Letter to WSJ: We Need a Modern Electrical Grid and Must Pay for It

The following is a letter written by former Chairman of FERC and member of Americans for a Clean Energy Grid Jim Hoecker to the Wall Street Journal in response to an article called “The Wind Power Tax.” The letter was published in the WSJ and is cross-posted here.

February 21st, 2013

Your editorial “The Wind Power Tax” (Feb. 11) registers your opposition to modernity and clean-energy development by attacking investment in electric transmission, which is essential to connecting renewables to customers.

You ignore basic facts. Transmission, which is less than 10% of electric bills, is an integrated network that serves multiple societal needs. Major transmission additions are needed to ensure our nation’s electric reliability, replace aging and outdated facilities and reduce the extraordinary costs of congestion on the grid. Only about one-third of the coming grid upgrade must be built to serve remote wind and solar plants. Moreover, federal regulators actually agree with you that the beneficiaries of such new facilities should bear the costs in rates. Those benefits can nevertheless be widespread and powerful, like those of the highway system.

Your jeremiad against the Federal Energy Regulatory Commission’s Order 1000 sides against the market competition among all electricity resources that transmission facilitates, and favors the continued Balkanization of wholesale power markets and an industry model that belongs more to post-World War II America than to the 21st century. The president, the American Society of Civil Engineers and the Bipartisan Policy Center aren’t promoting greater investment in our inadequate electric infrastructure for no reason. They, too, are concerned about the pocketbooks of electricity customers, not just tomorrow but 20 and 30 years from now.

James J. Hoecker

Husch Blackwell LLP

Washington

Mr. Hoecker is a former chairman of FERC and is counsel and adviser to the Working Group for Investment in Reliable and Economic Electric Systems.

Electric power lines and transmission towers in Denver metro area

Call the CDC: Anti-Renewable Fever has the Wall Street Journal Opposing Competitive Markets

Anti-Renewable Fever has the Wall Street Journal Opposing Competitive Markets
by Bill White, February 19, 2013

It’s been a difficult flu season, but even the Centers for Disease Control (CDC) did not see this coming: an anti-renewable energy fever so severe that the editors of the Wall Street Journal (WSJ) are now opposing policies that would create more competitive electricity markets.

A recent diatribe from the fossil fuel-loving editorial board contained all the familiar symptoms: bellyaching about wind power “subsidies”; blurring of federal and state policies; and delirious attempts to make old arguments new. The WSJ’s editors are now so disoriented that they are denying the benefits of free and competitive electricity markets, and opposing efforts to expand them.

Let’s hope some healing facts will prevent this bug from spreading to healthy media outlets.

Transmission lines are the backbone of competitive electric markets, which save consumers and businesses billions of dollars every year. They’re also the smallest part of any customer’s electricity bill – about 7 percent on average. Generation – the cost of power plants and the fuel they use – accounts for about two thirds of the average bill, or almost ten times as much. Transmission is the only way to move power from the best renewable resources – the windiest and sunniest places – to where that electricity is needed. Delivering that cheap power into competitive electricity markets drives prices down for everyone.

The Journal ignored these basic market realities when they chose to dig into a complaint by Interstate Power & Light (IPL), a traditional monopoly utility, related to transmission costs.

Here are the facts:

• The transmission upgrades being contested by IPL, like all high-voltage transmission lines, are open to any electric power generator connected to the grid: coal, natural gas, wind, hydro, oil, or nuclear.

• Midwestern states are promoting transmission investments to allow local clean resources like wind to compete on an equal footing with outdated, inefficient, and dirty power plants owned by monopoly utilities.

• Wind is winning this increasingly fair fight in the marketplace: 42 percent of new electricity generating capacity installed in the U.S. in 2012 was wind, more than natural gas, and more than coal, nuclear, oil, and hydropower combined.

• Governors and state legislatures – not the Obama Administration – have enacted laws requiring more renewable energy on their electric systems. Thirty-seven states, nineteen of which with Republican Governors, have mandatory renewable portfolio standards (RPS) or voluntary goals. There is no federal RPS.

• Iowa got 20 percent of its electricity from wind in 2012 – the most of any state in the country – and has the lowest electricity prices of any state in the Midwest.

