The Site Act and the Role of FERC

The US is nowhere close to being able to build the amount of long-distance power lines it will need for a clean energy transition. In this episode, electricity transmission expert Liza Reed breaks down the many problems with the current dysfunctional system, and what it will take to build up the needed infrastructure.

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Text transcript:

David Roberts

Electricity transmission has been having a moment lately, getting more attention from analysts and policymakers than it has in … well, at least in my lifetime. 

There's good reason for this: every single model of deep decarbonization shows that, to get there, the US will need lots, lots more long-distance high-voltage power lines, to carry renewable energy from the remote areas where it is concentrated to the urban load centers where it is needed. 

The problem is, the current system for planning and building those long-distance power lines is utterly dysfunctional, at every level, which means they aren't getting built. The US will not decarbonize on time or on budget unless it can figure this out.

It's a thorny, complicated subject — not just understanding all the flaws in the current process, but figuring out how to move forward with solutions. Loyal Volts subscribers will recall that I wrote a five-part series on these issues earlier this year, but if you're looking for a more compact & polished version, I highly recommend a newly released report, jointly produced by the Niskanen Center & the Clean Air Task Force, called, "How are we going to build all that clean energy infrastructure?" 

The report emerged from a workshop held with a variety of professionals across the industry and serves as a plain-language summary of the problems facing transmission in the US today and the candidate solutions. It's remarkably readable, even for non-nerds — I recommend checking it out.

To walk through those problems and possible solutions, I'm excited to have as my guest today Liza Reed, the Research Manager for Low Carbon Technology Policy at Niskanen. Reed completed and defended a dissertation on these issues just a few years ago and has been a crucial help to me in parsing through them, so I'm thrilled she's joining me today, so that Volts listeners can also benefit. Liza Reed, welcome to Volts.

Liza Reed

Thank you so much. It's wonderful to be here.

David Roberts

So the Niskanen Center has just come out with this report about transmission and its many challenges. So I thought the best way to structure the conversation would be to kind of walk through the report a little bit. But first, sort of by way of context, tell us, what is the transmission challenge in the United States? What are the decarbonization models telling us about what we need?

Liza Reed

The challenge is that we don't have enough transmission and that we need more transmission.

David Roberts

Pretty simple.

Liza Reed

Yep, it's that simple.

Liza Reed

And we don't have the right mechanisms in place to get the kind of transmission that we need.

David Roberts

But when we say need more relative to what we have, are we talking like a 20% increase, doubling, tripling? Give us a ballpark figure.

Liza Reed

There's sort of a range of estimates that come out of reports, but generally in the double to triple in the capacity is what we're seeing coming out of these decarbonization reports. So that's in the gigawatt miles, is sort of the metric.

David Roberts

And we're not building anywhere close to that pace.

Liza Reed

Exactly. Not at the speed we need and particularly not at the type that we need because transmission is being built. And this is one of the challenges when we talk about this decarbonization challenge, is that there is transmission being built. But transmission is generally defined as anything over 100 kilovolts. And the type of transmission that is going to move a lot of power quickly and over long distances is 500 kilovolts on that high range. So there's a ton of gigawatt miles being built between 100 kilovolts and sort of 345 kilovolts compared to what we're getting at these higher voltages that can transfer a lot more power, go a lot longer distances that provide a different kind of resilience and access to different power in different geographic regions.

David Roberts

Right. So the ones that are getting built are generally, I guess local is not quite the right word, but sort of like a utility will build a line within its territory to connect or strengthen two of it's —

Liza Reed

Exactly.

David Roberts

And what we need are these longer ones between territories, between regions, possibly national. So we're nowhere close on track. And so let's go through — the way you structure the report is around the five P's of transmission. So I thought we would walk through the P's. And what's going wrong with them currently. The first one is planning. So as I understand it, basically utilities have their own planning processes and that's basically what they use to decide on transmission.

But then there are other entities also planning and then there are other entities jumping into the system without planning at all. So tell us what's going on with planning right now.

Liza Reed

Yeah, absolutely.

Liza Reed

So there is planning at different scales. You're correct. And the largest scale on which planning occurs is within what's called a regional transmission organization. An RTO or an ISO. An Independent System operator.

David Roberts

Yeah. Let me pause you there because just in case there are a few people listening who are not yet total energy nerds, we need to start with a quick distinction. There are two sort of general kinds of utility areas. One is with the fully vertically integrated utility is what it's called. They own the generation, the transmission, the interface with the households. They own everything. And then there are these other areas which I think cover about two thirds of customers where the generation has been broken off into an independent business. The utilities are just there to deliver the power to the households.

And then you have these regional transmission organizations that kind of oversee these areas and try to coordinate them. That's a little bit of basic boring background for anybody who's not clued into that.

Liza Reed

That's absolutely perfect. And they are member organizations, which I think is also important. Right. They are organizations of utilities for the most part.

David Roberts

Right. As opposed to outside authorities that might have contrary interests or be able to impose contrary interests.

Liza Reed

Right. And they're not building it themselves. Right. I mean, they are bringing those stakeholders together in pursuit of particular goals, which are largely established by FERC about what these regional RTOs or ISOs should be doing. But they are member organizations, right. So they are conveners and collaborators and they are managing this transmission planning process. But at the end of the day, it is still those members and those utilities who have to build the transmission.

