In April 2023, President Biden announced a climate action plan in which he called for a carbon-free energy sector by 2035. This goal comes at a time when climate consciousness is driving an increased push for electric cars, stoves, and home heating systems, all of which will dramatically increase our electricity demand. In order to meet both of these challenges, the United States has seen a dramatic rise in proposed clean energy projects. Large public investments from the Inflation Reduction Act and the Bipartisan Infrastructure Deal have spurred these efforts. . Unfortunately, only a few of the proposed projects have become operational. The culprit? The difficulty of connecting new energy projects to the grid. While several factors contribute to this issue, the challenging regulatory environment is one important and often overlooked factor.
When connecting to the grid, new power plants submit interconnection requests to their local grid authorities. In order to get approval, the power plant must meet a set of standards set forth by the Federal Energy Regulatory Commission (FERC). After approval is granted, the power plant and local power grid create an interconnection agreement. These agreements outline how the plant will connect to and use transmission lines, note any upgrades that need to be made, and designate who will pay for repairs. Once this agreement is finalized, the local grid authority will work to connect the generator to the grid. Unfortunately, delays in both reaching an agreement and connecting new energy projects to the grid have caused a massive multi-year backlog across the country. As domestic energy demand rapidly increases, the current regulatory model is unsustainable. To ensure a timely clean energy transition, we must make the regulatory process more efficient and provide regional grid authorities with the resources required to make interconnections.
Currently, about 60 percent of our electricity comes from fossil fuels, accounting for 31 percent of US carbon dioxide emissions. To meet President Biden’s clean energy goals, the Department of Energy, along with regional grid operators, have slated many US fossil fuel electricity plants for retirement. This loss comes amidst a growing push towards electrification. Almost all states offer tax incentives for electric car purchases. Some, like California, have even mandated that all new cars sold after 2035 be zero-emission vehicles. Nationwide, new requirements have also been put in place requiring new constructions to use electric heating and electric stoves as opposed to their conventional natural gas counterparts. This increased reliance on electricity has led some to project that domestic electricity demand will increase by 18 percent before 2030 and 38 percent by 2035.
Recently, enthusiasm from private industry has resulted in record investment into clean energy technology and projects. However, almost all new projects are stuck waiting for an interconnection. Currently, around 2000 GW of electricity production and storage projects are stuck in this backlog—more than the current electricity generation capacity of the entire country. With such a long waitlist, recent energy projects have taken roughly five years on average to get approval. These persistent delays have been a problem for years. Only 21 percent of energy projects proposed between 2000 and 2017 actually became operational by the end of 2022.
If we are going to reduce reliance on fossil fuels and meet future energy demand, we must make building clean energy projects easier. This is especially important given the country’s current appetite for both public and private investment in clean energy.
FERC started the process over the summer by implementing new reforms to the procedure for interconnection agreements. Under the old rules, the process for getting approval for interconnections from regional grid authorities involved conducting several time-consuming studies. These studies would assess a new project’s impact on the environment, local economy, and utility prices, among other things, and were done for individual proposals on a first come, first served basis. Under the new rules, new projects are required to be studied in batches. These “cluster studies” will have a 150-day timeline and be followed by individual facilities studies. This follows a broader approach of imposing timelines and penalizing grid operators for not meeting deadlines. As part of this process, customers seeking an interconnection now have “additional financial readiness and site control requirement[s].” This summer’s new reforms show that FERC is trying to move in the right direction.
However, some have already begun to question the viability of these changes. One issue stems from situations in which transmission capacity is limited. FERC Commissioner Allison Clements acknowledged this with an example in her statement on the rules change. If, for example, a utility has “400 MW of low-cost headroom on the system” and several companies apply for an interconnection to fill that gap, studying all projects simultaneously in a “cluster” is ineffectual. Because companies are competing for limited space, if the cluster was approved, the additions would be “unviable on a collective basis.” This would inevitably trigger a cycle of restudy and delay as demand is left filled. While the new reforms may be a good strategy for dealing with the backlog of projects, the commission should be careful about implementing broad mandates.
As we wait to see what effect the new reforms have in practice, there are many new initiatives that the FERC should study and begin implementing. One such reform would involve creating a prioritization framework. With such a system, the agency could streamline the approval process for clean energy projects. This is especially important in areas with an overreliance on coal.
Another crucial component of improving clean energy regulation is ensuring regional grid operators have the resources required to meet the new demand. While updating aging transmission infrastructure is crucial and has received a lot of attention, we must also invest in administrative capacity. Grid operators are the front lines of clean energy development, making it crucial they get the resources they need. Their offices handle the studies, approval process, interconnection agreements, and much of the permitting. However, the dramatic increase in clean energy projects has “overwhelmed [their] critical planning and engineering resources.” Luckily, a fairly good model for revenue generation can be drawn from FERC itself. Even though Congress sets FERC’s budget every year, the agency is self-funded. Through licensing fees and annual charges, FERC raises enough money to reimburse the Treasury for its budget, “resulting in a net appropriation of zero.” A similar system could work for grid operators. Increasing fees on power producers to cover the cost of their operation could help offices get enough resources to run more efficiently. This would, in turn, help power producers by reducing approval times and cost overruns.
As the weight of climate change grows, so does the need to reduce emissions. Transitioning to clean energy production will be a critical step in meeting this need. Unfortunately, the current regulatory environment makes it difficult to build these new clean energy projects. If the status quo is maintained, this will mean longer dependence on fossil fuels. In order to adhere to our climate goals and ensure we meet the energy needs of the future, the country must implement new reforms. To do this, FERC must continue to implement new policies to deal with the current backlog and promote clean energy. We must also ensure that grid operators have enough resources to deal with the influx of new projects seeking approval. Making these changes will allow the United States to join a growing global push for clean energy and become a leader in energy transitions.