In response to a consultation on modernizing and expanding the electricity grid called the Electric Transmission Incentives Policy docket the Grid Advancement Coalition asks FERC to focus its evaluation of transmission incentives on the consumer benefits that proposed transmission investments will deliver, rather than on how “risky” or “challenging” a transmission project may be to develop. This would help broaden the set of technological solutions that transmission developers bring forward and help build broader public support for needed investments in the grid, they say.
New technologies such as Dynamic Line Rating, power flow controls, and flexible applications are comparatively inexpensive and can deliver significant benefits, but transmission owners are not incentivized to operate their existing assets more efficiently. Recent advancements in electronics, communications and computer processing power mean that digital solutions could be a much more cost-effective way to expand grid capacity than building physical infrastructure, but the rules governing how much money utilities can earn were written many years ago and still favour traditional investment. If cost recovery is based on investment, utilities want to invest in expensive not cheap upgrade projects. Further, transmission companies don’t have any incentive to reduce congestion as their costs are passed through to the customer, so it is the customer who would benefit from lower charges. A “shared savings” mechanism proposed by the Watt Coalition would allow utilities to be rewarded for adopting these technologies and defer expensive upgrades in infrastructure.
“Incentives to optimize the capacity of the grid as well as the management and control of energy on the grid would deliver substantial benefits to consumers,” said Rob Gramlich, executive director of the WATT Coalition. A recent report from consultants the Brattle Group and Grid Strategies identified some of the key technologies which would allow the grid to operate more efficiently at greatly reduced costs compared with traditional investment and made some suggestions for how to incentivize them. Two types of technologies identified in the report Improving Transmission Operation with Advanced Technologies: A Review of Deployment Experience and Analysis of Incentives will be of most benefit: those focused on flexible and dynamic control of transmission systems and those that explore enhanced and flexible application of pre-determined transfer capability that are used for operations.
The commenters suggest the Commission should convene a technical conference to fully explore the capabilities of advanced transmission technologies as defined by US lawmakers to improve the operations of the existing network, going beyond the focus of a dynamic transmission line ratings conference already planned.
They also urge the Commission to redesign inter-regional planning for transmission by requiring regions to plan together, count all the benefits of transmission, and to streamline the approval process for interregional transmission projects.
Lastly, the joint reply comments urged the Commission to issue policy statements by the end of 2019 stating its determination to address these key issues which will unlock the consumer benefits a modernized and expanded grid can provide.
“It is rare to see this breadth of support for grid expansion and modernization from organizations representing multi-state utilities that develop, own, and operate transmission, transmission equipment manufacturers, renewable energy companies, advanced energy technology developers, conservative and environmental non-profit public interest organizations, and major energy-consuming companies,” said John Jimison, Executive Director of Americans for a Clean Energy Grid (ACEG), one of the coalition’s members.
The Grid Advancement Coalition comprises: Advanced Energy Economy, Alliance for Clean Energy New York, American Council on Renewable Energy, American Wind Energy Association, ACEG, Center for Renewables Integration, Citizens for Responsible Energy Solutions, CTC Global Corporation, Enel Green Power North America, Enel X North America, Inc., ITC Holdings Corp., Natural Resources Defense Council, National Electrical Manufacturers Association, NW Energy Coalition, R Street Institute, Sustainable FERC Project, Union of Concerned Scientists, and the WATT Coalition.
FERC issued a related notice of inquiry on its Return on Equity (ROE) policy, which also relates to natural gas and oil pipelines. ROE levels for transmission owners are higher compared to other industries, but there are substantial development risks involved, and they are based on the net book value of the purchased transmission assets, which is often much lower than what was paid for them.
Reply comments were due on the FERC incentives policy docket PL19-3-000 by 25th August.