holistic, integrated regional fashion.
Stone: So this spring, the FERC introduced two notices of proposed rulemaking, or NOPRs, to address these challenges specifically. Can you walk us through the key details of both?
Welton: Yes. Here’s where things start to get pretty complex. So I will try to make this as un-wonky as possible. But bear with me. First, maybe I should just say a little bit about what a notice of proposed rulemaking is. I imagine many listeners will be familiar, but for those who are not, notices of proposed rulemaking, or NOPRs, are put out by an agency as the first formal step of a rulemaking process. And in this case, FERC actually also put out advanced NOPRs or ANOPRs to sort of solicit industry and public interest and state views on what they thought they should do, that the agency should do with transmission and interconnection. So they got those comments. And then this spring they put out two NOPRs, one focused on transmission planning, one focused on interconnection that announced the agency’s intentions regarding what reforms they’re planning to put in place. So we are now in the stage where agencies accepting comments on these NOPRs in advance of putting out final rules that probably will look largely like the NOPRs, but may change a little bit based on the comments that they get in response to these more concrete proposals that they’ve put out. So let’s talk about what they’ve put out in these NOPRs. And maybe I’ll start with interconnection, which I think is maybe slightly the simpler of the two. So in their interconnection NOPR what FERC is proposing is to put in place what they’re calling a first ready, first served cluster study process. It’s a very solid reform. And the idea is to try to fix this backlog on two ends. On the one hand, transmission providers should do bigger studies that incorporate more proposals at the same time, instead of doing these separate studies for every little project proposing to enter the grid, and then the burden on people that want to build generation and enter the queue is they have to prove that they’re ready financially and physically to build the project should it get selected, right. So this is basically trying to make sure that the resources in the queue are serious and ready to go if they do get selected through what is hopefully a quicker clustered process of studies. The order does a couple other things. It puts some deadlines and penalties in place if transmission providers don’t get their studies done on time. There was a big problem of transmission providers just not meeting deadlines a lot of times, and it allows more flexibility around resources co-locating and just interconnecting once to the grid. So this is a big deal, particularly for solar and storage, which is a booming category of resources that want to connect to the grid. So basically the aim of this NOPR is speed things up, make it easier to get through this interconnection process as long as you’re a resource that’s ready to go. So that’s the interconnection NOPR. The transmission NOPR is a bit more convoluted, but let me try and just talk through some of the high level things that it does. So one of the big things that this NOPR does is it asks regions to engage in longer term planning than they have been to date. The NOPR explains that regions have been very short sighted in responding to particular reliability and economic needs in their transmission planning, but not sort of taking a broad, long term system wide look at how the transmission grid is changing. And so it asks regions to plan over a 20 year time horizon and to use a variety of scenarios to help them think more comprehensively about what the grid is going to need in the future. That helps plan for where the resource mix is going, which as we’ve been talking about, is largely in the direction of lots more renewable energy. And they tell regions that these plans have to include state public policy requirements, which is largely clean energy standards. And they also have to include, and I think this is an important synergy, they have to include in their study needs that have been identified but not filled in multiple interconnection requests. So if there’s some upgrade that keeps popping up in these interconnection studies, that’s not getting addressed, that too should be included in these plans. And they also tell them to consider some technological upgrades to transmission lines like dynamic line readings that helps make transmission more efficient. Okay. So that’s the first big category for firm reforms, basically longer term, more comprehensive planning. The second thing that this NOPR does is it tells transmission providers and regional planners that they need to think more comprehensively about the range of benefits that any transmission line provides, which basically is an effort to help large transmission projects illustrate their multiple benefits to the system, which then hopefully helps people agree on how to share the costs of them more holistically and more broadly. Right and FERC here doesn’t say exactly what benefits have to be considered by regions, but it does suggest that regions have been systematically undervaluing certain attributes of lines in the past, and that basically all transmission projects should be evaluated for their ability to support multiple goals at the same time. Right, so making the grid cheaper and more economic, making the grid more reliable, and helping states to meet their public policy goals mostly to integrate renewable energy. Okay. So that’s the second big thing it does is expand the range of benefits that regions are supposed to consider. The third interesting thing that it does is it proposes an enhanced role for states in several respects. One, in thinking about what the range of benefits should be and how long term planning is done, and second in how costs should be allocated. So it says that regions can adopt a new method of letting states come to an agreement about how to share the cost of new transmission lines. This reform can seem sort of counterintuitive at first, right? States are often the ones that are fighting about how to share these costs. So why would you want to increase their role in the system? And here, this reform is very much interrelated with the fact that legally states control siting of transmission lines. So in many instances, you’ve seen lines being approved at the regional level as an important new project that delivers region wide benefits, only to have one of the states through which the line passes block approval of siting and caused the line to fail. And so I think FERC’s reasoning here is you might as well give states some more upfront authority to try to come to agreements about how to share the cost of these lines in order to sort of try to forestall this back end parochialism that you often see from states. Okay. And the last thing that I’ll highlight in this transmission NOPR is its approach to rights of first refusal. And this is a controversial piece of this NOPR. So as I mentioned, Order 1000 said that utilities couldn’t exercise a right of first refusal over some regional projects. The idea was, let’s enhance competition, lower costs. But perversely, it just made utilities turn to their little local fiefdoms and doing local projects. So now FERC is saying we’re going to go back on that requirement and we’re going to allow utilities to exercise this right of first refusal to exercise this prerogative, to build these bigger regional lines, as long as they’re doing it in partnership with some other entity, some other non affiliated entity. And so this is FERC basically making a pragmatic concession and saying, okay, we see the transmission providers have a lot of power in the system. And if what it takes to get regional lines built is allowing them to build them, maybe the game is worth the candle. So I’m leaving out some details, but that was, I think, enough of a big picture overview of what these NOPRs do.
