On November 27, 2023, Troutman Pepper’s award-winning Energy Group published a white paper titled, Unlocking U.S. Transmission Upgrades – Are We On the Cusp of Real Progress?  The white paper offers perspectives from a range of transmission experts and examines the latest regulatory and legal changes that could lead to much-needed upgrades to the U.S. transmission grid.  Specifically, the report discusses why transmission grid upgrades are needed, identifies four main obstacles to upgrading the transmission system, provides solutions and benefits to overcoming these obstacles, and concludes with reasons for optimism for the future of the U.S. transmission system.

In identifying why transmission grid upgrades are needed, the report notes that delivering transmission upgrades is important to the U.S. achieving its long- and short-term renewable energy deployment goals.  The report provides four main benefits to unlocking new transmission projects across the United States.  First, new transmission projects will save customers money by relieving congestion.  As more generation and load come onto the electric grid, existing constraints become even more restrictive, making generation dispatch less efficient and costing consumers more money.  Transmission upgrades can help lead to significant consumer savings.  Second, a stronger transmission system will help the energy industry handle existing challenges posed by the changing climate and higher proportions of variable renewable generation in the energy mix.  Transmission upgrades can ultimately help play an important role in matching power supplies with demand.  Third, new transmission projects will deliver new renewable generation projects and support critical investment and job growth—particularly in remote areas where current transmission capacity is unreliable and costly.  Fourth, as policymakers continue to make decarbonization a priority, new transmission projects are critical to realizing future energy goals.

Next, the report identifies planning, permitting, practicalities, and paying for transmission upgrades as major obstacles to U.S. transmission upgrades.  With respect to planning, the report notes that long interconnection queues present significant challenges for both entities developing generation projects and transmission planners.  Specifically, the report highlights the issue of long interconnection queues, which are six times longer than in 2014 and contain 60% more capacity than total U.S. power generating capacity.  For permitting, the report highlights that securing permits is the most significant obstacle to grid upgrades.  A common issue is the reluctance of landowners to accept new projects on their land, as many people do not want transmission lines near their property.  Institutional challenges also hinder the process, especially for projects that cross state borders and involve multiple layers of government.  Next, the report identifies two practical obstacles to U.S. grid upgrades: shortages of skilled workers and shortages of essential equipment.  The report provides that external consultancies could help expedite the transmission permitting process.  Lastly, the report highlights that transmission projects are capital-intensive and can increase customers’ energy bills in the short term.

To overcome these obstacles, the report points to legislative achievements that are already underway and implores greater collaboration between private landowners, companies, tribal groups, and state and federal governments.  With respect to planning, the report highlights that the Federal Energy Regulatory Commission (“FERC”) has already implemented Order No. 2023, which prioritizes generation projects that are commercially viable and shows little tolerance for developers clogging the queue with speculative projects.  This gives transmission planners greater certainty about the viability of the projects in the queue, and allows them to plan more effectively.  With respect to permitting, the report highlights that the federal government has been looking for ways to incrementally boost FERC’s leadership role in the permitting process to tackle interconnection issues.  For example, the Infrastructure and Jobs Act (“IIJA”) and the Inflation Reduction Act (“IRA”) have provided an avenue to move towards greater multi-agency coordination on permitting U.S. transmission projections, which has gained further support from policymakers on Capitol Hill and the Department of Energy (“DOE”) in recent years.  Further, policymakers have been floating a number of permitting reform proposals that will significantly enhance FERC’s capacity to take lead across state and federal permitting processes to deliver projects deemed to be in the national interest.  Streamlining the permitting process and assigning a single federal agency to lead the permitting process could significantly alleviate this burden.  With respect to practicalities, the report posits that policymakers involved in the planning and permitting process should be aware of these problems and strive to expedite processes to advance transmission projects more quickly.  To pay for transmission upgrades, the report highlights key provisions of the IIJA, the IRA, and initiatives undertaken by the DOE related to U.S. grid upgrades that help pay for transmission upgrades.  In turn, as renewable production costs decrease and customers benefit from a stronger transmission system, long term benefits will materialize.

The report concludes by acknowledging that the industry will continue to face challenges with interconnection and transmission issues.  However, there is optimism for significant improvement by 2030 as several programs, reforms, and increased coordination between state and federal regulators begin to materialize.

Contributors to this report are Chris Jones, Bill Derasmo, Judy Jagdmann, Fred Wilson, Adrienne Thompson, Andy Flavin, and Josh Combs.  A copy of the report can be found here.  For additional energy insights, visit Troutman Pepper’s Energy Law Insights webpage here.