David Roberts

So is it the case that then the RTO brings all its member utilities together and makes something like a regional transmission plan, but then all the individual utilities also have their individual plans?

Liza Reed

I think that's right. It's sort of challenging when we talk about transmission. And why I say I think that's right is that if you and I each put our finger on different points in the United States, the system would be different there.

David Roberts

All right.

Liza Reed

And I'm jumping ahead to the P for process.

David Roberts

It's the overriding P, so it applies to all of these.

Liza Reed

That's correct. That's correct, but right. For the most part that's true. And that's where what you mentioned earlier, these local reliability projects, which is often what they're called, that is often more of an internal to a utility approach. And then these larger planning approaches, again required by the Federal Energy Regulatory Commission are about how the utilities plan on how they work together and what they might need across the system. But that still has a boundary. Right. So we have utility boundaries. We have these RTO boundaries. And then inter-RTO planning or inter-ISO planning happens in theory and I mean technically happens in reality.

David Roberts

And it happens by the two RTOs getting together in a room somewhere.

Liza Reed

There was actually a great post just earlier this week about two RTOs. I believe it was Mid-Continent ISO, I believe it was MISO and PJM. And it's a single slide that says: Interregional planning approach. This year we decided we don't need anything. There's really nothing that we both need.

David Roberts

We're good.

Liza Reed

So we're moving on. But that's the problem. If you have to plan everything within your footprint and they do, right? They do all this planning within their footprint with their own set of metrics and their own priorities. Yeah, I can imagine that you get together and you're like, "Well, I figured myself out and you figured yourself out," right. Like you and your neighbor have a fence between your yards. You're not co-planting a tree.

David Roberts

Right. So you have planning taking place at regional transmission organizations, which in theory should at least get you to regional planning. Right. I mean, at least it's bigger than a single utility territory, but it doesn't seem to actually result in regional lines.

Liza Reed

Because there's a lot of barriers to regional planning and there's the technical aspect of regional planning and then there's the what do we call it implementation aspect where the entire electricity system is an engineering solution. Right? And one of the most important facets, I think, of engineering is that there's lots of ways to get to the end state that you need. And so you can do it with large interregional lines. Interutility lines. I mean, this is, again, what the studies have shown that is currently projected to be the least expensive way to reach the ends that we need. There are more expensive ways to reach the ends that we need. And some of those are more attractive to certain stakeholders because there's an onus of control there. There's a clarity. Right.

I know that every dollar I invest is resulting in benefits to my system. And when we have to share a project, do I feel like I'm getting proportionally the benefits that I'm paying for? And that's where a lot of these lines fall apart before they can be completed or even before the plan can be finished, right. You look at the system, you identify potential areas, but then you also identify potential solutions. And then you've got to pick amongst those solutions about what member organizations are interested in. And it can be very difficult to get these projects agreed upon if member entities feel like they have to pay for something that they're not getting a benefit from.

David Roberts

Right. In a curveball and all this. There are what are called merchant lines, which are not planned or built by utilities, but are being planned and built by sort of external market participants, which then aren't part of the utility planning or the RTO planning. As I understand it, they just kind of get bolted on if they can pass the test. So how does that work? I guess two questions here, sort of for my own background. What sort of percentage of transmission lines are merchant lines? Like, how big of a presence are independent transmission builders in this whole process?

And then B, like, how do they fit in the planning?

Liza Reed

Yeah, that's a great question. And when we think about these independent lines that aren't part of the process, because there are some transmission organizations, there are some developers that build transmission, but they are within the process. It's part of sort of a competitive bidding process. But outside of the process of that traditional planning process, merchant lines are an incredibly small, I mean, approaching zero.

David Roberts

Oh, really?

Liza Reed

Well, because it's so difficult to get these lines built, right? Because of all of these barriers to being outside of the process. You said bolted on. That's actually quite a barrier. Getting bolted onto the system is no small piece of the puzzle.

David Roberts

Right? So you got planning. The term you used in the report is balkanized. You got sort of multiple entities planning. It's sort of like two problems. One, there's a bunch of different entities planning. But then two, there's no sort of integrative process that brings all these plans together and makes sense of them. So you end up with balkanized planning, but then also balkanized building. You just get these sort of little regional or even like local lines, but very few of the longer ones we need.

Liza Reed

Right. And the boundaries are also a challenge because utility boundaries often do not fall within a state. Right. They are often crossing state lines. And so the utility's perspective versus the state regulator's perspective on what the benefits are —

David Roberts

Right. So you could see something that would be benefiting a state but not the utility, and vice versa in some cases. So planning is a mess. That's the first P. The second P is even more of a mess. It's permitting. And then here also, this is like I struggle to describe this to people because it's so crazy, but basically any jurisdiction you cross over, or any entity you cross over, if you're proposing building a line, you need to get a permit. And that can be true at the state level, the county level, there could be private landowners level.

There's just a million levels of permits. So describe the thicket to us. Sort of like who all do I have to get a permit from if I want to go across like three states and whatever, 100 theoretically privately owned pieces of land.

Liza Reed

So in some states it's at the state level. You go to the State Commission and they give you the certificate and has the Siting Board and those together, the certificate of CPCN is the Certificate of Public Convenience and Necessity. And then the Siting is what determines the line. Right. The Siting is where the line is actually going to go. The certificate is essentially the right to build and with the certificate comes the ability to exercise eminent domain if necessary. Right. If that route that is selected, if the developer is not able to enter into private agreements with the landowners along that route, then they can exercise eminent domain through holding this certificate from —

And just pausing here, let's explain imminent domain. It basically just means you can take it the land and they can't stop you, right? Is it that simple?

