This briefing was the eighth in a series co-sponsored by EESI and WIRES. The first seven briefings were "How the Grid Works", "Policy Challenges to Grid Expansion", "Upgrading the Grid", "Cost Allocation", "Integrating Variable Renewable Resources", "Planning to Expand and Upgrade the Grid", and Examining FERC’s Notice of Proposed Rulemaking.
On April 7, 2011, the Environmental and Energy Study Institute (EESI) and WIRES (Working group for Investment in Reliable and Economic electric Systems) held a briefing about regulatory and policy issues affecting the nation's electric power system. Investment in electric transmission infrastructure is among the nation's highest energy priorities because a strong grid facilitates development of alternative generation resources, promotes a liquid wholesale power market with minimal congestion and market power, improves reliability and energy security, and advances energy independence overall. The nation is likely to invest more than $300 billion in electric transmission during the next 20 years. By delving into the operation and regulation of the grid and the interstate flows of electricity it supports, the briefing was designed to provide a foundation for discussions about cost responsibility, land use issues, transmission planning, integration of variable renewable energy resources, and other issues that are becoming more important to the future of the power industry. The panel described the 21st century grid and how it is managed and regulated from the perspective of federal regulators, transmission providers, state officials, and regional transmission organizations.
- The electric system can be thought of in terms of four components: generation (creates electricity), transmission (used to move power long distances), distribution (used to serve loads like houses and businesses), and load (consumers of electricity).
- Today's transmission grid is a highly integrated, interconnected system. In the early decades of the electric system, generation had a radial connection to load and if it went down other generation could not replace it as quickly as today’s interconnected system can.
- Unlike highways, pipelines, and telecom, the flow of electricity cannot be routed or controlled. Power flows via the path of least resistance.
- The United States and most of Canada are divided into three interconnected areas: Western (West of the Rockies), Eastern (East of the Rockies), and ERCOT (the Electric Reliability Council of Texas). There are eight sub-regions and 135 “balancing authorities” to ensure electric supply meets demand at all times and that power markets function appropriately.
- Transmission is regulated by a number of federal, regional, state and local entities. These entities oversee operations, development, planning, siting, reliability, and ratemaking.
- Two thirds of utilities nationally are investor-owned utilities (IOUs), one third are publicly owned (e.g. owned by municipalities or electric cooperatives that are self-regulating).
- The Federal Energy Regulatory Commission (FERC) regulates utility corporate matters, rates for some transmission owners, and enforces reliability standards.
- The North American Reliability Corporation (NERC) sets reliability standards and is certified by FERC.
- Regional Transmission Organizations (RTOs) and Independent System Operators (ISOs) manage and provide a central clearing house for bulk power transactions, as opposed to bilateral markets with parties working directly to establish terms and conditions.
- The transmission system is essential to delivering remote clean energy resources, where the site of generation is often rural landscapes with good solar or wind resources far from electricity demand.
- Common challenges to building new transmission are where to build them (siting) and who pays for them (cost allocation).
- Larger policy concerns, like water, wildlife, land-use issues and renewable energy goals, have made stakeholder engagement in transmission planning much larger than before, when state governments were generally more willing to let public utility commissions and regional balancing authorities lead planning.