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What's FERC's Role in the Transition to 100 Percent Clean Electricity?

Our climate goals require connecting and transmitting enormous amounts of new clean energy capacity. We can’t do it fast enough without action from FERC.

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100% Clean Power
Utility workers servicing a high-voltage transmission line.

On the campaign trail, then-candidate Joe Biden made a promise to the American people: The United States would achieve 100 percent clean, carbon pollution-free electricity by 2035. Accomplishing this goal is the key to cutting carbon pollution across the entire economy, improving public health, increasing equity, creating good clean energy jobs, and tackling climate change. Cleaning up the electricity sector unleashes a powerful domino effect that decarbonizes other sectors of our economy. Powering our grid with clean energy, instead of dirty fossil fuels, will allow us to decarbonize our homes, buildings, cars, and more, by electrifying them. That means clean electricity could cut up to 75 percent of our total carbon pollution in the U.S. 

So, how do we get there? Passing the Inflation Reduction Act (IRA) was a historic step forward, but it still doesn’t get us all the way. New modeling, done in collaboration with NRDC, projects that the IRA investments could increase carbon-free electricity in the US to 66 percent clean power by 2030–still 14 percent shy of the 80 percent target consistent with the path to 100 percent clean electricity by 2035. Hitting this goal requires more than just executive action–it demands a whole-of-government approach. 

Furthermore, much of those emissions reductions will be impossible without additional action to expand the transmission lines necessary to connect new clean energy projects. To achieve these reductions, we need to dramatically improve how clean energy gets connected to, and transmitted through, our electrical grid. That’s where the Federal Energy Regulatory Commission (FERC) comes in. 

The Federal Power Act provides FERC with the authority to level the playing field for clean electricity in wholesale power markets and to expand and reform our grid to ensure clean energy can get to customers. But right now, inadequate transmission infrastructure is holding back hundreds of gigawatts of wind, solar, and storage across the U.S., stalling the transition to clean energy. And now that the IRA has made wind and solar the cheapest source of new power in the country, it’s up to FERC to modernize our grid so consumers have access to energy that’s both affordable and reliable. 

FERC must exercise its regulatory authority to reform planning in two key areas: transmission and interconnection, and resource adequacy. We break it down in our paper with NRDC, “Powering Toward 100 Percent Clean Power by 2035.” Check out the excerpt below.

Blog Post Image - Biden

President Biden delivers remarks at the National Renewable Energy Laboratory in Arvada, Colorado on September 14, 2021. © 2021 National Renewable Energy Lab/Flickr CC BY-NC-ND 2.0

The Need to Confirm a Fifth Commissioner

To implement these reforms effectively, the Commission needs a full slate of five commissioners and a permanent chair. Former Chair Rich Glick’s term expired at the end of 2022, leaving FERC split 2-2 between Democratic and Republican appointees. President Biden and the U.S. Senate must confirm a new FERC commissioner and establish a permanent chair quickly so that the Commission can address its transmission, interconnection, and other priorities at full strength. While some of the rules detailed below could possibly advance through a 2-2 FERC, a strong climate and clean energy majority on FERC is essential to finalizing the strongest rules possible. President Biden and the Senate must prioritize this vacancy. Without a fully-staffed FERC able to finalize much-needed rules reforming transmission planning, interconnection, and power markets, many of the climate benefits enabled by the IRA would be left unrealized.

 

Transmission and Interconnection 

FERC must reform transmission planning to better plan for new generating resources, many of which are clean, low-cost renewables sited far from the areas where the electricity load is concentrated. Large-scale regional and interregional transmission will be needed to bring this clean energy to consumers. A recent study by the Princeton REPEAT Project found that high-voltage transmission needs to expand at a rate of 2.3 percent per year to achieve the full carbon reduction potential of the IRA, similar to the historical rate of expansion from 1978–2020 (~2 percent)—but far beyond the 1 percent annual expansion this last decade. Further, as extreme weather becomes more common, large interregional transmission lines can allow a region suffering from extreme weather to import power from its neighbors, providing needed reliability and resilience to keep the lights on. 

FERC’s current transmission planning rules provide perverse incentives for transmission owners to plan the system to meet local, rather than regional, needs. Because of this, data show that most transmission is built outside of regional planning processes in regional transmission organizations (RTOs). In nonRTO regions, regional transmission planning is essentially nonexistent. Transmission projects planned outside of the regional transmission planning process are not subject to meaningful review. Interregional coordination processes, in particular, have been unsuccessful, with no meaningful interregional transmission developed to date. 