Stone: You know, there’s so many moving parts here. And again, you talked about getting the states more involved in this process and that has often been the barrier to regional planning and regional transmission development in the past. You know, just your reading of the tea leaves, do you think this is going to be enough to get states involved in projects where potentially the benefit to that given state may not be so great? And that’s generally where where states have backed out in the past. They see a line coming through their territory, costs allocated to them, but without benefits that are clear to them, they’ve often said no. Do you think this will help overcome that?
Welton: It’s a great question. I honestly don’t know. I think FERC recognizing how important state cooperation in general is to this project of building a grid, has decided to play nice with the states. And I think that’s the right call. Whether or not this is going to be enough to persuade states, I think is an open question. Right. And one of the things that the NOPR allows but does not require is to do transmission planning in more of a clustered approach as well. Right. So maybe plan several lines that span a region and will serve multiple purposes all in concert. This is a strategy that I think could allow for planning several lines with beneficiaries in different places so that basically everybody gets a piece of the pie. Whether this is going to be enough to appease states that just for purposes of geography and politics, don’t have a big stake in seeing their transmission get developed is a tricky question. I think FERC’s doing what they can without stepping hard on state toes, and we’ll see if it’s enough or not.
Stone: To what extent has there been consensus around both of these FERC proposed solutions? Is everybody been on board? Has there been any significant pushback?
Welton: I think most people seem to agree that interconnection needs updating and Order 1000 didn’t work. And so I wouldn’t say that there’s like broad pushback to the idea that there needs to be some updating of both planning and interconnection. I’ll highlight a few points of big disagreement that are lurking out there. One is that Commissioner Danly dissented from the transmission NOPR and basically suggested that this was an environment driven reform and that that’s outside of FERC’s purview and isn’t justifiable. So his big beef seems to be that this NOPR may require states that don’t have clean energy goals to help pay for the transmission that’s largely being built to achieve their neighbors clean energy goals. And you see a similar sentiment coming out of a bunch of other states that really aren’t interested in grid transformation. So that’s one point of disagreement. Perhaps what’s caused the most controversy is this ROFR reform, this right of first refusal change that gives utilities more authority to be the builders, the presumptive builders of regional transmission lines. A lot of utilities support this. A lot of independent companies and academics and commentators are against this change because they see competition as really an important piece of how you get to the grid of the future. And so they think this is a step backwards and that perhaps FERC should have instead ordered more competition all the way down instead of less competition all the way up. One other interesting detail that I haven’t seen discussed much but I found notable as I move from reading the ANOPR, the advanced NOPR, to the NOPR is that the advanced NOPR and a lot of the comments responding to it talked about this idea of having independent transmission monitors in each region that whose job would basically be sort of like market monitors now to ensure that the regions are planning fairly and allocating costs fairly and keeping costs low. There was lots of controversy in the comments to the ANOPR about whether or not to have these independent transmission monitors, and FERC basically just didn’t talk about it at all in the NOPR. They just kind of let the idea go away, which I found curious at least.
Stone: You know, I want to jump back to a comment that you made a few minutes ago regarding Commissioner Danly’s opposition to the transmission NOPR on the basis that there was an environmental component involved. And this is kind of a segway to the next question I want to ask, and that refers to the Supreme Court’s recent decision at the end of June in West Virginia versus EPA. And in that ruling, the Supreme Court essentially limited the power of the EPA to regulate carbon dioxide emissions and do something to limit those emissions. And in its ruling, the court relied on what’s known as the major questions doctrine to again to limit the EPA’s power. How might this decision impact FERC’s work on these NOPRs or beyond, and specifically to green the grid or limit greenhouse emissions more specifically?
