Transcript The State of the U.S. Grid: Recalibrating Risk and Regulation

The State of the U.S. Grid:
Recalibrating Risk and
Regulation
Remarks of James Hoecker
Husch Blackwell Sanders LLP
Hoecker Energy Law & Policy PLLC
Former Chairman, Federal Energy Regulatory Commission
The World Bank Workshop:
“Expanding Transmission for Renewable
Energy – Smart Planning and Cost
Recovery”
June 24, 2010
1
Today’s National Grid
 Key network infrastructure vital to the nation’s economy
 A nationwide164,000-mile, highly-integrated network of
transmission lines and control facilities, interconnecting over
750,000 MW of generating capacity to millions of customers in
all regions, and 3000 utilities
2
“This is your father’s electric
system–but it can’t stay that way
for long”
(Sue Tierney, 2008)
 The “Grid” Is the Enabler Of New Technologies and System
Innovation.
 Primary Benefits of transmission: network reliability, lower
costs of energy/capacity
 Strategic Benefits: renewable resource development and
integration, lower GHG emissions, fuel diversity, market power
mitigation
 Extreme Event Benefits: mitigate impact of multiple
contingencies, reduce price volatility from outages
 Secondary Benefits: economic development, new investment,
tax base
(LBNL, Public Interest Energy Research)
3
Challenges Confronting Our
Transmission System







Aging and deteriorating infrastructure
More dispersed resources of generation
Wholesale competition among generators
Complex bulk power markets
Arrival of the digital economy
Electricity consumption doubled 1980-2007
Shifts of public policy (e.g., RPS, efficiency, demand
response)
4
Obstacles to
Transmission Upgrades/Expansion










“Not in my backyard” or “not in my term of office”
Conflicts between local, state and regional interests
Inconsistent state and local regulation
Uncoordinated environmental reviews
Federal land authorization, esp. in the West
Lack of timing coordination among siting entities
Varying GHG restrictions and RPS’s
Difficulty right-sizing for short and long-term needs
Uncoordinated siting of lines and generators
Timing of “need” determinations
Recently, regional resistance to power “imports” and
broadened allocations of transmission costs
5
Must We Build More Transmission?
 NERC: Transmission additions will triple to 3100
miles/year 2009-2018. Project proposals abound: 90
planned projects each greater than $100 million
(totaling $120 Billion)
 Prospects for a clean energy economy—RPS, climate
legislation, smart grid; renewable energy projects
mean jobs and will drive major transmission
expansions and upgrades; 20-30% wind penetration in
the East = > $100 Billion for transmission (NREL)
 Other drivers: reliability, cyber security, replacing
aging facilities, new technologies, load growth
 PROBLEM: approval processes are out of sync with
the realities of multi-state, multi-system, multipurpose transmission
6
Q. Who Decides What Best Serves
The Public Interest? A. Everybody
 Siting – Location and Multiple Definitions of “Need”
States consider need for facilities when siting them
 Cost allocation – Who Pays? Who Benefits?
States are influenced by the rate impacts on citizens
when considering need; recent FERCs defer to
states and stakeholders
 Planning – Which Projects Are Needed? Which Are Not?
Stakeholders, regional planners, regulators, or politics
can influence whether projects satisfy reliability,
economic, environmental, or public policy needs
7
Major Transmission Proposals
8
Transmission Plans: N. America
Source: North American Electric Reliability Corporation
9
Where Do We Go From Here?

Smart Grid Technology Beats the “Old Technology” Rap
– Two-way Communication of Data; Control of Supply
and Demand
– Automation Enables A Self-Healing Grid
– New Visualization Tools Promote Reliability
– Other Benefits Include Fuel Diversity, Competitive and Liquid
Wholesale Markets; Market Power Mitigation; Risk Mitigation
and Price Stability
– Smart Tech Not a Panacea for Aging Infrastructure or Access to
Renewable Energy

Resolving Economic – Regulatory Conflicts
-- Regulation versus Entrepreneurialism
-- Public Utility Business Model

Reform of Policy and Procedure
-----
Opposition to cost socialization
Opposition to federal oversight of planning
Resistance to standardization
Assurance of cost recovery
10
Voices of Transition
“The way we look at it, the grid’s been smart for awhile. It
takes some pretty sophisticated tools to monitor,
dispatch, and control electricity flow.”
-- A Transmission engineer
“Do you know what keeps me up at night? Not my
programmers. Not my investors. Not my health care
costs. It’s state regulators.”
-- A smart grid firm CEO
Source: Fox-Penner, Smart Power
The Hill, The Spill, and
the Climate Bill
 Positive investment trends in all regions: quadruple the
1990s
 Interconnection-wide planning efforts (ARRA-funded)
 More FERC leadership in cost allocation and planning
 Pending transmission and climate legislation could
address planning, siting, and cost allocation to varying
degrees–
– S.1462 American Clean Energy Leadership Act
(E&NR Comm.)
– H.R. 2454 American Clean Energy & Security Act
(Waxman-Markey)
– American Power Act (Kerry-Lieberman-without
Graham)
12
James J. Hoecker, JD, Ph.D
Husch Blackwell Sanders LLP
Hoecker Energy Law & Policy PLLC
[email protected]
www.helppllc.com
202-378-2300
www.wiresgroup.com
13