Blog Post Image - Transmission graphic

One successful example of regional planning is in the Midwest, where the Midcontinent Independent System Operator (MISO) approved in July 2022 the largest investment in transmission lines ever in the United States. This opens the door to an estimated 53 gigawatts (GW) of new wind and solar energy, plus storage and battery projects— enough to power 12 million homes. According to the Union of Concerned Scientists, this transmission will prevent 400 million metric tons of carbon emissions between 2030 and 2050. Moreover, it's good for consumers— providing, on average, $2.60 in benefits for every dollar spent. However, additional policy action will be required to realize these gains. The approved lines will now go to states for approval, where the fights to get these built will get tougher and localized. Additionally, MISO still has three more tranches of transmission lines to approve in the next few years, including building lines in the South and expanding the connection between MISO North and MISO South. Even these tranches will not be sufficient to meet the need: there is a total of 112 GW of clean energy and storage sitting in the MISO interconnection queue and many fossil fuel plants retiring in the coming years. However, MISO’s leadership on transmission is a critically important start. 

This kind of progress can be replicated in other areas of the country. In April 2022, FERC issued a proposed rule to improve regional transmission planning. This rule would require RTOs to conduct long-term, forward-looking scenario planning to meet the needs driven by changes in the resource mix and consumer demand. In the proposed rule, FERC outlined the multiple benefits of transmission development but did not require transmission planners to actually plan for these benefits. FERC needs to move forward quickly with a final regional transmission rule that requires transmission regions to plan for a minimum set of benefits. While this proposed rule did not include a requirement to plan large, interregional lines, several FERC Commissioners indicated in public statements that they are still considering reforms to interregional planning, too.

This is the first time in a decade that FERC is reviewing its transmission planning rules. FERC needs to be bold to finalize rules that spur the transmission desperately needed for reliability, for resilience, and to bring clean energy resources onto the grid. FERC must finalize its regional transmission planning rule, and then issue a rule addressing interregional transmission, too. An interregional planning rule should address minimum transfer capability requirements, which FERC is publicly considering and which would spur a minimum level of transmission capacity between grid regions. However, the Commission should go further and reform interregional transmission planning and cost allocation more comprehensively, as its April 2022 proposed rule would for regional transmission.

To meet our emissions reduction goals, we must also ensure that clean energy can be connected to the grid. Right now, there are over 8,100 active projects in interconnection queues, totaling 1,000 GW of generation and 400 GW of storage. Projects currently take an average of 3.7 years to get through the interconnection queue, and only 23 percent of generators ultimately make it all the way through. Getting even a fraction of this power, which is mostly clean energy, onto the grid faster would help ensure reliability and resilience, and reduce consumer costs by allowing access to low-cost power sources. In June 2022, FERC proposed rules to streamline the processing of projects in the interconnection queue, reforms that could help get more solar, wind, and storage connected to electric grids nationwide. Rather than considering interconnection requests one by one, as occurs now, FERC’s proposal would require a “first-ready, first-served cluster study process” that groups projects together and prioritizes those closest to commercial operation. 

FERC needs to move quickly to finalize these interconnection rules so that the thousands of solar, wind and storage projects waiting for approval can get connected to the grid. FERC’s rule should include strict deadlines for interconnection studies and fines for utilities and transmission providers that fail to meet them. Without FERC dramatically reforming the interconnection process, the U.S. has little hope of meeting its clean energy and climate targets. The grid operator in the Mid-Atlantic, PJM, recently proposed (and FERC reluctantly approved) reforms designed to start working through the backlog of wind and solar projects trying to connect to the grid. However, even if these reforms work as planned, PJM is unlikely to be able to connect projects quickly enough to meet the state clean energy goals already on the books. FERC must finalize a new interconnection rule quickly so that the Commission can begin to reject inadequate proposals like PJM’s.

Resource Adequacy 

Resource adequacy is the process of ensuring that sufficient supply of electricity is available at all times. It is a jurisdictionally complex field, with intertwined federal, state, and private roles. Roughly 142 million Americans live in regions where FERC-jurisdictional rules, known as “capacity markets,” play a key role in maintaining resource adequacy. Each year, these rules direct the collection of billions of dollars from electricity consumers to support power plants and other electricity sector resources. FERC-jurisdictional capacity market rules must be reformed to adapt to the changing technologies of a low-carbon power system, and to remove explicit barriers to state clean energy policy. 