Just compensation. Right. You have to give them some just compensation, but the land can be taken by the state for this purpose.

David Roberts

But then there are other entities involved in permitting it in other states.

Liza Reed

So state level is the best case scenario. And even that is if every state you cross needs to — so your best case scenario right now is that you are crossing two states where both states have state level siting and state level permitting. And both states are getting enough benefit from this line that it passes their metrics for allowing the line to be built.

David Roberts

Right. Because each of them are thinking, when they're making their permitting decision, are just thinking about what does it do for our state? Statutorily, I think they're sort of often that confined to thinking about specifically what does this do for our state?

Liza Reed

Exactly. And there are a few states where regional interests is actually in the statute, but few. And how do you show that? Right. Like, what's the metric for demonstrating that?

David Roberts

Yeah. Is there anything like a common — I mean, when these states are making decisions about does this transmission line benefit our state enough to warrant a permit? If I'm a line developer, do I know what to expect, or are there common criteria for what counts as benefit or metrics or anything like that?

Liza Reed

There are not. Generally speaking, you expect reliability to be a metric and cost to be a metric, where reliability is actually explicitly defined by the North American Electric Reliability. Oh, shoot, I forget the C.

David Roberts

It's probably a council or a commission. It's one of those. Definitely one of those.

Liza Reed

So reliability is often defined by NERC, and so that is a common metric. Are we adding reliability to the system? But then there's a cost question as well. And again, depending on what state you're in or how the process goes and depending on what the utility-state relationship is, how that cost gets considered is very interesting, whether it gets evaluated at the front end or evaluated at the back end, where some utilities rely on cost recovery from their state commissions. Right. So you put in the capital expenditure and then after the fact do a rate case and say, here's the money that we spent, here's how we benefited our rate payers and our consumers, but here's why we now need to raise the rate to pay ourselves back for this risk that we took in this capital expenditure.

David Roberts

Right.

Liza Reed

But a lot of times those conversations actually get pulled forward too. Right. Though technically it's not approving the rate case before it gets built. There's still that discussion of, well, what are the benefits? Is this going to lower cost? Who is it going to lower cost for?

David Roberts

Right. And one thing you point out in the report is if you want to build a really long line, you're going to, at least in some cases, be crossing a state where you're just crossing the state, there's not direct benefit to the state other than the sort of larger regional or national benefit of having this line. And so do we have examples of states sort of permitting lines that are like that that just come through them, or is that just like, "You're screwed if you need a state to let you do that?"

Liza Reed

Well, this is one of the challenges that high voltage direct current has because it is more expensive to build what's called a tap off station, right, or a substation that's more expensive in HVDC systems. And so you're more likely to try to get by with just a cut through. If you have an AC line, a substation is proportionally pretty low cost, so you can just tap off some power.

David Roberts

Right. So an AC line you can dump power into the state and then create that benefit. But with a high voltage direct current line, creating an off ramp where you can dump some of your energy off the line into that state is actually a big chunk of capital cost.

Liza Reed

Indeed, that off ramp can even be important for meeting the state guidelines to even be in the conversation in the first place. One of the Clean Line — so Clean Line Energy Partners was trying to develop a couple of different high voltage direct current lines. And one of the issues that they ran into was that in one of the states, they were trying to cut through initially. But if transmission lines are being built in the state, they have to be approved by the state commission. But the state commission only recognizes utilities that serve the state as an eligible entity to come before them to build transmission. Right.

David Roberts

It's a catch 22.

Liza Reed

Sure. Not exactly a catch 22. Right. But yes, it's tricky for sure and certainly more tricky for HVDC.

David Roberts

Is that what ended up killing some of those Clean Line projects, the cut through states?

Liza Reed

I find it difficult to point to one thing that killed the Clean Line projects because often those projects are great examples of just how fraught it is. Right.

David Roberts

Right.

Liza Reed

So many pieces that slow you down. There's patient capital and then there's "I don't even know what we're asking for." When you're ten years down the road and you haven't broken ground on anything.

David Roberts

Yeah. No capital is that patient. What is the alternative? What are the other levels of permits that sometimes you have to deal with?

Liza Reed

In Georgia, siting goes county by county.

David Roberts

Yikes.

Liza Reed

Yeah.

David Roberts

So that means you're literally like, what does it mean to get a permit from a county? Are you sending a representative to a county board? Or how big of a hassle is a process for getting a county?

Liza Reed

Likely that I mean, you are putting this case before the county and there's so much more uncertainty about where the line can go. Right. Because if there's objection in one county that requires a line to be moved and where it crosses a county line now might impact that siting opportunity in the adjacent county.

David Roberts

Right. And if you think if the state is sort of insular and only looking at its own interests, I imagine that's doubly so for a county. Do you have to prove that you're going to benefit each county you go through? I'm not even sure how that would work.

Liza Reed

I'll be honest. I don't know either. We would have to talk to a developer who's gone through the process to know what that looks like.

David Roberts

And then also, aren't private landowners, don't they get involved somehow around these processes?

