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The permitting process in the US for new power transmission
lines and connections to the grid is slowing the transition to
renewable power generation and storage batteries, said industry
experts and regulators at the just-concluded CERAWeek 2022 by
S&P Global in Houston.
Panelists discussed a number of solutions, ranging from
selecting which renewables projects get priority permitting review
and ratemaking incentives that encourage smart use of technology to
finding the right place for battery storage in the regulatory
structure.
"We have 670 gigawatts of renewable power in the [permitting]
queue across the United States. It's encouraging … and a large
[percentage] of what we need to do to decarbonize the power
sector," said Chris Shelton, chief product officer, AES Next, the
technology development arm of power distribution company and
utility AES.
But the grid is not keeping up. "Seventy percent of [the US]
grid is in the last half of its life," said David Carroll, chief
renewables officer for ENGIE, a France-based utility with
operations around the world.
Operators have the opportunity to modernize the grid and to do
so in the best way to manage renewables, he said. "There's a lot of
investable capital to do it now," Carroll said.
One of the most infamous aspects of the current system is the
time it takes for a new transmission line to receive necessary
permits from the states. A few years ago, the average time was
about two years, according to Shelton, but it's ballooned to four
years or more.
The source of the problem is fairly obvious: a surge in the
number of renewable power projects seeking to connect to power
grids. The regional transmission organizations and independent
system operators (ISOs) that manage grids in the US were set up to
review a fairly small number of coal and gas projects. Now, there
are hundreds or even thousands of applications on file.
One ISO, known as PJM, coordinates power for the District of
Columbia and all or parts of 13 states in the US Midwest and East.
Earlier this year, PJM proposed a two-year delay on accepting any
new applications for connections, as it has a backlog of more than
2,500 requests for permits. It has a task force studying
solutions.
While hiring staff to speed up review would be one answer, one
regulator at CERAWeek said that a new way of looking at connection
applicants is needed as well. Applications are reviewed by PJM on a
"first-come, first-serve" basis, so operators have an incentive to
start the permitting process to get ahead in the line. However, the
panelists said many of those projects don't have a realistic chance
to be built, and yet they are taking up regulators' review
time.
"A lot of these projects won't go into service … maybe 20% of
them will be finished," said Jason Stanek, a member of the state
utility regulatory body Maryland Public Service Commission
(Maryland is in PJM). "Let's get rid of the first-in, first-out
approval system."
This problem will become even more acute as applications start
to pour in several years from now for connections from large
offshore wind farms that have been approved up and down the East
Coast, Stanek said (articles here and here).
Wrong incentives
Ratemaking rules also are ripe for reform. State and federal
policies allow utilities to be paid back—with a profit—for
adding new transmission lines, and they worked well for decades.
The rules helped create a highly reliable power grid, and one that
had redundancies that made returning it to full operation fairly
quick.
But it's also expensive. Stanek explained that utilities have an
incentive to propose a more costly project to add transmission
lines rather than a digital project to improve
performance of existing lines. "As regulators, we need to encourage
outside-the-box thinking instead," he said.
This is not to say that new lines aren't needed as well,
especially for renewables or a new gas-fired power plant that's far
from where the power is used. Stanek said wind power operators in
Kansas are eager to sell power to New York City residents, but the
grid is not interconnected in a way that allows that to happen.
A Kansas-to-New-York connection would require a truly national
grid, rather than the series of regional grids that exist today.
But it has significant hurdles to overcome. "There's no support for
new transmission … in 'flyover states,'" Stanek said, referencing
states in between the site of generation and its end use.
Under the $1.2-trillion infrastructure bill signed by President
Joe Biden in November, the US Department of Energy has been given
$20 billion for the Building a Better Grid
Initiative. The program aims to make the grid more resilient to
climate change impacts and to expand access to new renewable
energy. Shelton said that DOE has $2.5 billion it can loan under
the Transmission Facilitation Program to be an "anchor-tenant" for
up to 50% of the cost of a new transmission line or upgrade, as a
way to encourage upgrades and expansions.
Under the infrastructure bill, Congress also sought to
strengthen the federal government's hand in overcoming states'
opposition to new power lines. Currently, states have almost total
control over a power line permitting, and so one state can block a
multi-state project. The infrastructure bill gave the US Federal
Regulatory Energy Commission (FERC) limited power to override a
state's refusal to permit a new power line, referred to as
"backstop authority."
FERC had backstop authority since the Energy Policy Act of 2005,
but federal courts had repeatedly denied FERC's use of it, saying
that Congress had not clearly articulated conditions for
backstopping. Under the new law, this has been clarified, and
Carroll called it "a good first step."
Criticism of battery regulations
Batteries represent yet another area where power providers are
eager to invest, but often are slowed by outdated regulations.
"Batteries are generation, but they also are consumption. They
have turned the model upside down," said Demetrios Papathanasiou,
global director for the World Bank's Energy and Extractives Global
Practice.
If a battery is put in the transmission category, then utilities
run into trouble because most states and ISOs prohibit a utility
from owning transmission. In those circumstances, a utility can't
propose to install battery backup for its own wind or solar
operations. States and FERC are starting to provide exemptions,
said Stanek.
Shelton, the AES executive, described other illogical situations
related to batteries as well. AES wanted to install a 20-MW battery
storage unit at a power station it owned in New York State but was
not operating. It already owned a 50-MW power connection to send
the battery's power to the grid, a legacy of the power plant. Yet
the company was required to do a full modeling of PJM's regional
power needs as part of a permitting process for the connection that
took two-and-a-half years, he said.
In another situation, New York State regulators required AES to
add 32 MW of interconnection capacity for a battery unit that the
company planned to install at a 125-MW wind farm. The purpose of
the additional capacity is to make sure that power coming from the
combined wind farm and battery system could meet contractual
commitments, but would never exceed the existing connection's
carrying capacity. The company was prepared to sign an agreement
and install technology to ensure maximum output would never be
exceeded, but instead the unnecessary upgrade was required, said
Shelton.
In sum, the panelists agreed that reforms are underway, but more
are needed. Better planning, quicker permitting, and finding ways
to value carbon reduction, resilience, and reliability in the
ratemaking process are critical to building a net zero grid.