The electricity system in the United States is poised to undergo significant changes over the coming decades. Rapid load growth, a changing generation mix, and increasingly unpredictable weather patterns promise to stress the power system. Multiple recent studies highlight significant benefits associated with expansion of interregional transfer capabilities for efficiently adapting to these changes. Despite these proposed benefits, few, if any, interregional transmission projects have been built in recent memory.
E3 partnered with NARUC to write a report confronting the barriers to interregional transmission that exist today and address them with potential reforms and collaborative solutions. It distinguishes between states, federal government, and planning regions as key actors in implementing solutions designed to be flexible to accommodate regional differences.
The challenges and potential solutions have been grouped across three areas related to interregional transmission (see Figure 1) including: planning — the process of identifying transmission projects, assessing their technical and economic viability, approving cost allocation, and awarding development rights; permitting — the siting and permitting processes which are generally conducted by state regulatory agencies; and operations — the frameworks under which capacity on interregional transmission is allocated and optimized in the delivery of electricity.
Planning
Most transmission planning activities occur either at the regional or the subregional level, and while Federal Energy Regulatory Commission (FERC) requires interregional coordination of transmission planning processes, it does not require formal interregional planning. To enable planning regions to seek interregional collaboration, we suggest:
- Coordinated Interregional Planning: Planning regions could expand coordination to determine joint transmission needs, which would motivate reconciled planning processes or the development of new ones, to identify interregional projects that meet needs more cost effectively than regional alternatives.
- Process Harmonization: Harmonizing planning approaches and timelines would enable efficient collaboration and allow projects to avoid delays due to asynchronous planning processes.
- Model and Data Harmonization: Planning regions could strive to reconcile differences in modeling techniques, tools, data inputs, and benefit calculation methods to enable streamlined collaboration on interregional transmission analysis.
Permitting
While the planning of interregional transmission projects takes place at the system level (which is multi-state), projects must apply for permitting at a state level, and the permit applications for a single project are independent and unconnected across states. Challenges arise from limited resources at permitting agencies, differences between permitting processes, and difficulties in meeting permitting criteria independently across every state through which an interregional project passes. To support successful siting and permitting of interregional transmission, solutions include:
- State Transmission Authorities: States create and provide funding to special agencies to engage in transmission planning activities, analyze transmission needs, provide siting guidance to developers, and participate in or even fund transmission development.
- Host Community Benefits: Projects could be designed to provide non-energy benefits to host communities to ensure states that bear the physical impact of a project also receive benefits. These benefits can include providing jobs and job training, revenue sharing, investment in capital projects, and social programs.
- Streamlined Need Determination Across Planning and Permitting Processes: The interregional planning process and the permitting processes often include a separate assessment of the need for a project. Relying on the same analysis for both need determinations could streamline permitting processes.
- Multi-State Evidentiary Record: States could coordinate evidentiary proceedings to synchronize permitting timelines and standardize data collected to inform decision making. Different states may still have different priorities and may choose to include different types of benefits in what they consider, but standardizing a common set of underlying facts, models, and timelines could help expedite approvals.
Operations
Actualizing the modeled benefits depends not only on new transmission facilities, but also on how those facilities are operated. Recent historical data for the operation of existing interregional transmission lines indicate that interregional interties are often underutilized even when flows are most valuable. This is often due to factors like: economic charges to schedule and transmit power between regions; scheduling requirements up to 75 minutes before energy is delivered, reducing its ability to support near-term changes; bilateral agreements for power transfers that are not responsive to price; and a lack of reliable protocols for how to operate interregional lines during times of extreme grid conditions. Potential solutions include:
- Reduce Transaction Charge Impacts: The balance between fixed and volumetric charges can be restructured to minimize impacts on scheduling decisions while maintaining asset owners’ revenue requirements.
- Reduce Advanced-Time Requirements: Reducing the time between scheduling and operations will allow for transmission to be more supportive of real-time conditions.
- Develop Optimized Scheduling Mechanism: New operational mechanisms modeled after the Western Energy Imbalance Market and Europe’s market coupling efforts can optimize use of unutilized interregional transmission headroom.
- Improve Preparation for Resiliency: Market operators could work to define possible emergency conditions and establish protocols for rapid communication and operations during periods of high resiliency need
Conclusion
Planning, permitting, and operating interregional transmission to maximize system benefits is challenging. But in the face of massive transformation of the power sector over the coming decades, it is important to take steps to enable the identification of beneficial interregional transmission. Not doing so could mean the development and operation of a more expensive grid, on both the generation and transmission side, and increased frequency of reliability events.
The solutions suggested in this report may not be the “path of least resistance,” as they require states and planning entities to engage and collaborate in ways that are potentially new and different from current practices. But the elements of engagement and collaboration discussed in the report are derived from successful examples seen recently in different jurisdictions, which suggest they could result in meaningful state- and region-led transmission planning if employed on a wider basis going forward.
Download the full E3 and NARUC report here.
Any questions? Email Lakshmi Alagappan, Partner, at lakshmi@ethree.com.
This report was written by Lakshmi Alagappan, Jack Moore, Ben Joseph, Stuart Mueller, and Arne Olson.