Liza Reed

Sure. So if your land is being potentially taken under eminent domain, if you can't come to an agreement with the developer on a private agreement on the access or use of your land or agreement on an easement or purchase, but the siting is approved. Then there's the eminent domain process. Prior to that, private landowners and community members and local interests get involved at the point of siting decision at community meetings with siting boards regarding their concerns about the line, for their property values, their concerns about the use of the line. Some of them are quite legitimate.

This line is you've misunderstood where the well is on my property and you can't be this close to the well, right. Or this is cutting through my farm and if we can move it over here to the edge of my farm, this is better for everyone involved. Others are I've read a number of dockets and inevitably people are concerned about being close to high voltage power lines.

David Roberts

Oh, it's going to mess up their 5G chips in their head, or stuff like that. Are there similar —

Liza Reed

Yes. There are a host of, I believe, firmly held but inaccurate beliefs about the health impacts. Now, typically those do not sway a in fact, I have never seen those sway a docket in front of a public commission. But all of these sort of different voices are coming to the fore about where this line should go, if it should go there at all. Often arguments about where the power is coming from, where the power is going, shouldn't we all do this locally? I have a lot of sympathy for that perspective because I think one thing that transmission —

Transmission is not in the common lexicon when everybody's talking about energy, right. And as community members, you think about local solar and rooftop solar and those are the things that are relevant often to individual landowners and the recognition that those are part of the solution but cannot serve the entire need, that's a hard sell in many cases.

David Roberts

Right. And if you're a developer trying to plow across whatever multiple states, multiple counties, multiple private pieces of land, that means educating each one of those individual entities about that, which I imagine can be time consuming, exhausting. So that's the second P permitting, which is, if we could summarize the problem, we're talking about interregional high voltage, long distance lines that would benefit the nation, but there's no national permitting. All the entities that are permitting are looking at their own narrower interests and just are creating basically one hurdle after another.

Liza Reed

Exactly.

David Roberts

And then the third P is paying, which is always, of course, a problem in any sort of project development of any kind. But tell us a little bit about how these things get paid for. It's somewhat different if you're a vertically integrated utility; obviously, you just build the line and then charge your ratepayers to pay for it. And that at least seems straightforward. But then once again, once you are going between utilities or between states, that's where things get complicated. How does that work?

Liza Reed

So the challenge here in the business is called cost allocation. That's the difficulty and it's sort of self-defining. Cost allocation is how you are allocating costs. And FERC requires that costs be allocated among beneficiaries. And non-beneficiaries are not forced to pay to participate in allocating the cost for a line that does not do them any benefit. So there are two challenges here, right? On the one hand, you've got to decide how to share the costs among the people who are beneficiaries, but you also have to agree on how to define the beneficiaries.

David Roberts

Yeah, I was going to ask who counts as a beneficiary and who decides that?

Liza Reed

Right. Great question. And everybody has a different answer, right? Every RTO has a different answer. And then utilities and developers have different perspectives. Is a generator a beneficiary of transmission? Because without transmission, they're not getting their power onto the grid, right. Is the next-door utility — maybe that substation isn't in their footprint, but what level of reliability improvement do they get before it becomes something that they should participate in supporting?

David Roberts

Right.

Liza Reed

The geographic footprint of these systems is actually quite large because for the most part, our electricity system is integrated. It is all touching each other, and so that power is flowing in lots of places.

David Roberts

Right. And you get into these sort of like second-order benefits, third-order benefits in some attenuated sense, everyone in the country benefits from easing regional congestion and stuff like that and just reducing the cost of wholesale power. Those benefits cascade out.

Liza Reed

And they're not static.

David Roberts

Right.

Liza Reed

When you add a new generation somewhere on the system, the benefit of that transmission line to the system is now altered. When you add another transmission line somewhere else, the benefit of an earlier transmission line is altered.

David Roberts

Right. And so once you make this determination about cost allocation and who pays for what, it's fixed. Can you go back and revise it when things like that happen and kind of change the equation?

Liza Reed

So my understanding is that different RTOs have different approaches to this.

David Roberts

That seems like a common theme here.

Liza Reed

That is correct. We haven't even discussed that. Not the entire country is covered by RTOs, right. Most of the west is not even covered by an RTO and they have a completely different system that please don't ask me about. But in some of them, there is sort of a medium-term cost allocation and then a revisiting. I'm not familiar enough to dive into the details of how that process is worked out and managed, but that's certainly another financial risk for everyone.

David Roberts

So just kind of summarizing. The basic problem here is FERC has sort of said you got to allocate costs among all the beneficiaries, even if we're talking multiple utilities, multiple states, but it has not specified in any very concrete way what the hell that means or who counts as a beneficiary or how you go through that process of cost allocation. So everyone's kind of winging it on their own. And often when multiple utilities have to get together and figure these things out, it just kind of grinds out in disagreements and no one can come to an agreement.

And so once again, you see the incentives pushing utilities to just build stuff within their own territory. So paying is our third P, our third mess. It's worth saying those are sort of the traditional three P's that people have thought about planning, permitting and paying. You add a couple more. One is participation. And I have some serious questions about this that I want to get to later when we start talking about solutions. But just tell me sort of like, are there any rules and guidelines now for participation or what passes as participation now? Or what exactly do you mean by participation?

Liza Reed

Right. So I'm going to pause here, Dave. I'm not sure how to answer this question. I'll come up with an answer shortly, but I'm about to not make friends with the answer to this question.

