The transition to a decarbonized grid will require PJM, its stakeholders and federal regulators to rethink the way they plan and pay for the transmission needed to get there, participants said during a May 18 PJM workshop that featured Federal Energy Regulatory Commission Chairman Richard Glick and panelists representing a spectrum of industry interests.
New transmission will be required for a future system that relies heavily on renewable generation, which often is remotely located from customers, Glick said at PJM’s first Interconnection Policy Workshop.
“We’re in the midst of a very dramatic transformation in the electric sector. That transformation is going to bring about a significant number of benefits, but it also provides some challenges,” Glick said.
Panelists debated the federal rules governing how transmission is paid for and how the beneficiaries of those projects are defined. They also discussed how projects should be most efficiently studied and approved by regional transmission organizations like PJM.
Glick opened the session by laying out the transmission challenges involved in the transition to a more decentralized system of smaller, renewable generation sources, including those in areas without existing transmission infrastructure.
“There’s no doubt that we’re not going to be able to achieve the very ambitious goals set by the Biden Administration, as well as by a number states, in terms of greenhouse gas reduction – especially in the electric sector – if we don’t address the transmission issue, because we’re going to have to access those remotely located renewable sources,” Glick said.
In addition to transmission planning, Glick said, his agenda includes focusing on both interregional and intraregional planning, and rethinking traditional cost allocation methods and the definition of “beneficiary” when allocating costs to the rate-payers who benefit from new transmission projects.
“One of the areas we need to think about more broadly is, how do we take into account other societal benefit?” Glick said. “If we’re going to be building out transmission for more remote resources and reducing greenhouse gas emissions, how do we define who benefits from that?”
Glick said he expects FERC to put forward a plan by the end the summer to outline its priorities in that area.
The Interconnection Policy Workshop series aims to promote communication and dialogue among stakeholders on policy issues that are national in scope, but also directly affect how PJM administers its queue today, and how it might administer both its queue and the Regional Transmission Expansion Plan process in the future.
Following Glick’s remarks, Craig Glazer, PJM Vice President – Federal Government Policy, provided a historical overview of federal interconnection policy. In his presentation, Glazer outlined the dilemma that Glick touched on – the way transmission is planned and paid for currently may not meet the development needs of a decentralized grid.
Glazer explained how PJM Orders dating back to 1997 and 1999 established the “but for” principle, in which the interconnecting generator, or “cost causer,” pays for transmission upgrades that would not be needed “but for” the addition of the project. This was meant, in part, to protect consumers from paying for upgrades that are not otherwise needed.
Through Order 1000 issued in 2011, FERC moved to a “beneficiary pays” requirement for baseline upgrades – those improvements that the system requires to address reliability, market efficiency or public policy requirements –while the cost causer driver remained as the principle driving the allocation of grid upgrades associated with interconnection. Who those beneficiaries are in a decarbonized grid, Glick suggested, is not necessarily covered by current rules and processes.
Glazer then moderated the panel, introduced by Ken Seiler, PJM Vice President – Planning.
Seiler said studies indicate that the bulk power system is in need of hundreds of millions of dollars in upgrades to accommodate decarbonization policies. Developers have submitted nearly 200,000 MW of proposed new generation seeking interconnection with the PJM system, 93% of it solar, wind, battery or renewable-storage hybrids.
“We fully expect the volume of the interconnection requests to continue for the next several years, based on our current policies to decarbonize, and transmission will be key and well-needed to interconnect and reliably operate all the new generation,” Seiler said.
What developers of renewable and other generation projects are looking for is greater certainty around interconnections costs and timing, panelists said. Panelists debated a number of issues, with some innovative hybrid approaches proposed to cost allocation, and a variety of proposals to accommodate renewable integration while continuing to harness competitive forces.
The panel was split on the question as to whether the “but for” cost allocation standard for interconnection should be scrapped which led to additional discussion on potential ways to harmonize the competing “cost causer” versus “beneficiary pays” paradigms.
The panel featured:
- Amanda R. Conner, Vice President – FERC and RTO Strategy and Policy, AEP
- Rob Gramlich, President, Grid Strategies, representing renewable buyers and other consumer interests
- John Brodbeck, Senior Manager – Transmission, EDP Renewables
- David (Scarp) Scarpignato, Director – Government and Regulatory Affairs, Calpine
- Susan Bruce, an attorney with McNees, Wallace & Nurick, on behalf of the PJM Industrial Customer Coalition
- Frederik (Erik) Heinle III, Assistant People’s Counsel, Office of the People’s Counsel for the District of Columbia
The policy workshops will be conducted in parallel with the work of the new Interconnection Process Reform Task Force. That group, which began meeting April 23, expects to have a proposal of PJM-specific process changes to submit to FERC by January 2022. (See New Task Force to Explore Interconnection Process Reform.)
The next meeting of the Interconnection Process Reform Task Force will be held June 1. The Interconnection Policy Workshop’s next session is June 24.