In written testimony made available prior to today’s House Subcommittee on Energy and Power hearing to examine transmission issues, DOE Senior Advisor Lauren Azar outlined the key barriers to transmission development and how DOE is working to remove them.
She said that while she continues to discover more and more barriers, the primary ones are uncertain public policy goals, the lengthy timelines from conception to construction and market power exerted by existing power suppliers.
As a state utility commissioner, Azar said she was frequently faced with the decision of whether to spend billions of dollars on new electric infrastructure or on upgrading existing power plants. “The biggest obstacle to making a sound decision was predicting what the future would hold: not the future of how much electricity we would need to generate; but what the public policies would be in the future,” she said.
Some power generators, especially those with inefficient generation resources, are motivated to block new transmission that would connect more efficient and competitive generation to their markets, she said. “So, you only need to look at the areas of our nation where we repeatedly have significant energy price differentials over a long period of time to know that someone or something is blocking the emergence of a competitive marketplace,” she added.
Azar explained that transmission projects take 10 or more years to be built because of local opposition, plus having to purchase easements from hundreds or thousands of property owners and churning through the state and federal permitting processes. In contrast, she said, it generally takes only three years for a power plant developer to build a new generating facility.
“Transmission developers are looking for generators who are willing to purchase capacity on future lines and generators would like certainty the line will be built, Azar said. “Unfortunately, the load serving entities often require that the new generator provide energy sooner than the transmission line can be built.”
She said DOE’s strategy to eliminate these barriers includes the ongoing efforts of the department’s power marketing administrations, which were provided billions of dollars in borrow authority by the Recovery Act that can be and is being used for transmission investment. She also cited the DOE’s authority to designate National Interest Electric Transmission Corridors, which are geographic areas where transmission congestion or constraints adversely affect consumers.
Energy Secretary Steven Chu said Oct. 11 that DOE would not pursue its plan to delegate to FERC its designation authority but that it would, instead, work more closely with FERC in reviewing transmission projects under sections 216 of the Federal Power Act.
In his written testimony for the same hearing, FERC Chairman Jon Wellinghoff explained how the plan to delegate authority to FERC evolved.
“After a meeting this year that included Secretary of Energy Chu, Secretary of the Interior Salazar, Secretary of Agriculture Vilsack, and me, the agencies agreed to explore ways to implement existing statutory authority on transmission facilities more efficiently and effectively,” Wellinghoff said. “One such idea was for DOE to delegate its authority to the Commission,” he said, adding that FERC would then consider issuing narrower, project-specific NIETC designations where appropriate.
EPAct 2005 amended section 216 of the Federal Power Act to require DOE to conduct studies every three years on congestion on the nation’s power grid, and to authorize DOE to designate national corridors. Section 216 also granted FERC “backstop” siting authority to issue permits for new transmission facilities if a state does not have authority to approve the siting or if the state has withheld approval for more than one year.
But DOE’s 2006 congestion study and its designation of two national corridors were challenged by state and environmental groups and vacated by the U.S. Court of Appeals for the 9th Circuit. A FERC rule that established a process for backstop siting of transmission in national corridors was also challenged in the U.S. Court of Appeals for the 4th Circuit, which rejected FERC’s procedures.
Because the limitations imposed by the 4th Circuit would curtail FERC’s ability to permit transmission projects “it is questionable whether a potential applicant for a permit would invest the resources required to file an application with FERC, given the uncertainty of FERC’s authority and the likelihood of antagonizing the affected states, and protracted litigation,” Azar said.
In his written testimony, Southwest Power Pool President and CEO Nicholas Brown said SPP believes that it is logical for the designation authority to reside within FERC. “Granting FERC the additional authority to designate the national interest corridors will simplify and perhaps expedite the process of siting large-scale, multi-state transmission facilities where the need for FERC backstop siting authority arises,” he said.
ITC Holdings President Joseph Welch said in written testimony that because FERC’s backstop authority has largely been nullified by the courts, regional, multi-state projects can be thwarted by a single state. He cited one ITC project, The Green Power Express, as an example of a project that would benefit from FERC having backstop authority because it will run 3,000 miles through seven states, 20 utility service territories and two RTOs, as well as non-RTO areas.
“In the past 10 years the United States has built roughly 11,000 miles of natural gas pipeline,” Welch said. “During the same period, the electricity industry has only added approximately 660 miles of new high voltage interstate transmission. This can largely be attributed to the authority of FERC to site natural gas transmission, but not electric transmission.”