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Perspective

Advanced grid technologies are needed to realize FERC's standard market vision.
Fortnightly Magazine - October 1 2002
  1. cable in strategic locations on power grids could result in dramatic improvements in the distribution of currents across power networks. The high capacity and low reactance of advanced HTS cable designs indicates that they will draw flows away from overstressed aluminum and copper lines and cables-taking the heat off the underlying system, improving its reliability and extending its useful life.

Standard Market Design: Spurring Adoption of New Approaches

FERC's SMD promises to clarify the financial benefit of investing in the grid. By creating valuable Congestion Revenue Rights, the new framework will directly reward cost-effective strategies to enhance network flows, instead of diluting these benefits among all network users as at present. New grid technologies, meanwhile, will make grid upgrades possible without compromising the land-use and environmental values that states and local communities hold dear. To enhance the prospects that SMD will lead to consumer benefits, FERC and the states should work together to pursue the following objectives:

  1. TARGET VOLTAGE CONSTRAINTS. The requirement of power system reliability must not be compromised in pursuit of the objective of competition-related benefits. FERC's formulation-"security-constrained, bid-based dispatch"-emphatically, and quite properly, subordinates the latter to the former. Yet in many areas of the country, voltage and stability constraints can be significantly raised, at very low cost, through the application of advanced power electronics-based technology. FERC's rule should create incentives to go after this low-hanging fruit by assuring users the benefit of the resulting Congestion Revenue Rights.
  2. FOSTER COMPETITIVE ENTRY. Through its orders on the TransEnergie and Neptune projects, FERC has set the template for competitive entry by merchant transmission providers. So far, however, entrepreneurs have not been willing to file proposals to construct transmission on overland routes, and specifically in the dense urbanized areas where the bulk of congestion occurs. Uncertainty regarding how state siting laws will be applied to third-party merchant transmission projects must be resolved. State and federal policies should expressly encourage, rather than block, third-party proposals that attack the problem of grid underinvestment-particularly, those that employ low environmental-impact technologies. In every network industry that has undergone competitive transformation, after all, network investment was the key to the success of reforms. Moreover, it was not incumbents, but rather new entrants, that led the way in adopting new technologies and strategies.
  3. ENCOURAGE NEW APPROACHES. FERC will oversee, and states will participate directly in, the RTOs now being brought into existence. Regulators should insist that RTOs, as an integral part of their ongoing planning activities, actively seek out and pursue low environmental-impact proposals to strengthen the power grid.

Accelerating Technology Adoption: A Key Priority

When the dust finally settles, FERC's SMD should certainly help to restart needed grid investment. While necessary, however, it is not sufficient in and of itself to break the impasse. New grid technologies can play a key enabling role in helping this new framework to succeed. But some level of increased public commitment, at least initially, is required to speed this process. Unfortunately, investment in research, development, and deployment of new technologies by regulated utilities is low by the standards of other technology-intensive industries.