David Roberts

Good. It's a podcast about transmission. We need some controversy.

Liza Reed

All right. Okay, here we go: Participation. If you talk to folks in the business in transmission, many of them will tell you that participation is already part of this, that there's participation in transmission planning, that there's participation in permitting. And it is often the permitting where people talk about participation because they think about those community meetings and the landowner engagement and things like that. The planning process also requires stakeholder engagement. They are not connected. Right. The planning and the permitting are two very different processes, as we've already discussed, at very different scales. The stakeholders are not consistent, and as often is the case, who gets to decide who a stakeholder is?

David Roberts

Once again.

Liza Reed

And there's arguments for, I think a lot of strong arguments for broadening who is considered a stakeholder, and that participation should be inclusive and consistent throughout. If you are bringing in someone five years down the line when it's just time to take their land or a community or even local governments, right. The later you bring anyone into the process, the more they feel they are being strong-armed or likely are being strong-armed.

David Roberts

Right.

Liza Reed

And I think it's important to note here that this report is not suggesting that there is going to be some consensus view that just by talking to more people, suddenly everyone's going to agree on where a transmission line is going to go. But it does say, let's really be frank, let's take an outside perspective on, particularly at the scale that we need for decarbonization on what these impacts are going to be and if we need to reach scale and speed and we already know what some of the pushback is going to be. What are ways that you include people, include local governments, include local authorities, include all of these impacted groups more actively and clearly in a process — which is our last P, I keep running into process — instead of this. Again, it's not even bifurcated, right? Because it's more than two.

David Roberts

Yeah, whatever. I don't know what the word is. Multipurcated.

Liza Reed

Yeah, there we go.

David Roberts

So that's participation. When we talk about solutions, I want to come back to this because it vexes me, but let's just get through the fifth P, which is this process which is sort of meant as like a meta P gathering up the other ones. And the point of the report here on this fifth P on process is just that there really isn't one. That the process is so fragmented and so different from place to place, even sometimes within places, that it makes for an environment where people trying to develop power lines don't and really can't know what to expect or how long it might take or what they might need or how they should go about it.

Is there more to say about process other than like, there should be one?

Liza Reed

There should be one. Well, it's clarity so that folks enter the system, right? So that you get private capital interested in it because it's not even high risk. It's just wild uncertainty because capital is not necessarily afraid of high risk, right? You can find high-risk capital, but risk and uncertainty are very different issues. But then the other thing about process is that it can create scale. If nothing is ever repeatable, then you can never get to scale.

David Roberts

Right. So at the very least, you want a process where people endeavoring to enter it can have some sense of what's going to happen, what the steps are, right? Like what are the criteria for getting through it.

Liza Reed

Because you can also get better.

Right. So those are the five P's. And when you talk about this is a mess, a mess at multiple levels, a mess at basically every stage. I mean, I think people listening by now should have gotten the basic idea that if you're trying to build a transmission line, you're in a foggy planning process and then a foggy multi-part capricious permitting process, and then all the while you're trying to pay for it. And the people you're trying to get to pay for it don't necessarily agree that they're getting benefits or don't have the patience to sit around waiting for the other parts of the process to work out.

David Roberts

So it's really a wonder that any of these things get built at all. And they really kind of don't. As you said at the beginning, this is why they're not getting built even though we desperately need them. So we got to talk about solutions to these things. The way the report sort of frames solutions is solutions that are more on the kind of private sector, private actor side of the spectrum versus public. And I wanted to sort of interrogate that, get into that a little bit, but just let's go through some of the private, sort of more private sector-oriented solutions that come up here because I have questions about some of them.

Like for instance, you say permitting reforms. I guess this would be a good place to bring up my question about participation, I guess because this is sort of framing the rest of the discussion. Because what I've heard so far is there's just so many steps and so much of a mess and so many delays that it's killing all these projects. When I hear participation, what that brings to mind for me is more process, more delays, more difficulties. Because what I have in my head is I'm really into urbanism and all these sort of density issues and all this kind of thing.

And when you talk to urbanists about participation, what they hear is all these siting boards and historical preservation boards and all this just endless, endless delays. And so two things about participation from that angle one is just more delay and more time and more difficulty. But two, it's also the people who participate in the participation venues are not representative of the full range of beneficiaries. You know what I mean? Like if you're trying to build an apartment building near a single-family neighborhood, it's the homeowners that end up participating in the process and they all want to block it.

And the people who might benefit from the apartment building don't exist yet or don't know about it yet and can't show up at these meetings. So participation is just very fraught. So I guess I wonder when you talk about a lot of these solutions, like, for instance, permitting reform, that sounds to me like a gentle way of saying overriding some of these local barriers, basically just being able to come in and say no. Like, enough discussion. We're doing this. Which pulls in the opposite way, opposite direction of more participation. Do you know what I'm saying? So I guess I wonder how you reconcile this in your head, more participation versus the need for speed and cutting through some of these things.

