Federal Support for Clean Energy: Planning vs. Buying

Energy Policy in the U.S. is going through a very interesting change. The limits created by the delegation of authority between federal and state are plainly visible, while the purchasing power of the Defense Department during wartime is focusing on renewables and conservation.  There are new policy statements just released, one for the planning electricity infrastructure for the civilian sector, and several for the energy decisions of the military.

The Federal Energy Regulatory Commission should be congratulated on the release of Order 1000 July 21st. This is a major step in the efforts to reform Transmission Planning needed to prepare the electric grid for the future.  Transmission Planning is primarily an engineering task, with economics playing a secondary role. Order 1000 allows the inclusion of public policy goals in the evaluation of new transmission.

For those who believe that the missing piece is U.S. energy policy is direction to change the sources of energy from fossil fuel to non-carbon supplies, Order 1000 is still missing that piece. Order 1000 is cogent and progressive policy, carefully adjudicated and considered. The Commission, led by Chairman Jon Wellinghoff, is the most supportive of innovations from the market place that we have had.  I worked with the FERC staff on detail from National Renewable Energy Lab to the Office of FERC that was developing this Order.  What Order 1000 reveals are the limits on the Commission’s authority.

Order 1000 and previous Commission orders leading up to this set the ground rules for the participation and the scope of Transmission Planning.  Transmission Planning is federally regulated activity, but selection and funding new power plants is in states’ jurisdiction. The authority and jurisdictional boundaries are illustrated by the effort to include Transmission Planning that enables the satisfaction public policy goals for new energy supplies.  The Federal Energy Regulatory Commission does not set those goals. The Commission is ordering:

each utility to establish procedures for identifying those transmission needs driven by Public Policy Requirements for which potential transmission will be evaluated in the transmission planning processes.”

The Commission leaves to the utilities to create the procedures for how such evaluations will be undertaken, as long as they do evaluate “proposals by stakeholders for transmission proposed to satisfy an identified transmission need driven by Public Policy Requirements.”

The Order 1000 treatment of cost allocation is very similar. The Commission orders the utilities to develop methods for assigning the costs of approved and needed transmission. The Commission provides 6 principles to guide the utilities. Three of these principles address the concern that costs are assigned to the regions that benefit, not to regions that do not benefit, and only to the regions that benefit. Another principle relates to how to apply a benefit-cost ratio. If such a method is used, the Commission requires that a threshold of no higher than 1.25 be used.  If this seems to be a lot of effort to define just the ground rules, you see what I mean about the limits on the authority of the Commission.

Compare this regulatory planning guidance with action taken by the federal government through the spending of the Defense Department. The DoD is the largest buyer of energy in the world. A rising drumbeat among military strategists has led to energy decisions that explicitly favor renewables and conservation over oil.  The most dramatic energy policy document this year is the June 14 Defense Department’s Operational Energy Strategy. See the document at http://energy.defense.gov/OES_report_to_congress.pdf

There is an excellent summary of the range and depth of DoD actions to adapt the armed forces to renewable, secure and more efficient energy from the Center for American Progress.

The U.S. loosens its reluctance to pursue industrial policy in times of war.  We are in such times, and the policy of U.S. military has been summarized as “Less Fuel, More Fight.”  

(This was first posted on my own blog: http://blog.mikejacobs-energy.com/2011/07/federal-support-for-clean-energy.html

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Mike Jacobs works to expand the understanding and use of electric power storage systems to make the supply of electricity greener and more reliable. He has worked with utility regulators and system operators for 20 years to expand the energy supply. Mike introduced merchant transmission to power system operators with TransEnergieUS and led the creation of the Transmission Committee at the American Wind Energy Association. Mike worked with National Renewable Energy Lab in 2009-2010 as liaison between NREL and FERC. He has served on the technical review committees for wind integration studies in the Upper Midwest and New England, as well as renewable industry advocacy boards in the Southwest and Midwest and the board of the Northern Maine Independent System Administrator. Mike is now working to increase transmission for renewables with storage. His wind development work with First Wind in Hawaii includes two installed grid-connected battery storage systems. In addition, he is at work on a book about the history and politics of the energy industry.

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