Welton: Yeah, it’s a great question. I think a lot of people are busily assessing how this newly articulated major questions doctrine might impact agency work more broadly. When it comes to FERC, I do think they’re positioning is quite different from the position that EPA had in the West Virginia case, in large part because the statutory authority that was being fought over in the West Virginia case was a portion of the Clean Air Act that talk specifically about systems of emissions reduction. That’s just a really differently written statute than the one that FERC is operating under here, which is basically their authority to ensure just and reasonable rates and practices. And one of the things I think the agency does quite well in their NOPR is explain why these reforms are needed to keep costs down, to keep the costs of the system just and reasonable. So I don’t really see either of these NOPRs as the kind of agency, I don’t want to say overreach because I don’t think the agency overreached in EPA and the West Virginia case either. But they’re not at least doing anything that’s as bold and creative a use of statutory authority as we saw in that case. Now, you did have Danly suggest that this is an environmental NOPR. I think… I just pretty vehemently disagree with that position. Right. Because one of the things that’s curious about the Federal Power Act is that it gives a lot of control of the system to the states. So states specifically have jurisdictional control over generation choices, under the Federal Power Act. That means it’s up to states whether or not they want to set clean energy and renewable energy goals and targets and laws. And so FERC here isn’t itself adopting any particular environmental valence. It’s just saying states are doing this. They have the legal authority to do this. And our job is to build a system that is just and reasonable in light of the changes that we see happening in the States and in the marketplace more generally, as renewables costs compete with pretty much all fossil sources very favorably right now. So I don’t think that these actions will be vulnerable to major questions challenge in the same way that the EPA’s were. Now, that said, I also think that this is a court that is deeply untethered from real true statutory textual analysis and precedent. And so, you know, could this be invoked? Certainly. Would it have the same kind of odds of success? I don’t think so.
Stone: What about in the case of pipeline emissions that the FERC also oversees?
Welton: Yeah, I’ve heard some people suggest that this is potentially more of a major questions doctrine challenge. So at the same time that FERC has been doing this work on the transmission side, it has been undertaking what have proven to be a fairly controversial set of policy reforms on the natural gas pipeline certification side of its work. Again, though, this is a broad standard that FERC works under. It’s supposed to ensure that these projects are in the public interest and meet public convenience and necessity. Some are arguing that this somehow doesn’t include robust consideration of climate change. I think history suggests that environmental concerns have long been within the purview of FERC, and this is no radical extension whatsoever. It’s just considering the most pressing current environmental problems as part of a broader assessment of public interest. So I would say the same analogy holds, but again, this is a court that I find fairly unmoored from these kinds of deep historic considerations of what agencies have long had the power to do and what statutory text grants them the power to do. And so, you know, if FERC incorporates climate change robustly into its pipeline work, you certainly are going to see somebody argue that this is an agency expanding its purview beyond what its mandate includes. I think that’s wrong, but obviously a potential challenge.
Stone: And I’m going to go off topic here for just a moment. But we are talking about regulation of carbon emissions. You know, and I want to ask, how will the Supreme Court’s or how might the Supreme Court’s decision in West Virginia potentially impact the EPA’s rewriting of the Clean Power Plan? And that, again, is the Obama era rule that was stayed by the Supreme Court, never went into effect that would limit the emissions from the electricity industry.
Welton: Yeah, there’s also a lot of speculation about exactly what EPA is going to do in the wake of this ruling. And one of the things I find frustrating about the opinion in West Virginia versus EPA is they don’t really give EPA a clear roadmap here as to what’s allowed and what isn’t allowed. They say that thing that Obama did where he said that states should come up with plans where they shifted generation from fossil fuels to clean energy. Well, that’s not allowed. But we’re not saying exactly the contours of what is or isn’t allowed. So you’re in a situation where I think EPA could pretty clearly require sources that emit greenhouse gasses to do things at the plant to limit those emissions, but they have to take costs into consideration. So could they require carbon capture and storage at plants? I think that depends very much on what they find about the economics of carbon capture and storage technologies at the present point vis-a-vis power plants, could they require coal plants to switch to using natural gas? There’s kind of a back and forth on this in the footnotes of the case where I’m not sure they totally understand the technical implications, but potentially, if it was economically viable, you could see them doing that. And then some have asked, could they still put in place some sort of trading system where they come up with a cap and allow sources to trade to get the most efficient reductions? Maybe, the court really hasn’t made that clear. So I think there’s a lot of smart minds at EPA right now sitting down to figure out how to write the most effective rule that still stays within these sort of fuzzy boundaries of what the court has put on the table. Pretty clearly, what they can’t do is require the system to switch more rapidly to clean energy, which is pretty obviously the most cost effective and appropriate solution from the perspective of science. So, you know, that’s disappointing, but I still think the EPA has some authority on its hands to push this transition forward.
