Important Electric Grid Recommendations from the U.S. Department of Energy's New Report

The Department of Energy (DOE) recently released its first installment of its Quadrennial Energy Review (QER) - a comprehensive report examining how the United States can modernize energy infrastructure to promote economic competitiveness, energy security, and environmental responsibility. This installment contains many good findings and recommendations pertaining to electric grid modernization relevant to the Federal Energy Regulatory Commission (FERC).

While the QER did not provide the federal agency largely responsible for regulating our country's backbone electric grid with specific recommendations, it is important that FERC and the regional grid operators it oversees proactively examine how they can support electric grid modernization in coordination with other regulators and stakeholders.

Now is the time to update our aging electric grid to reflect evolving customer needs, technological advances, a changing environment, and a cleaner energy mix

Electric grid reform is timely due to a confluence of factors. First, our grid infrastructure is old and in dire need of upgrade. We could just patch up the existing system by replacing old poles and wires with new ones and call it a day. But given evolving customer preferences for more control over energy usage and newly available efficiency-enabling technologies, doing that would be like replacing an old rotary phone with a newer one instead of upgrading to a smart phone. Grid reform should also consider the changing environment, as grid reliability is increasingly threatened by severe weather. The continuing shift in the energy generation mix to include the benefits of more roof-top solar and remote wind generation will also require changes to our transmission grid.

QER electric grid modernization findings and recommendations

Here are some QER highlights relevant to FERC and what it can do to support a clean electricity grid. (Our Sustainable FERC Project coalition submitted comments to DOE on some of these items before the QER was finalized.)

The necessary transmission build-out for a low-carbon future is likely consistent with historic investment

To access wind and solar renewable resources far from populated cities, we need long-distance transmission infrastructure. But how much is enough? The QER studied a variety of clean energy future cases, including scenarios with high penetrations of wind and solar power, a cap on climate-warming carbon dioxide emissions to achieve a 40 percent reduction in 2030, and increased natural gas prices. The scenarios produced a range of new transmission requirements, all consistent with our historic investment in transmission infrastructure. In other words, the needed transmission infrastructure build-out to get to a low-carbon future is reasonable. So it boils down to this: the nation will continue to invest billions of dollars in grid infrastructure updates whether we build for a clean energy future or ignore the potential for it - which will it be? We'd argue for the clean pathway to clean our air and stave off the worst effects of climate change

We can more efficiently use existing infrastructure to avoid unnecessary and costly transmission construction

Just as the highways clog at rush hour, the electric grid gets congested when customer power demand is at its peak. The QER emphasizes that there are a number of ways to alleviate congestion on transmission wires without building costly new infrastructure. These include managing energy use through energy efficiency (smarter use of energy) and demand response (customer reduction in electricity use during high congestion times in exchange for compensation), locally supplying energy through distributed generation (such as rooftop solar), or using stored energy when the transmission lines are constrained. These alternatives not only reduce new transmission construction requirements, but come with the added bonus of improving electric service reliability and reducing pollution from electricity generation. Indeed, three important DOE-funded planning studies show that scenarios combining high levels of these resources can reduce the expected costs of new transmission investment (see a description of the Eastern Interconnection study here).

We can also avoid costly transmission construction by using existing transmission more efficiently through improved operations. Without getting into the wonky details, this means grid operators can adopt smart network technologies and better network management practices to minimize electricity transmission bottlenecks.

We need to appropriately value and compensate energy efficiency, demand response, energy storage, and other resources providing cleaner, cheaper grid services

Unlike traditional power plants, energy efficiency, demand response, energy storage and other resources can nimbly respond to unanticipated grid events or meet energy demand without requiring extra transmission capacity at peak times. But these resources often offer more to the grid than they receive in compensation. Accurately valuing the services these resources provide would allow regulators and utilities to incent their participation in grid markets. The QER therefore recommends that DOE help develop frameworks to value and compensate grid services that promote a reliable, affordable, and environmentally sustainable grid.

Overlapping and patchwork regulatory regimes add to grid evolution challenges

The energy regulatory landscape is a complex patchwork of state, regional, and national regulatory regimes (as illustrated in this short video). This overlapping patchwork, especially between federal and state regulatory authority over newer electric market services, has complicated regulating these services in the regional markets (see more about the much hyped Order 745 example of jurisdictional ambiguity here).

FERC and state utility regulators have collaborated on some of the topics in this gray area, such as smart grid and demand response, and the QER recommends that they continue to do so. The QER also recommends that DOE convene public utility commissioners, legislators, and other stakeholders at the federal, state, and tribal levels to explore approaches to integrate markets.

The opposite problem to regulatory overlap is the regulatory vacuum, where no regulator has stepped into the space. FERC, for example, looks at the process and not the substance of regional transmission planning and requires even less from the coordination between regions. This is insufficient to facilitate the kind of planning required to ensure that our grid cost-effectively facilitates our clean energy future.

The QER therefore recommends that DOE conduct a detailed and comprehensive national review of transmission plans, including assessing the types of transmission projects proposed and implemented, costs, and consideration of interregional coordination. The recommendation also includes assessing incentives and impediments to new transmission development.

A more active role for FERC?

While most of the QER's grid modernization recommendations are specifically directed at DOE, FERC should not stand on the sidelines. FERC, too, can take an active role in ensuring that clean energy resources are appropriately valued and compensated in the markets, in removing barriers to smartly planned new transmission, and in encouraging more efficient use of existing transmission infrastructure.