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 Major transmission additions are needed to ensure our nation’s electric reliability, replace aging and outdated facilities and reduce the extraordinary costs of congestion on the grid.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.

Thoughts from a Post-Rocky Mountain Clean Energy Transmission Summit World

The Rocky Mountain Clean Energy Transmission Summit is behind us and what an event it was! Headlined by an impressive host of public and private sector leaders, journalists, and other energy and transmission experts, over 100 attendees participated in our Denver summit.

Owing to a remarkable array of perspectives and experiences, conversations covered many issues, offering unique solutions to though problems.

But one message seemed to carry over the rest—a message that moderator and Senior Editor at High Country News wrote about later in his article, Transmission: the missing link in the renewables revolution.

In the critical context of climate change and renewable energy, the argument for transmission is as follows: in order to cut carbon to the level we must by 2050, we need 100,000 MW of renewable power. That necessitates at least 25,000 miles of new high voltage transmission. In other words, we need enough transmission to cross the country, going east-west, over 9 times. But those wires are not easy to put up. In fact regulators, nationally, regionally and locally can make putting up transmission a long and difficult process, despite being easier than it has been in years past as a result of FERC Order 1000.

On top of all that, to connect renewables—which often are located in rural areas—to urban centers you need to put up transmission, transmission must be built to cross those rural areas. Often, that means going through the wilderness. And that has turned many environmentalists, who would otherwise support the infrastructure that is needed for renewable power, against it.

And there are many other groups who have their own issues with new transmission.

So this is the task at hand: to find a way to address complex regulation and the concerns of all those affected by new transmission so that we can find a way to build the infrastructure needed to avoid the worst effects of climate change.

As one can see, this is exactly why getting stakeholders in the same room as experts who represent many backgrounds—from government to contractors to environmentalists—is critical to progress.

In that vein, we’d like to extend a massive thank you to our sponsors, speakers, moderators, and attendees who made the Denver event a great one.

We hope that you’ll be able to join us at our next event. Stay tuned.

our_outdated_grid

It’s All Connected – Regional Transmission Planning in the Southeast

Cross-posted from AOL Energy, published 11/13/12.

It’s All Connected – Regional Transmission Planning in the Southeast
by Bill White

More than two weeks have passed since Hurricane Sandy brought the Eastern Seaboard to a standstill. Although life is slowly returning to normal, Sandy joins a long series of painful reminders of how dependent 21st century America is on reliable electricity: it powers nearly every facet of our lives. The potential silver lining in the wake of Sandy’s devastation is the influx of interest in our outdated and inadequate transmission grid, highlighting long ignored issues from the benefits of buried transmission lines to the importance of an integrated, redundant, resilient grid – built to withstand even Sandy’s fury.

A robust and modern electric grid is also essential for taking advantage of America’s unmatched renewable energy resources. Wind and sunlight cannot be delivered to customers from their best sources – mostly remote areas and offshore – using railcars and pipelines like coal, oil, and gas; they need transmission lines. In the Southeast, where wind and solar are relatively scarce, transmission lines are critical for bringing cheap and abundant renewable resources from other regions. The Tennessee Valley Authority (TVA), which provides power to nearly all of Tennessee and other Southeastern areas, is now importing wind power from eight wind farms in the Midwest. Alabama Power, a subsidiary of Atlanta-based Southern Company, last year made one of the largest wind purchases ever from producers in Oklahoma.

Several changes under way promise to accelerate the nascent interregional “trade” in cheap renewable energy. Dozens of outdated and inefficient coal plants across the Southeast will be shutting down over the next several years as new air pollution rules take effect; businesses and consumers are demanding more clean energy; and vehicle electrification is growing rapidly, especially in the Southeast. Nearly three percent of electric vehicles sold in the United States this year were registered in Tennessee. Not coincidentally, almost all of these were Nissan Leafs – soon to be manufactured at a plant in Smyrna. But electric vehicles are only as green as the power plants that charge them, and in the Southeast today, coal generates about half of the electricity. How the region invests in transmission will largely determine whether the power from retiring coal plants will be replaced by renewable resources.

A new planning framework unveiled last year by the Federal Energy Regulatory Commission, Order 1000, asks utility transmission planners to work together to solve the transmission challenge across large regions by avoiding duplication and building only those upgrades needed to strengthen the grid, improve reliability, increase efficiency, and integrate large amounts of renewable energy.

