What Can Federal Authority Do for Transmission?

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On December 19 the U.S. Department of Energy (DOE) released its final guidance on a National Interest Electric Transmission Corridors, or NIETC, selection process, marking a new chapter in a nearly two-decade saga.

The context for the resurrection of the NIETC authority is the well-established need to accelerate the deployment of high-voltage and long-distance transmission projects in almost all corners of the U.S. power grid. This is both a demand-side and supply-side story. On one hand, utilities across the U.S. are reporting increased rates of demand growth, especially from the commercial and industrial sector. On the other, a shift to more transmission-heavy generation resources (wind and solar), and an overall expansion in installed generation capacity drives a requirement for more transmission.

Brief Background on NIETCs

The historic development of the power grid has been largely the story of utility investment regulated by state public utility commissions. NIETCs are a unique creature in the planning ecosystem in that they represent a federal planning authority in a regulatory landscape that has otherwise left power in state and regional hands.

NIETC’s have existed since the Energy Policy Act of 2005, but the DOE’s first attempt at designating NIETC corridors met significant opposition from environmental groups and other stakeholders; both corridor designations were eventually struck down in the courts. The authority has languished unused ever since.

The New Guidance

The new guidance from the DOE seeks to establish a multiphase process which opens with a “request for recommendations” window open through February 2024. The window is wide open to all—including state policy officials, project developers, and grid operator officials—to submit proposed corridor pathways. Two key additional features stand out.

First, unlike the previous attempt at NIETC corridors which covered vast tracts of the country, the new corridors will be narrow, linear in nature, and wide enough to host one or more transmission projects. The narrower a corridor, the easier it is to conduct environmental reviews, assess other impacts (culturally or historically sensitive areas) and identify and receive feedback from affected stakeholders, thus improving prospects for delivering transmission projects. But too narrow a corridor may limit the ability for competitive project proposals and fail to provide adequate siting flexibility for projects to respond to stakeholder feedback. The DOE is tasked with striking a delicate balance.

Second, the DOE has established an emphasis on corridors which cross planning region borders, such as the seam between the Midcontinent Independent System Operator (MISO) and PJM, and improve interregional transfer capacity. This makes sense because these markets have been unsuccessful at developing projects which directly address transmission constraints between regions, despite established transmission planning process that are bearing fruit within regions (see MISO Transmission Expansion Plan, or Regional Transmission Expansion Plan in PJM).

In keeping with a theme of wide discretion, it should be noted though that the DOE has not restricted itself to the interregional criteria, it remains merely a suggestion to parties submitting recommendations in the opening submission phase.

The only firm statutory hurdle for a NIETC designation is that it passes the a “threshold need determination,” which is “whether the narrow geographic area for potential NIETC designation has present or expected transmission capacity constraints or congestion that adversely affects consumers.” But as elaborated on by the DOE in both the guidance and the National Needs Study, this threshold is should be very easy to meet for just about any corridor that crosses state lines.

All this adds up to substantial discretion available to the DOE and leaves the direction and outcomes of NIETC process wide open.

The Open Question

Beyond the threshold need determination, which is easily met, and the various discretionary criteria, which are even wider, how then should the DOE narrow down and focus its NIETC authority?

This question carries weight because a major concern expressed by stakeholders is that the introduction of NIETCs into the planning ecosystem may usurp, conflict, or confuse existing regional transmission planning processes. These are now gaining steam in many regions (again, the MISO MTEP is relevant), and should be further bolstered by an imminent Federal Energy Regulatory Commission order on the issue. The risk of unintended consequences is not without precedent; Order 1000 from the commission was intended to expand transmission development and instead initiated an era of underinvestment in transmission networks.

There is one potentially clarifying question to ask: Which types of projects are uniquely positioned to address national interests, as opposed to state or regionally assessed interests? The assessment of the strategic national interest is a criterion clearly beyond the scope (or interests) of state public utility commission officials or regional transmission planning processes, but is well within the scope of the DOE.

The emergent emphasis on strategic economic competition, and the empowerment of the DOE and other federal agencies, through recent congressional action (CHIPS and Science Act, Bipartisan Infrastructure Law, and Inflation Reduction Act) to invest in and nurture strategically important industries only accentuates this point.

For example, the 2022 CHIPS Act seeks to reestablish a U.S. industrial foothold in semiconductor fabrication industry. The net effect is the direction of billions of federal dollars toward projects and industries which require vast amounts of energy. Insofar as the semiconductor industry is a national strategic interest, ensuring the timely expansion of transmission capacity to serve this industry is also squarely within the strategic national interest. From this flows a coherent justification for the use of the NIETC authority.

Another example is the strategic investment in the hydrogen economy through the Bipartisan Infrastructure Law and Inflation Reduction Act. Again, if global leadership in the hydrogen economy is a strategic objective, and then ensuring enough transmission to serve the serve the electric demand at the new hydrogen hubs is a strategic necessity. It seems possible to apply this reasoning to other strategic sectors including clean energy manufacturing, electric vehicle and battery manufacturing, critical mineral mining and processing, and defense industrial clusters. All these strategic sectors require robust, reliable, and affordable access to electricity that a NIETC designation may be crucial to unlocking.

Ultimately, though the DOE has taken great pains to lay out a legally robust process for the NIETC authority, it has remained indeterminate and vague about the ends of this federal authority. But the combined weight of these recent legislation suggests this is an era in which the federal government forcefully engages in strategic economic policy. The weight of these new federal authorities and dollars should be brought to bear to deliver on national strategic ends. It would seem prudent then to articulate the use of federal authorities directly in relation to specific, tangible, strategic objectives.

What We’re Reading (or Watching)

Gridlocked: Planning Failure with the Southeastern Regional Transmission Planning Process, Southern Renewable.org

Panel: Climate Change and the Free Market, The Federalist Society

Transmission Impossible? Prospects for Decarbonizing the US Grid, National Bureau of Economic Research

Cy McGeady is a fellow with the Energy Security and Climate Change Program at the Center for Strategic and International Studies in Washington, D.C.

Cy McGeady
Fellow, Energy Security and Climate Change Program