In the wake of recent high-profile electric power failures, numerous policymakers and politicians have asserted an inherent tension between the aims of clean energy and grid reliability. One Texas regulator declared that the best response to the hundreds of deaths caused by last year’s blackouts was for the state never to build another wind turbine again—even though the failure to weatherize natural gas infrastructure has been diagnosed as the blackouts’ primary cause.
At the same time, large utilities such as Duke Energy have proposed major new investments in natural gas generation, citing the need for reliability.
These calls for new fossil fuel investments in the name of reliability are a dangerous distortion of reality. Numerous studies have confirmed the technical feasibility of rapidly transforming the grid to run predominantly on renewable energy at penetration levels of 80% or 90%. Moreover, it should be obvious by now—in a year when one in three Americans has personally experienced the effects of a natural disaster—that continuing to run the grid on fossil fuels is its own recipe for disaster.
In fact, much of the perceived tension between clean energy and reliability is a failure not of infrastructure, but of law and governance. The U.S. system for regulating electricity divides responsibility among too many players, assigns too many overlapping or competing tasks, and creates too many distorted incentives.
Across numerous issues from reliability regulation, to electricity markets, to transmission planning and financing, it is a siloed legal system in need of greater integration and coordination.
Our siloed system prevents us from achieving the dual imperatives of reliability and clean energy. The North American Electric Reliability Corporation (NERC), a not-for-profit composed largely of individuals from the energy industry, has primary responsibility for drafting reliability standards for the industry. This structure, while incorporating important expertise, creates a natural tendency toward rules that do not create major expenses for industry members.
Thus, although NERC and numerous other agencies have amassed evidence for decades of the importance of weatherization for preventing blackouts and saving lives, the agency until 2021 continued to make weatherization recommended, rather than required, for all plants.
Nor has NERC sufficiently considered the potential reliability gains of investment in clean microgrids or other emerging technologies, as compared to measures that shore up fossil-fuel infrastructure.
Transmission and Electricity Markets
Meanwhile, it seems like transmission grid expansion should be a win-win for utilities and clean energy. What the country needs most is long-distance, high-voltage transmission lines, capable of carrying power from wind- and solar-rich regions to population centers.
It has been maddeningly difficult to get these lines built, again because of governance silos: Utilities prefer to finance smaller lines exclusively in their own territories; states maintain control over transmission line siting and have used that power to block lines that provide regional benefits; and regional grid operators have erected methodological and financial obstacles to cross-regional cooperation that might force them to pay for upgrades in other regions.
Similar tensions have pervaded regional electricity markets. In several markets, generators have successfully pushed to amend participation rules to exclude renewable energy resources and emerging resources like energy efficiency, storage, and demand response. That might be rational from a self-preservation viewpoint, since new entrants erode incumbent profits.
From the viewpoint of states trying to achieve clean energy goals, however, or from climate science itself, it is irrational and inefficient. Indeed, several states have threatened to pull their utilities out of regional markets that are undermining state public policy goals.
Breaking Down the Silos
To its credit, the Federal Energy Regulatory Commission (FERC) has taken steps to break down these silos. In the past year, the agency has begun to reform electricity market rules that punish renewables and convened a joint federal-state task force on electric transmission.
Congress also seems motivated to improve electricity governance: in addition to providing $65 billion in grid-related funding in the recently passed Infrastructure Investment and Jobs Act, Congress also enhanced FERC’s authority to override state vetoes of important national transmission lines and created new authority for the Department of Energy to support such lines.
However, both more legal muscle and more creativity are necessary. A focus on reforms that would break down governance silos to ensure a more collaborative effort toward achieving these twin aims also is needed.
For transmission, a national planning authority is an obvious answer to the parochialism plaguing both utilities and states.
For regional electricity markets, FERC needs to ensure that electricity market design maximizes competition among all resources, while accommodating states’ clean energy goals.
For reliability, we need reforms that force NERC to embrace both the reliability challenges and opportunities presented by renewable energy investments.
Across all of these areas, reformers must keep in mind that rethinking the structure of who has power to make rules—and not just the substance of rules themselves—will be critical to an enduring commitment to grid transformation.
We all want our lights to stay on through the mounting range of disasters that climate change is already producing. But to let reliability concerns be used as a smokescreen for self-motivated opposition to clean energy is misguided. A clean, reliable, affordable grid is absolutely possible—as soon as we reform our governing institutions to make them deliver it for us.
This article does not necessarily reflect the opinion of The Bureau of National Affairs, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.
Hannah Wiseman is a professor at Penn State Law, the Wilson Faculty Fellow in the College of Earth and Mineral Sciences, and Institutes of Energy and the Environment co-funded faculty member.
Alexandra B. Klass is a Distinguished McKnight University Professor at the University of Minnesota Law School where she teaches and writes primarily in the areas of energy law, natural resources law, and environmental law.
Shelley Welton is an associate professor at the University of South Carolina School of Law and the incoming Presidential Distinguished Professor of Law and Energy Policy at the University of Pennsylvania.
Josh Macey is an assistant professor of law at the University of Chicago Law School, where he specializes in environmental law, energy law, bankruptcy, and the regulation of financial institutions.