Stone: Okay. So jumping back to the topic of the FERC here. So we talked about two reforms that the FERC is working on, transmission reform and interconnection reform. Are there any other policy changes or rule changes that we might expect from the FERC to accommodate the shift to clean energy?
Welton: I am hopeful. One of the things that I will note that these NOPRs don’t do is they really don’t address the question of inter-regional planning. And a lot of the models of how we get to a very high renewables future suggest that we’re going to need more inter-regional high voltage transmission lines as a part of the solution of how you really do a cost effective, reliable, clean energy transition.
Stone: Can you explain for us what is inter-regional versus regional transmission planning just for people who might not be familiar?
Welton: Yeah. So at the present time, the way that transmission planning primarily works is at a regional level, which is typically RTO by RTO or in places that don’t have RTO’s, they’ve established regional areas in which they’re supposed to cooperate and plan together. But you’re talking about, you know, at most the mid-Atlantic or the Midwest or the Southwest planning together. Inner-regional planning is how do you get these regions to talk to each other, to coordinate, to build lines across regions, which is particularly important if you think about how do you get dense solar, heavy resources from the desert southwest to the coasts, how do you get the windy Midwest energy to population centers? We’re going to need not just within region lines, but lines that cross regions as well. So FERC basically hasn’t done much on a regional planning yet. There’s a bit on inner regional planning in the transmission NOPR, but it doesn’t robustly change the way that interregional planning happens, and it’s been a big sticking point. Regions use different methodologies. They have different ways of valuing benefits. All this makes it harder to come to agreement about how to share the costs of potential big inner-regional lines. And so one of my hopes is that FERC will get more aggressive on inner-regional planning in the coming months and years. The other work that they’re doing that I think maybe is interesting to highlight is that they are also looking at changing some of the reliability requirements that are mostly handled by the North American Electric Reliability Corporation. And, you know, as we’re seeing extreme weather pummel the grid, particularly this summer, again, we’re in the middle of another series of crises of hot weather, threatening grid reliability. I think this is another really important piece of the puzzle of propelling the clean energy transition forward, which is making sure that we have confidence that we have the right governance models and rules in place to ensure that the grid will continue to respond and be reliable under the extreme weather conditions we’re facing and the different resource mix that we’re facing. So I think FERC is smart to at the same time it thinks about how to propel the clean energy transition forward, also think about how do we make sure that we’re enhancing grid reliability at the same time.
Stone: Assuming that the two proposed NOPRs from the FERC become rules, how significant will they be in actually greening the grid?
Welton: That’s such a crystal ball question. I think it’s you know, I don’t know. I think that, what I would say is, these are important steps forward. A lot of people had hoped that Order 1000 was an important step forward and it seems not to have done as much as people hoped that it would. But I think that at the very least, FERC is creatively deploying its well-established authority to try and make regional planning go better. I think on the interconnection front, we will see some improvements based on clustering and readiness requirements. Exactly how much is hard for me to say. What FERC didn’t do on the interconnection front is really come up with a better plan for how to share the costs of network upgrades. And so how much we can do just by speeding up the queue and not addressing that cost issue is a major sort of question that still lingers in my mind. On the transmission front, as we talked about a little bit already, FERC has decided to basically take a pragmatic, cooperative approach. And I hope that this really might get states to the table. And especially as they’re thinking longer term and bringing in more benefits, it might ease the path for better agreement on cost allocation. We still may see holdouts and FERC has authority to go in and override state siting decisions. It just got enhanced authority in this regard in the infrastructure bill last fall. One of the questions in my mind is, is FERC going to have to use it? I think it’s political dynamite and they don’t want to touch it. And the hope is that if you bring states in upfront and encourage dialog, you can reach agreement and not sort of have to use this potent back end tool. And maybe the very fact that they haven’t means that you will see more agreement upfront. So I am, I’m cautiously optimistic that these are steps in the right direction.
Stone: Shelley, thanks very much for talking.
Welton: Thanks so much for having me.
Stone: Today’s guest has been Shelley Welton, a Presidential Distinguished Professor of Law and Energy Policy with the Kleinmann Center and the Penn Carey Law School. Visit the Kleinman Center for Energy Policy website for more energy policy insights, upcoming events and our archive of over 100 episodes of Energy Policy Now. You can get updates from the Center by signing up for our monthly email newsletter on our homepage or follow us on Twitter. Thanks for listening to Energy Policy Now and have a great day.