Additionally, Swiss engineering firm ABB Group announced a technological breakthrough last week that could solve the problem of transmission losses over very long distances. ABB’s new circuit breaker for high-voltage DC lines – far more efficient than AC lines over long distances – will allow large amounts of renewable electricity to be delivered over thousands of miles, for instance, from Iowa to Tennessee.

Americans have always responded to crises by replacing what was lost with something better, stronger, and smarter: building an even stronger foundation for future growth and prosperity. Let’s not wait for the next Sandy to modernize our electric grid – our most important infrastructure investment for the future of the Southeast – and the nation.

Bill White is a Senior Vice President at David Gardiner & Associates, with more than fifteen years of managing public-private partnerships advancing action on energy and climate change.

The Southeast Clean Energy Transmission Summit: Bringing the Fight to The Volunteer State

For its latest event, Americans for a Clean Energy grid brought the battle for a domestic clean energy build-out into contentious territory: coal country. ACEG hosted the Southeast Clean Energy Transmission Summit in Nashville, Tennessee on November 14th along with co-hosts Vanderbilt University, Clean Line Energy, ITC Holdings, and WIRES—each of whom supplied a panelist of their own. The summit brought together several booming voices in the energy industry: Federal Energy Regulatory Commission (FERC) Commissioner John R. Norris, PJM Interconnection President & CEO Terry Boston, and Nashville Mayor Karl Dean, among others, to speak about the benefits of clean energy transmission. Discussion touched on the shifting dynamics of the energy industry, the Southeast’s lag in clean energy build-out, and the challenges behind planning, siting, and allocating costs for new transmission wires. If one point resonated above all, however, it’s that in order to have the clean energy future that the United States wants to see, there must be transmission wires spanning the country to support it. If power plants are our heart and distribution lines our nerves, then transmission is our backbone.

Commissioner Norris offered an even more compelling analogy in reference to the need for regions to cooperate in their planning:

I’m an Iowa farm kid. We raised hogs on my farm growing up, and the neighbors raised cattle. When we needed to put a new fence in for the hogs, we didn’t just go put a hog fence in right next to the cattle fence, that didn’t make a lot of sense. It made a lot more sense to talk to that cattle farmer and see if we could share poles, and we could pay for the woven wire on the bottom and he could pay for the barbed wire on the top. It just kinda made sense to me that we increased communication across regions so we could figure out how to make our neighboring systems cooperate and share resources.”

Overall, the day was chock-full with quotables:

“The Southeast lags the rest of the country in renewable energy development. Not a single Southeastern state is in the top 25.” – Jim Rossi, Professor of Energy & Administrative Law at Vanderbilt University

“Power engineering is not rocket science…it’s much more important.” – Terry Boston, President & CEO of PJM Interconnection

“Grid manufacturing and construction alone will create 150,000 to 200,000 permanent, high quality jobs nationwide for the next 20 years.” – Jim Hoecker, Counsel, WIRES Group

“Multiple benefits to us [of transmission] are obvious, but there’s an equally strong opposing opinion that needs to hear the story.” – David Till, General Manager for Transmission Strategies, Tennessee Valley Authority

“Wind is truly a home-grown, American industry.” – Christy Omohundro, Regional Representative, American Wind Energy Association

“It was hard to give up my Mustang, but the power in a Nissan Leaf is fantastic.” –Mayor Karl Dean, City of Nashville

The event drew in local stakeholders ranging from media outlets to electrical wire workers to students to environmental groups. Other panelists and moderators included representatives from AOL Energy, Natural Resources Defense Council, Nashville Public Radio, Southern Company, Southern Environmental Law Center, GLWN, Oak Ridge National Lab, The Tennessean, Nashville Public Radio, Nissan, and the Tennessee Valley Public Power Association.

YouTube links for the event will be provided shortly.

The next Americans for a Clean Energy Grid’s event is being planned for January in Denver, Colorado.

transmission blue sky

Transmission is Key to a Diversified Energy Portfolio

This article originally appeared in Crains Cleveland Business on August 14, 2012.

The demand for reliable and cost-effective electric power continues to increase in the U.S. and around the world. According to the U.S. Energy Information Administration in its Annual Energy Outlook 2012, the demand for electricity in the U.S. is expected to grow by 22% by 2035.

Clearly, we will need to add a significant amount of electricity generation capacity to meet that demand. But is that the end of the story?