Transmission lines have broad bipartisan support across the country for good reason. Twelve states from Montana to Ohio recently approved a plan to share the costs of 17 critical transmission lines which will save ratepayers tens of billions of dollars in power costs by allowing cheap wind energy to displace power from inefficient, expensive, and dirty power plants. Michigan ratepayers, who today face the highest electricity prices in the region, will reap savings on their electric bills equivalent to two to three times the cost of these lines. That’s a welcome rebate made possible by a modern and efficient grid, competition, and cheap clean energy – not a stealth tax.

Fair and competitive markets are strong medicine for incumbent utilities pampered for decades on a steady diet of rich monopoly profits. Blocking the infrastructure needed to facilitate those markets – like cutting off the internet or closing roads – is not the path to long term economic success for the nation or lower prices for customers. We’re not sure what the CDC would recommend, but our advice to WSJ editorial board is simple: swallow the bitter pill of free market competition, and call us in the morning.

wind turbine blue

Clean Energy Transmission: The Missing Link

I recently wrote an article for Sustainable Business Oregon that you might be interested in reading. In it, I discuss the need for additional transmission lines to link renewable energy sources from the point of generation (which is usually located far from American cities) to the homes and businesses that use the electricity.

New transmission lines will not solve our energy problems on their own, but without them we do not stand a chance at achieving a clean energy future. Effective federal policies will be instrumental to developing these much-needed new lines, and there must be clean energy transmission policies included in the energy bill now moving through Congress.

To read my article, click here.

Bill White is Senior Vice President at David Gardiner & Associates

transmission grey sky

Cyber Security: How the GRID Act Keeps Us Safe


Transmission Lines in Palm Springs, California

Jeff Stein works with David Gardiner & Associates in Washington, DC.

Recent threats to our electric grid, along with numerous studies, have highlighted the possibility of attacks on our electric grid infrastructure and the need for stronger grid defense.

Just as the balkanization of transmission policies, specifically siting and cost allocation, inhibit our potential to inject 21st Century clean energy sources into the grid, the fragmentation of grid security oversight exposes our nation’s bulk power infrastructure to detrimental cyber attacks.

H.R. 5026, the Grid Reliability and Infrastructure Defense Act (GRID Act), which passed the House of Representatives last month, calls for a more transparent and reliable defense mechanism for the bulk power system to protect against attacks on our grid.

The bill includes a number of provisions to establish a more transparent and streamlined process by which the President, the Department of Energy, and the Federal Energy Regulatory Commission (FERC) can act to address existing or potential vulnerabilities. The bill also provides for FERC, the President, and the Department of Energy to respond immediately to an attack on the bulk power system. Some of the provisions include executive authority to address a grid security threat, which also allows FERC (under executive direction) in the wake of an imminent security threat to issue without notice, hearing, or report, emergency orders to protect necessary infrastructure. Also, if FERC identifies grid vulnerability, FERC is directed to issue a notice and opportunity for comment to promulgate a rule requiring implementation of protective measures.

The security provisions in H.R. 5026 show the need for federal backstop authority as well as interagency and multi-stakeholder cooperation to protect national security with modernized grid infrastructure. The mechanisms to establish a stronger federal framework to ensure grid security cements a clear role for FERC, the Department of Energy, and the President to work with key stakeholders in the bulk power system. A degree of oversight at the federal level facilitates the necessary improvements to our grid and develops a standardized emergency action plan.

While the security enabling mechanisms established in the GRID Act will no doubt enhance the government’s ability to protect Americans by securing our infrastructure, the overall message of the bill that a clear government role is needed for grid modernization should be carried over to other grid improvement initiatives. We must plan for grid infrastructure policies at the federal level with established transparency and accountability provisions for a modern, secure, and environmentally friendly bulk power system. Federal oversight of grid infrastructure initiatives will help the United States achieve its 21st Century national security and renewable energy goals, and similar oversight should be used when framing future grid legislation and regulations. This sort of coordination with solid transparency and accountability features are needed for an effective bulk power system. We must continue to follow this framework for federal oversight and multi-stakeholder coordination to establish a modern, secure, and environmentally friendly bulk power system.

