DOE tries a ‘fundamentally different’ approach to modernize the nation’s power grid

Source: Peter Behr • E&E • Posted: Tuesday, January 17, 2012

The Energy Department is preparing to change how it assesses congestion on the high-voltage power line network as it seeks to revitalize the stalled transmission policy process created in the 2005 Energy Policy Act, DOE senior adviser Lauren Azar says.

Lauren Azar

Department of Energy senior adviser Lauren Azar. Photo courtesy of DOE.

This year, DOE will complete its third triennial analysis of congestion in the Eastern and Western interstate power grids under the 2005 law, identifying any areas where power flows are constrained by lines or equipment.

Once those areas have been identified, Energy Secretary Steven Chu will invite “interested parties” — utilities, transmission owners, investors — to make proposals for resolving areas of congestion, Azar said in an interview. These will be considered “statements of interest, indicating that they want to provide a transmission response. They may want to provide a new generation source. They may want to provide demand response. It’s not going to be limited to transmission.

“Based on that, the secretary is then going to decide whether or not to designate any specific [transmission] corridors” under the provisions of the 2005 act, she said. “This is a fundamentally different kind of approach than we’ve taken in the past.”

The 2005 law’s most controversial and contested provision allows the Energy secretary to designate a “National Interest Electric Transmission Corridor” based on the congestion assessment, and gives the Federal Energy Regulatory Commission backstop authority over siting transmission line projects if state regulators don’t act on the proposals in a year’s time.

The first congestion assessment, in 2006, outlined the entire mid-Atlantic region from northern Virginia to New York as region of critical congestion, and another large area in Southern California. The size of the areas triggered political protests by transmission line opponents and supportive legislators.

The studies go beyond transmission limits that could affect grid reliability to include restrictions that prevent cheaper electricity from reaching customers when demand is highest. The 2009 American Recovery and Reinvestment Act legislation also directed DOE to identify regions with substantial potential renewable energy that could be tapped with stronger transmission connections.

Exploring a legal frontier

The provision has never been used, and FERC’s authority has been significantly curtailed by decisions in the 4th and 9th U.S. Circuit Courts of Appeals.

The effect of the new plan would be to allow transmission developers or other industry participants to propose transmission congestion responses that would be incorporated into DOE-designated corridors.

Last fall, DOE and FERC collaborated on a proposal to revise the 2005 process by permitting transmission developers to propose “project-specific” corridors — a strategy meant to respond to objections confronting the initial corridor designations. DOE would also have delegated its role of pinpointing corridors to FERC under the proposal.

But the proposal caught some key players by surprise. It provoked protests from the National Association of Regulatory Utility Commissioners and from Sen. Jeff Bingaman (D-N.M.), chairman of the Senate Energy and Natural Resources Committee. Chu then scrapped the delegation plan, but the idea of narrowly defined corridors has survived.

DOE has issued a Federal Register notice on the new assessment without indicating when the work will be completed this year.

Before joining DOE, Azar was a member of the Wisconsin Public Service Commission and was first president of the Eastern Interconnection States Planning Council (EISPC), representing state regulators from 39 states, the District of Columbia and parts of Canada that make up the Eastern Interconnection grid. The council has played a key role in the first-ever interconnectionwide study of future transmission needs, funded by DOE.

The study will model three different long-term scenarios for how power generation and transmission may be developed by 2030, depending on the amount of renewable energy that is built, and other policy variables.

Azar said the process has already succeeded in helping state regulators gain a bigger picture of the regional grid’s challenges.

‘States can’t go it alone’

“Just convening that group was a huge success for the nation. Ultimately, we need to have a resilient and robust grid, and to do that most economically, we’ve got to do it together,” she said. “States can’t go it alone, or it’s going to cost too much.”

She said some interactions among state regulators, utilities, grid managers and interest groups were eye-opening.

“One state came into the process saying, literally, ‘We need absolutely no transmission,’” Azar said, declining to name the state.

“During this process, it became quite clear there was pretty significant congestion in that state. That state is now talking with its neighbors about how best to build transmission across state lines and into its state to bring renewable resources into its state. That did not happen before this process.”

Asked why that state’s regulators happened to be misinformed about congestion issue, Azar sounded her often-heard concern about the need for more competition in the power sector.

“One of the problems that I’ve seen in this industry is market power issues. Some folks that have less competitive generators actually don’t want to see more transmission, because what that does is bring a cheaper commodity into their area, and it threatens their use of their less efficient generators. I think that might be one of the reasons they didn’t get the information they needed.

“It was euphoric for me to be with the regulators and see the light bulbs go off when they realized some of the information they hadn’t been getting,” she said. “This process helped to give them that data.”

Some utilities won’t welcome competition

The DOE-funded studies of the Eastern and Western interconnections are not meant to define particular routes for new transmission or choose who would build them. But they will define generally where lines will be needed under the different scenarios.

“There will be maps. There will be lines on maps,” Azar predicted. “I would be shocked if we do not see transmission developers — whether they be incumbents or merchants — come forward with applications reflecting the lines that are on those plans.”

“It is just a matter of reality. If people have confidence in the results — namely, that indeed transmission in those certain areas would be economic and would provide necessary energy — the market is going to respond,” she said.

Azar acknowledged that the interest in more transmission will vary around the nation. Areas with new renewable resources will want to get them connected to urban centers. Some utilities with long-standing customer franchises won’t welcome that competition.

She said she hopes a national perspective on the need for a more modern, flexible and sturdier grid takes hold. “If you look at the age of our infrastructure right now, we’re going to need to transform that infrastructure, no matter what. Both lines and generation, storage, power flow controls … customer controls.

“When you take all of that together and place it where we are [in] a global economy, we have to transform this infrastructure to stay competitive.”