Liza Reed

Absolutely. What you've described is a pretty common perspective that folks have about what participation means. And I'll counter that participation doesn't mean everybody gets a vote. We are not sending every transmission line to the ballot box. Right? It is just about when we pull out participation to be separate from permitting and separate from planning. It is about ensuring that consistency of communication, giving people information, also identifying who is encouraged to participate. Right. In the examples that you are giving people who have the time and financial resources to participate —

David Roberts

Right

Liza Reed

are the people who are participating. Right. And so being clear on who should be involved and what it takes to get those folks involved and that includes right, that's not just landowners within states, that's also tribes. Right. And there's lots of different stakeholders here that should be considered. The other piece, I think what's helpful is I'll give you an example. I'll give you a permitting example that's been proposed that I think speaks to this without just sounding like some magical dream. We'll just allow more people a voice, and all of a sudden it'll work out.

David Roberts

And it will be faster.

Liza Reed

Right? It'll be fine. Just trust us. So Senator Whitehouse introduced what's called the SITE Act. It's streamlining interstate transmission of electricity. Oh, gosh, I don't remember the date. I think it was two weeks ago. So, Senator Whitehouse and Representative Quigley both introduced the SITE Act to their respective bodies. And the Site Act proposes that the Federal Energy Regulatory Commission, that FERC, have siting authority on lines that touch two states or more and have a thousand megawatts or more of capacity. So, on the one hand, this speaks to what you were saying about overriding. Now, I would argue it is not overriding.

David Roberts

Specifically that's taking permitting authority away from states and giving it to FERC.

Liza Reed

I would specify that it is identifying that authority, which is appropriate for the federal government to have because it is a federal benefit.

David Roberts

Right.

Liza Reed

It is aggregating benefits across diffuse benefits.

David Roberts

Yeah, totally. Totally.

Liza Reed

So is it overriding or is it reassessing.

David Roberts

Appropriately identifying, let's say.

Liza Reed

Discuss in the comments. So that's the one piece. But the other part of that bill is that it says folks with — often landowners impacted or it's 100 foot within the right of way. So it expands it. It says more people can consider themselves impacted than just within 100ft of this right of way. It's a wider width of impact. It also has specifics on how much notice they get. Right. What the process is for being heard, and that they get essentially their day in court. Right. And that's the piece that is really informed by some of the efforts we've seen in response to pipelines under the National Gas Act. And this is — so this is, I think, a helpful example of how you can create solutions that streamline while still including and even broadening participation.

David Roberts

Ah. So FERC gets the permitting power under the bill. FERC would get the permitting power. But FERC would also be obliged by statute to have a sort of formal participation process running up to that.

Liza Reed

Right. So under the Natural Gas Act, when natural gas lines are permitted, landowners do have to get notice. You always have to give landowners notice before you condemn their land, right. Through eminent domain.

David Roberts

Oh, yeah. Let's just pause and note, just in case people don't remember this or know this, but when it comes to natural gas pipelines, unlike with transmission lines, FERC already has that authority. FERC has the authority to use imminent domain and override, sort of —

Liza Reed

That's correct.

David Roberts

states and locals. But there is a participation process on that end, too.

Liza Reed

Well, it would be nice if there was.

David Roberts

There should be.

Liza Reed

It's not statutorily defined. And so, FERC tells the developers to give notice to the landowners. I'm sure you can imagine that developers aren't running out the door to tell people that this is happening and FERC doesn't follow up to ensure that it happened. So, one of the things that the SITE Act proposes is FERC can delegate that responsibility to someone, but it cannot be someone whose financial interest is getting that pipeline built.

David Roberts

Ah, right. And I suppose the positive gloss on this would be to say by bringing in people earlier, by creating this sort of formal system where people know how to participate and can participate earlier, you might forestall some of these objections from landowners or counties and thereby speed things up.

Liza Reed

One of the things discussed in the report is that participation is a two-way conversation, right. It's not just listening to people complain and saying, "Yes, but the models say that the line has to go here, I'm sorry, you don't have an electrical engineering degree and ten years of power systems experience." It is saying, "What do we need? What will support this community? What do the local authorities need? What can we work out to make this work?" And that goes back to process, too, right.

Like creating this as a relationship and as replicable and as sort of establishing standards, potentially. Right. That's one of the things that's proposed, is do you establish sort of minimum standards on not only what participation looks like from a timing perspective, but what benefits can be expected to communities who are hosting a transmission line?

David Roberts

Right. And how does this tie into consent-based siting, which is another sort of private sector-ish solution that's been thrown out?

Liza Reed

Sure. So, consent-based siting is an example of this. I don't know if it would work for transmission, I'll be honest, but it's an interesting thing to think about, where consent-based siting is usually discussed in the form of nuclear power plants or nuclear waste, where the community comes to an agreement on hosting a waste facility, for example. But they have a strong voice in setting those rules, right. On what they are willing to accept, on what it means for safety, on what it means for job training, on what it means for all those different pieces.

David Roberts

Right. And what about regional — this is a mouthful — regional transmission anchored economic development clusters. Somebody's going to have to work out a good acronym for that one.

Liza Reed

Yeah. So this is an example of how we think about what rural economic development actually means. Right. And one of the points we make in this paper is if we want to pursue some of these ideas, we've got to get past this five-word phrase or this acronym that we can fit on a slide. What does that mean? Right. If you're willing to create, if you want to make this anchor in this cluster, does that mean that other state or federal entities are also participating beyond electricity, does it become an investment and what type of investment and how does that become sustained so that we're actually creating long-term economic development.