utility worker

Update from Capitol Hill: Draft Transmission Bill from Rep. Sensenbrenner


Representative James Sensenbrenner (R-Menomonee Falls, Wisconsin) recently released a discussion draft of a bill to amend the Federal Power Act to require regional transmission plans.   A brief summary of the highlights follows.
FERC, in consultation with electric reliability organizations, transmission operators, transmission owners and states, must designate one or more regions in both the Eastern and Western Interconnections to create transmission regions to be represented by a “regional transmission planner” within one year of enactment.  Any entity with an existing planning process (such as an RTO or ISO) may submit an application to FERC for approval as the regional transmission planner for a designated region.  FERC will rule on the application within 18 months. If no regional transmission planner is approved, or is not submitted by regions in a timely manner, FERC shall either designate a planner or assume the role itself.
No later than 2 years following FERC’s approval of a planner, and every two years following, the regional transmission planner must submit transmission plans to FERC that are designed to enhance grid reliability and security, encourage diverse resource generation, and show that upgrading high voltage transmission lines helps regions achieve their energy and transmission goals.
The discussion draft requires that the regional transmission plan be consistent with FERC order 890 standards, incorporate input from state and local policymakers, maintain a broad geographic and market scope, and to take efficiency and other resources into account.
The draft also addressed cost allocation. No later than 18 months following enactment, FERC must require that all cost allocation methodologies adhere to a clear and consistent set of regulatory principles.
Certificate of Public Convenience and Necessity (CPCN)
Regional planners may submit a request to issue a CPCN for a regional transmission project.  The request will be based on necessity to comply with reliability criteria, ensure congestion relief, enhance energy supply diversification, and strengthen the development of smart grid technology.  Regional transmission projects that receive a CPCN could fall under federal siting authority if:
  • Transmission facility is part or all of a regional transmission project;
  • The state in which transmission facility is to be sited does not have the authority to approve the facility or consider interstate benefits;
  • Applicant for a transmission permit does not qualify in a state because the applicant does not serve end-use customers in the state;
  • State commission has not issued a decision within one year after the applicant’s request was submitted; or
  • State authorized siting but placed unreasonable conditions.



transmission blue sky

Senators Kerry and Lieberman Announce Draft Climate Bill

Senators John Kerry (D-MA) and Joe Lieberman (I-CT) announced a draft climate and energy bill today titled “The American Power Act.” The draft, which initially targets utilities only, puts limits on global warming pollution that aim to cut national greenhouse gas pollution levels 17 percent by 2020, and 83 percent by 2050. You can read more about the bill here.

While no specific mention of transmission is included in the APA, Senator Kerry did indicate that Senator Jeff Bingaman’s (D-NM) “American Clean Energy and Security Act” (ACELA; S.1462), which does include transmission provisions, would be incorporated as part of a comprehensive bill. Bill White recently wrote a blog post about ACELA on NCETI.

Senator Kerry expects that Senate leadership will try to move the bill rather quickly, with activity planned for as early as Memorial Day. His intention is to pass the bill during the current session of Congress, which concludes this fall.

wind turbine blue

Why is Federal Transmission Legislation Needed?

Transmission Lines in Palm Springs, California

Bill White is Senior Vice President at David Gardiner and Associates

Meeting steep carbon reduction goals will require profound and rapid changes in the ways we generate, distribute, and consume electricity. Energy efficiency, distributed generation, demand response, smart grid upgrades, and utility-scale renewable resources will all be needed at unprecedented levels.

Enormous amounts of high quality renewable resources are now trapped in remote regions without electric transmission service. Connecting these resources to population centers is potentially one of the cheapest ways to massively and rapidly reduce greenhouse gas emissions from the electric power sector. Unfortunately, the existing framework for planning, developing and financing transmission infrastructure was never designed to address a challenge of this scale, pace, and scope. Transmission planning authorities are too geographically fragmented and near-term focused to even consider – much less pay for and site – a reliable integrated transmission grid capable of delivering remote renewable resources to consumers.

Legislation establishing participatory and transparent electric transmission planning at a national scale has been introduced in the Senate to overcome this barrier to achieving national policy goals and maximizing broad societal value. The American Clean Energy Leadership Act (ACELA; S.1462), passed by the Senate Committee on Energy and Natural Resources in June of 2009, directs the Federal Energy Regulatory Commission (FERC) to oversee broad scale regional planning processes for new transmission lines. The broad regional plans would be produced through collaborative efforts of utilities, transmission planners and a wide array of stakeholders to ensure full consideration of alternatives, incorporate local knowledge, and ultimately produce more effective and confidence-inspiring plans.

