While much of Washington and the energy policy community spent this year preoccupied with the vicissitudes of the Inflation Reduction Act (IRA), pending actions at the Federal Energy Regulatory Commission (FERC) will determine whether the IRA’s 10-year extension of clean energy tax credits can successfully drive the nation towards decarbonization. With Senator Manchin’s energy permitting reform bill stalled in Congress and a proposed 30% investment tax credit for transmission investment left on the cutting room floor during IRA sausage-making, all eyes are now on FERC. In particular, the Commission’s direction on essential reforms to generator interconnection and how transmission is planned and paid for will determine whether the more than 1,150 GW of renewable and storage resources in the interconnection queue can come online and deliver their power to customers.
NOPR on Regional Transmission Planning and Cost Allocation Methods
In April, FERC issued a Notice of Proposed Rulemaking (NOPR) for reforms to regional transmission planning and cost allocation methods. It proposes useful reforms to transmission planning, such as requiring planners to study a longer time horizon, incorporate expected changes in the generation mix, and account for a larger set of transmission benefits. Widespread adoption of these reforms should also help to standardize the transmission planning process, improving compatibility between neighboring plans.
However, the NOPR leaves a lot of room for interpretation. The factors determining the future generation mix and the benefits to be assessed are optional, not mandatory. While it requires cost allocation to be based on the principle that the beneficiaries of transmission should pay for it, which can lead to broad regional cost allocation, that too can be subject to a narrower reading by regional planning entities. A range of projects, from Texas’s Competitive Renewable Energy Zone projects a decade ago to the Midcontinent Independent System Operator’s approval of $10 billion in new transmission this year, have proven broad cost allocation to be the only method that successfully moves transmission plans from paper to construction. Similarly, the NOPR does not propose to take on the pressing need to create functional methods for interregional transmission planning and cost allocation.
NOPR on the Incorporation of Severe Weather Events into NERC Standards Governing Transmission Planning
The Commission has hinted that it may be interested in other means for enabling interregional transmission development. In June it released a NOPR that proposes to incorporate severe weather events into North American Electric Reliability Corporation (NERC) Standards that govern transmission planning, and in early December it held a workshop on setting a minimum requirement for the amount of interregional transmission needed to address reliability risks.
NOPR on the Generator Interconnection Process
In June, the Commission also released proposed reforms to the generator interconnection process. They include moving to a first-ready, first-served cluster interconnection study process, which has helped in regions that have implemented that process. The NOPR also establishes deadlines and penalties for transmission service providers to complete interconnection studies, and allows more flexibility for generators to propose their own transmission solutions or add storage behind the point of interconnection to create hybrid projects.
However, FERC does not propose to address the fundamental problem driving the large backlog of clean resources in the interconnection queue: most major transmission upgrades are planned and paid for by interconnecting generators through what is known as participant funding, even though that transmission provides multiple benefits and therefore could be more efficiently planned and paid for through the regional transmission planning process.
And Requirements for Interconnecting IBRs in Particular
The interconnection NOPR also proposes new requirements on interconnecting inverter-based resources (IBRs), in response to multiple recent events in which many IBRs failed to ride through grid disturbances. FERC proposes to require that IBRs provide validated positive sequence dynamics and electro-magnetic transient models as part of the interconnection process. In addition, FERC proposed language that attempts to introduce a requirement for IBRs to ride through grid disturbances.
However, at its November meeting the Commission hinted that it may take a different approach to those interconnection requirements. FERC issued a NOPR that would direct NERC to develop standards requiring IBRs to provide validated models and ride through grid disturbances, possibly responding to multiple commenters who had expressed concerns about the ride-through requirement FERC had proposed in June. At its November meeting FERC also directed NERC to expand the applicability of its standards to inverter-based resources that are individually smaller than 75 MW but that in aggregate can materially affect reliability, also responding to concerns about the ride-through performance of these resources.
* * *
With all of that work in progress, FERC now also faces uncertainty about its leadership. Current Chair Glick plans to depart after Congress failed to act on his renomination, driving speculation about who will replace him as Chair and who will be nominated for his seat and potentially that of Commissioner Danly, whose term expires in 2023. With so many balls in the air, and the uncertainty over the future FERC leadership, it is difficult to make any projections about how these initiatives will proceed. Stay tuned!