David Roberts

Right. So that would be sort of transmission as part of a larger vision of how to spark economic development in these particular regions. And so then we look on the public side, the public sector side solutions. It's worth saying that there have been attempts to give Doe and FERC more power over this stuff, more role in the planning to encourage regional planning, but they haven't really gone anywhere. So why did those previous efforts, if you look back at sort of FERC rulings, there's like a dozen that are saying in one way or another, please do some regional planning, but it never seems to work.

So why have these sort of public sector solutions not taken off yet? Why aren't they getting any traction?

Liza Reed

Well, they're pretty tepid, as you said, right. Interregional transmission planning should happen. And so we get a slide that says, well, we thought about it, right. We talked about it and that's not going to work for us this year. Thank you for trying. So that's one of the issues. And there's also this authority question. Who has the authority? And currently the answer is nobody. Who has the authority to actually compel certain actions to be taken. RTOs and ISOs are member organizations. They are voluntary member organizations. Right. And I'm not saying that they should be required membership organizations, but that is one of the discussions that folks are having about RTOs and ISOs, right.

And what makes things compelling?

David Roberts

And just to pause there, I mean the reason for that is RTOs are hesitant to make decisions that overrule or override any of their utility members because the utility members always have the option of just saying, "Well, screw you, we're not going to be part of the RTO anymore." Right. So it's sort of like a definition of capture, really.

Liza Reed

That is a consideration. I mean, there's a counterpoint to that that says maybe it's not that easy to leave an RTO or an ISO, right. If you are currently in cost allocation contracts, you might not be able to extricate yourself from them. So now you are paying for something you're not even getting a benefit from. But that is certainly a concern, right? Is that impacting things?

David Roberts

Easy to threaten to do it.

Liza Reed

For sure.

David Roberts

So I don't want to keep you forever. So I want to kind of get to the final thing I want to grapple with. Toward the end of the report, you say here are sort of two sets of recommendations. One that focuses more on the private sector and one that focuses more on the public sector. The one that focuses on the private sector is sort of tweak this incentive and tweak this process. You're trying to change the incentive structure to channel private activity more profitably and honestly, when I read through that recommendation, my reaction was, this just sounds like a bunch of incremental, marginal muddle.

It just does not speak to me about the sort of speed and clarity we need. And then, so the other set of recommendations are more focused on the public sector. And that's where you discuss the creation of a National Transmission Authority, or NTA, which would take hold of this whole thing about interregional lines. About national lines. I mean, we're talking about interregional lines, but there's all these proposals also in the background for a macro grid, for a whole regional like a national grid, not just interregional, but a grid that sort of sprawls across the entire nation, which, given our current process, just seems like an impossible dream.

So you create this National Transmission Authority and you give it like you're doing the planning, you're running the participation process. You have authority, eminent domain authority, to override in some cases when you need to. It just seems I mean, these are obviously my personal policy biases coming out here, but it just seems like if you need something so big and so fast and it's so clear what you need, wouldn't it be better just to nationalize this and grab hold of it and just have one accountable entity that you can use to cut through this Gordian knot?

I mean, I'm asking you to reveal your own preferences here, but does that speak to you?

Liza Reed

I'm so excited to dive into this question, Dave, because I do think this is the meat of the report, and I'm kicking myself for spending so much time talking about other things. That reaction, I think, again, is pretty common because the National Transmission Authority is something clear, right? It is quite, as you said, it is different. It's like, oh, if this isn't working, let's do something different. And again, what the report is saying is we are sketching out a possibility, but the next part of the conversation is, okay, what is that? How are you going to do that?

How many policies do you need? How are you writing those policies? Because you cannot build that accidentally. You have to build that intentionally.

David Roberts

Well, that's part of the beauty of it to me. Right. I mean, the system we've built now is we just backed into it piecemeal. It makes no sense. No one did it on purpose.

Liza Reed

The electrical engineer in me says it is a great engineering marvel that we back into it. That is amazing how some of the best engineering happens is you just figure out what you need. So a national transition authority is not easy to define. And I'm not saying we shouldn't try to pursue defining it. I actually think it's incredibly important to try to pursue fully defining what a solution is. Right. This whole report is about another P, which is paradigms, right? Are we going with a National Transmission Authority because people say it right? I'm sure you have heard about National Transmission Authority idea before, right?

This report couldn't have been the first time you heard it. People talk.

David Roberts

Well, yeah, I've been wanting to nationalize the electricity grid for a long time.

Liza Reed

Yeah. But we need to pursue what the implications of that are because electricity is interconnected in a way that the highway system is not.

David Roberts

Right.

Liza Reed

And a car crash in New York does not affect traffic in Texas. These are very big questions. Do we want to build a macro grid? Niskanen is a member of the Macro Grid Initiative. There are clear benefits to a macro grid. How do we design that macro grid? If we have the federal government create a National Transmission Authority today that is tasked with building a macro grid, how are we updating those plans to respond to the real challenges of building transmission lines, even under an NTA, how are we updating those plans to respond to how generation is being built in different places?

Right. We can't have a plan today and then finish it in 20 years, the entire system is going to look different. So you're asking a lot of the federal government and you're asking them to do it with speed. You're asking them to do it with flexibility. Feel free to reference Operation Warp Speed now. And I will reply that we still haven't gotten vaccines in all the arms. Right? I mean, this is a major undertaking and it's building. Right. It is not research. It's creating a physical system. It's a lot to ask. Those authorities need to be explicitly defined.