Climate and energy policies alone – such as a carbon cap and a national renewable electricity standard – cannot be expected to promote an efficient and strong renewable energy industry if they are layered on top of a balkanized and dysfunctional transmission planning system. Such an approach is likely to perpetuate market barriers and force reliance on higher cost resources. An open and fair framework for planning, paying for, and siting essential clean energy infrastructure, such as the one proposed in S.1462, is a necessary part of the solution.

solar panel

Coalition Urges Congress to Eliminate Transmission Barriers

Leading labor unions joined environmental groups, renewable energy developers, electric utilities and other stakeholders recently in asking Senate leaders to strengthen authorities in S.1462, the American Clean Energy Leadership Act, to enable the construction of new power lines to bring renewable energy resources to market. New electric transmission is critical to developing America’s vast domestic renewable resources, creating thousands of new jobs, improving national security, and addressing the threat of global climate change.

“Bringing more clean energy to America will generate good-paying jobs that can’t be outsourced. But, we can’t tap that economic and energy potential without new transmission. It is critical that Congress removes this roadblock to economic growth,” said Yvette Pena Lopes from the Blue Green Alliance.

Transmission to bring renewable electric power from remote rural areas to American cities will generate enormous and widely shared economic, environmental, and national security benefits. By artificially and narrowly defining the benefits of new transmission, S. 1462, as amended in the Senate Committee on Energy and Natural Resources, severely limits the ability to plan, develop and integrate renewable energy into our nation’s electricity grid. This approach ignores the long-held principle that the costs of large-scale transmission infrastructure with widespread benefits should be broadly shared across regions.

“If Congress wants to create jobs and support the nation’s economic recovery, it should be promoting policies that enable needed infrastructure development, not prevent it. By changing the standard we use to measure transmission benefits, Congress will tie regulators’ hands, and that in turn will significantly limit investment in both transmission and the energy resources that need it,” said Denise Bode, CEO of the American Wind Energy Association (AWEA).

The signatories note that renewable energy resources must be developed across the country – in all regions – and that in all cases new transmission infrastructure will be needed to bring renewable energy to homes and businesses. As an example, the letter cites a recent study by the Department of Energy showing that developing wind resources in the eastern United States, including both land-based wind in the Midwest and offshore wind in the East, will “require transmission infrastructure upgrades for which planning should start immediately.” Planning on a large scale is particularly important for wind and solar energy because they are constrained by their geographic location and concentrated in areas that are not currently served by major transmission lines.

“Our existing framework for planning, developing and financing transmission infrastructure is geographically fragmented, short-term focused, and procedurally cumbersome,” said Reid Detchon, Executive Director of the Energy Future Coalition. “Without new federal policies, our national clean energy resources will remain untapped, continuing our over-dependence on coal. We need to develop renewable energy and the infrastructure to support it in all regions of the country to meet our urgent economic, environmental, and national security goals.”

The amended legislation prohibits consideration of at least two broad benefits of clean energy: dramatically reduced environmental impacts and improved energy security. Excluding consideration of environmental benefits will also discourage steps to reduce the environmental impact of construction and siting of transmission facilities.

“Action can be taken to reduce the land and wildlife impacts of transmission lines – such as flexible routing, maximizing the use of existing rights of way, and advanced technologies to reduce impacts and losses – but these may not be employed without broad cost allocation,” explained Carl Zichella with the Sierra Club.

The group highlighted how a lack of transmission drives up the cost of energy for all users by limiting consumer choice in renewable energy. In recent comments, the Federal Trade Commission noted that transmission congestion “limits competition and increases power costs and prices, to the detriment of consumers.”

“Transmission makes up a small percentage of the overall cost consumers pay – from as little as four percent in some states to an average of eight percent nationwide. It is reasonable to argue that providing access to lower-cost generation, which constitutes more than 60 percent of customer bills, would lower overall costs. Even when using local resources, a small investment in transmission increases competition, reduces congestion, and lowers wholesale market prices,” said Nina Plaushin, Vice President of Federal Affairs, ITC Holdings Corp.

The group concluded that the Senate should remove this unnecessary barrier to renewable energy development and enact meaningful reforms to encourage rational planning, siting and cost allocation of new electric transmission.

To read the letter, click here.