Between 2016 and 2020, FERC implemented a series of rules that aim to preempt state energy policy by limiting how resources subsidized by state or local policy are considered in capacity markets. These rules— PJM’s Minimum Offer Price Rule (MOPR), New England ISO’s Competitive Auctions with Sponsored Policy Resources, and New York ISO’s Buyer-Side Mitigation (BSM)— have the effect of protecting fossil-fueled resources, especially gas-fired combined cycle power plants, from competition with state-supported energy resources, typically clean energy. More recently, FERC has begun to roll these rules back—although these actions will not take effect until 2025 in the case of New England, after that region's grid operator requested and FERC approved a two-year transition period. FERC must hold New England's grid operator accountable to this deadline with no further delays and should move expeditiously to ensure that capacity market rules designed to undermine state energy policies are entirely replaced as quickly as possible.

More generally, resource adequacy rules have been designed for the characteristics of traditional power plants, and are in need of reforms to accurately reflect an increasingly low-carbon grid. Accuracy is paramount: resource adequacy planning must both ensure that the power system remains reliable as it transitions to new sources of supply and allows clean resources to displace fossil resources to the maximum extent consistent with maintaining reliability. 

In particular, current resource adequacy rules are designed around power plants that are dispatchable, available at most times, and located nearby. In contrast, some clean sources of electricity operate differently, with limits on when they are available and how much power they can produce. Many resource adequacy constructs also assume fossil resources can provide electricity at all times when time after time it has been shown that they struggle in extreme heat and cold. Currently, resource adequacy rules are overly conservative in assessing what grid services low-carbon sources of electricity can provide, essentially punishing renewables and electric storage for their characteristics while not acknowledging the ways newer resources, particularly energy storage, can be more responsive than fossil generation. FERC should address these issues by reforming market rules so that they: 

  • Accurately consider the resource adequacy value of all technologies instead of setting arbitrary limits on participation and using accreditation methods that undervalue clean energy resources. 
  • Allow for resource adequacy to be achieved through combinations of complementary resources, such as demand-side management combined with renewables. 
  • Incorporate the effects of flexible and price-responsive load. 
  • Recognize diurnal and seasonal differences in the need for and supply of power
  • Remove barriers to interregional trade in capacity. 

FERC and the regional transmission organizations (RTOs) are currently removing some of the hidden subsidies for fossil fuels and barriers to renewable energy from electricity market rules. In April 2022, FERC issued an order that required each of the RTOs to comprehensively assess their current system needs over the next 5–10 years given recent changes in resource mixes and load profiles, and detail how they plan to reform their markets to meet expected system needs. FERC explicitly required that market reforms cannot discriminate against any type of generation. This proceeding put pressure on the RTOs to make sure that their markets appropriately value new clean energy resources and flexible demand and continue to serve load reliably. FERC also indicated that it may use the information it received to propose further market reforms. At a minimum, FERC must use the information provided by the RTOs to ensure that they allow all resources that are technically capable of providing ancillary services to do so, and send price signals that reflect the full value of needed services—by compensating resources for the full cost of producing and generating electricity and for being available at the right time and place. Advocates should closely follow the RTO processes that this order started to ensure the RTOs appropriately value clean energy resources and demand flexibility as more of these resources come online. 

These resource adequacy rules, while important, only affect the areas currently in an RTO. Utilities in the western United States, with the exception of those in California, are not currently in an RTO. Efforts are underway to consider various market mechanisms in the West. A recent report by Advanced Energy United highlights the benefits of an integrated western market, including $2 billion in annual energy cost savings, adding up to 4.4 GW of additional clean energy to the Western grid, and adding 657,000 new permanent, high-paying jobs to the West. Advocates need to work with utilities and states in the West to move to market structures that can take advantage of these market benefits. Similarly, utilities in the southeastern United States are not in an RTO. While southeastern states have recently moved to increase competition through the Southeast Energy Exchange Market, the creation of a full RTO would drive substantial benefits. A southeastern RTO is estimated by Energy Innovation and Vibrant Clean Energy to create $384 billion in economic savings through 2040 and to reduce customer bills and carbon emissions substantially—with retail costs 29 percent lower in 2040 compared to business as usual.

 

FERC will play an essential role in our transition to 100 percent clean electricity. They must take the critical steps outlined above to achieve President Biden’s climate goals. This blog is an excerpt from our recent paper that outlines a robust roadmap on how the U.S. can achieve 100 percent clean energy by 2035. To learn more about what President Biden, agencies, and states need to do to meet this climate goal, download our entire paper. 

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