The time-honored discounted cash flow method for determining appropriate utility returns falls short when interest rates are low. Inadequate ROEs ultimately increase cost of capital and wipe away...
Gridlock in 2030?
Policy priorities for managing T&D evolution.
transmission lines that cross state borders or the 30 percent of U.S. land managed by federal agencies. These boundary-crossing lines face special problems related to planning, cost allocation, and siting.
When boundary-crossing lines are proposed today, they tend to be evaluated in isolation, not as part of a wide-area planning process, and allocation of the costs involved is often done via facilities-specific negotiations. FERC Order No. 1000, issued in July 2011, should significantly increase wide-area planning of transmission systems, make routine the allocation of the costs of boundary-crossing transmission facilities, and, by explicitly adopting the “beneficiaries pay” principle, rationalize the allocation of those costs. Grid efficiency would be further enhanced if the affected parties went beyond the order’s requirements and established permanent and collaborative planning processes at the interconnection level and developed a single cost allocation procedure for boundary-crossing projects in each interconnection. However, planning tools that can deal with complex networks taking uncertainty into account don’t exist today, and research to develop them is needed. For such research to be most productive, detailed data covering the major interconnections must be made appropriately available to researchers.
Under current law, states retain the primary role in siting transmission facilities, and their interests often conflict. Any involved state can block a multistate project. Moreover, federal agencies with missions that include purposes unrelated to energy can and do block or delay the construction of transmission lines across land they control. No agency is charged with considering the broad national interest. Boundary-crossing projects are thus particularly difficult to build, and the special difficulties involved will pose an obstacle to the efficient integration of grid-scale wind and solar generation. In recognition of this problem, the Energy Policy Act of 2005 contained a section that was intended to give FERC backup siting authority if states withheld approval of multistate transmission facilities in congested corridors, but subsequent court decisions have effectively annulled that section.
To deal with this problem, FERC needs effective siting authority over major boundary-crossing transmission facilities everywhere in the nation. Some have argued that in the interest of efficiency, FERC should have sole siting authority over these projects, as it does over interstate natural gas pipelines. Others contend that giving FERC backstop authority to site projects blocked or unreasonably delayed by states or other federal agencies would create a process more sensitive to states’ and other agencies’ legitimate concerns. While both approaches clearly have strengths and weaknesses, new legislation that adopted either would represent a significant improvement over the status quo.
Peak Demand and Electric Vehicles
Changes in the nature of electricity demand over the past several decades have produced a substantial increase in the ratio of power demand during peak hours to average demand—an increase in the peakiness of demand. Figure 2, which presents load duration curves for New England and New York expressed as percentages of peak hour demand, illustrates this increase. Because power systems need to be sized to meet peak demand with a margin for reliability, the peakier demand becomes, all else equal, the lower capacity utilization becomes, and thus the higher