Many experts would argue that modernizing and expanding the capacity of our nation’s electrical transmission grid is critical to assuring the long-term stability of our electrical system and its ability to meet ever-increasing future demand. One source of new electricity generation that experts look to in order to meet our increasing demand is wind energy. In some parts of the country, wind energy is now very cost effective and competitive with other sources of new generation. But, as we all know, the wind doesn’t always blow at the same speed all the time.

This intermittent nature of wind energy causes a variety of complex technical issues and challenges for utilities and grid operators as they try to integrate wind energy into the grid at a large scale. Essentially, the current grid has limitations on the amount of wind energy it can accommodate, which is one of the obstacles to large-scale wind deployment. If we want to achieve higher levels of wind energy on the grid, then we must address this problem.

Energy storage technology is one way to deal with the challenges presented by intermittent power. Researchers and companies already are working on this issue. In fact, here in Northeast Ohio, Ashlawn Energy is developing a large scale battery (1 megawatt; 8 megawatt-hours) for the City of Painesville Municipal Power Plant in Lake County. The battery will allow the City of Painesville to store some power when the wind is blowing and then release it when the wind is not blowing. This technology has the potential to truly transform our electricity grid.

In addition to energy storage, another approach to managing intermittent power can be found by expanding the transmission system. The wind blows at different speeds and at different times of the day across different parts of the country. When you look at wind in aggregate across the U.S., it is much more consistent and continuous than in any one geographic area.

What if we could move, or share, the wind energy generated in one part of the country to match the needs in another other part of the country? If we could do that, then we could achieve a more consistent energy output from our nation’s wind resources and solve many of the challenges associated with integrating wind energy into the grid. But in order to tap into this opportunity, we need the ability to move large-scale quantities of energy around the country. This would require significant expansion of our transmission system.

Updating and expanding the transmission infrastructure has its own challenges and will require significant investment. Last week, I participated in the Ohio Clean Energy Transmission Summit, in Columbus, to discuss challenges associated with the current transmission infrastructure and the possibilities for the future. The daylong gathering examined many facets of this complex issue, including regulations and policies for new transmission capacity, costs and benefits associated with new transmission infrastructure, and the impact it will have on developing new energy resources. The economic development opportunities offered by investments in transmission were also discussed.

Ultimately, any changes to the transmission grid depend upon the regulatory framework established by the Federal Energy Regulatory Commission (FERC). The independent government agency regulates the interstate transmission of electricity, natural gas and oil. FERC recently issued a landmark order, Order 1000, which reforms the Commission’s electric transmission planning and cost allocation requirements for public utility transmission providers. Order 1000 is intended to ensure that regions are able to build the transmission infrastructure they need to meet the needs of their consumers and that the costs will be allocated in a fair manner. Currently, many utilities and grid operators across the country are responding and trying to understand this new FERC order and how to make it work in their region.

Expanding the electric transmission system will provide a more reliable, resilient grid for all of us and will enable the integration of multiple generation sources to achieve a diverse portfolio. However, we must be smart about making these investment decisions by objectively weighing the costs and benefits of building out the transmission infrastructure.

transmission blue sky

Associated Press: New Rules Could Boost New England Renewable Power

Before the start of January’s New England Clean Energy Transmission Summit, ACEG’s Bill White spoke with the Associated Press about the potential of clean energy and how FERC Order 1000 will enhance New England’s ability to incorporate renewable energy into its power supply.

All six states in the New England region have some sort of renewable energy portfolio standard. However, to help meet these standards, up to date transmission lines are needed to connect the region to its own remote sources of renewable power, like Northern Maine, as well as abundant, renewable sources from across the country. Modernizing a region’s transmission infrastructure can be a delicate process due to cost allocation and siting issues.

In his interview with the Associated Press, Bill White explained:

“While transmission costs are initially high, the infrastructure lasts decades, brings down costs, and is a good investment it in the long run. He said transmission costs average just 10 percent or less of the total on utility bills nationwide — electricity generation costs makes up the bulk of the bill.

New collaborative planning processes also mandated under the federal order will allow people to help determine which lines are needed, where they’re needed, and how they help states reach their own goals for things such as more renewable energy, White said. He thinks once that’s understood, the projects will find strong support.”

While more renewable power generation could do more than satisfy state mandates, it also has potential to decrease New England’s electricity prices, which are high because of the region’s dependency on fossil fuels.

To read the Associated Press story, click here.