They're still going to, I think, come under legislative and court challenges, right? So they've got to be able to take that. We've got to be able to respond to them and we have to find a way to fund it. And we all want it to be — so I guess I am a little bit defined on my bias, but I'm about to explain my bias in the other direction as well. I'm very good at straddling the fence here. Where is it going to sit? Is it in the Department of Energy? Is it in the Federal Energy Regulatory Commission, which I just need to call it FERC? Is it in FERC, which is technically under DOE?

Does it make sense to have a regulator also be a planner and an implementer? Or is that really going to mess up their regulatory authority? If it's in the Department of Energy, what is the way that it gets funded so that it is not so susceptible to the whims of budget cycles? And if it is being funded through, for example, a postage stamp rate. A transmission bill to every user. Whose business model is that messing up and what are you going to do about it?

David Roberts

Right? And also, while we're throwing in complications, there are reasons utilities don't build these interregional lines. And it's often from a utility's point of view, especially if I'm a vertically integrated utility and my power is relatively expensive and if I built interregional lines connecting me to cheaper power sources, it would reduce the cost of my power, which is great for my ratepayers, but not necessarily something I want. So you're not only overriding or intention necessarily with landowners and counties or whatever, but the utilities themselves are probably not going to be enthusiastic participants in a nationalization like this.

Liza Reed

That's right. And when I say whose business plan is it interrupting? I don't mean it like I have some emotional attachment to someone else's bank account. It's more that those business models impact choices that are made in supporting the transmission in their footprint, right. In ensuring the actual reliable electricity delivery to your house. Because it isn't transmission that connects to your house, it is distribution that connects to your house. All these systems are integrated and so the impacts of an NTA are significant. It will take time and I think all of this needs to be grappled with very clearly before we just say this should happen.

Because if this is done, I'm not suggesting that we can come up with a perfect policy. That doesn't exist, but we need to come up with an intentional policy right. And be continuing to have this conversation and not just sort of slap something together.

David Roberts

I don't know, we're podcasters. I feel like it's our right to wave our hands vaguely at a giant policy and move on.

Liza Reed

I want to touch very briefly on the private enterprise piece because I do think the report does make it seem very incremental and I'm actually in discussions with a couple of folks on how to write an example that will spell out the private enterprise piece. So that's clearer because again, if we want to build a macro grid, it doesn't seem like something that private enterprise can accomplish. Right. Do you want a private company deciding if they are sending power to Texas in a crisis or if they are willing to take a cut in prices because it's an emergency?

Right. So you have to send the power, but you're not allowed to charge for it. Right. Well, maybe you do. If there are rules, there are ways that you can establish collaborations and partnerships and RTOs and ISOs are an example. Maybe we can improve upon that example. But private investment can move faster than government capital in many cases, can move more flexibly than government capital in many cases, and can see opportunities in ways that the government can't. There's very likely a hybrid solution that is going to be the ultimate solution. But it really should be a thoughtful one that understands these questions and considers implications and not just we were able to get backstop strengthened, let's see what happens.

David Roberts

Right, but this idea that private capital is kind of smarter and flexible and so on is part of what motivated previous reforms. I mean, we're talking about how merchant power lines are a tiny fraction of the total. But FERC's idea was, let's create an analogous market, analogous to wholesale power markets, where you can actually have competitive — you can have private capital coming in and competing to do the best, fastest, most efficient job, and it just completely hasn't. So you need some pretty substantial reforms because clearly whatever's happening is not working.

Liza Reed

Yeah, no, I completely agree with that. That is a point well taken. So it is a big question to ask is, can this be done? And then what would the gaps be?

David Roberts

Right. And so, I mean, when I think about a national transmission authority and all the sort of cascade of questions that you raise about where does it sit, how does it work, who's it accountable to, how does it pay for itself, how does it interact with DOE and FERC? How does it interact with states? I rapidly grow overwhelmed and want to throw my hands up. So if national policymakers read this report, took it to heart, said the system we have is clearly not working. We're clearly not building transmission fast enough. We're clearly specifically not building interregional and national power lines as fast as every single model says we need to if we want to hit these goals we have.

What would you like them to do? What is the right process to put in place, to start working toward? Because the easiest thing in the world reports come and go all the time. People are constantly waving their hands at grandiose solutions to this and that. But what is the incremental next steps? Who should take hold of this? And what is the process by which we could put some kind of meat on the bones?

Liza Reed

Right, so the primary takeaway is that we should just build nuclear. I'm kidding.

David Roberts

Don't trigger — trying to trigger me.

Liza Reed

So the primary takeaway is that these are big conversations and that they need to be ongoing. When it comes to policymakers, I think there's a real opportunity to have a hearing about national planning. That is actually one of the takeaways of this report, right, is we need national planning because that establishes clear metrics, that establishes clear definitions. It gets everyone on the same page. Then do you implement that national plan through a national transmission authority or implement it through motivating private capital? But let's have some hearings on a national plan and how to make that happen and where it should sit.

David Roberts

Everyone seems excited about that step. No matter what report on transmission you read, everyone recommends we've got to have a national plan. But when I look at all the challenges, those smaller scale challenges, I can easily imagine a national plan being drawn up and then sitting somewhere. It seems like the most likely outcome.

Liza Reed

There's a lot of threads that need to move forward here. That's a great call. It is not just a national plan. But I do think hearings on a national plan and how to define a national plan and where a national plan should sit is an incredibly important next step. The other one is to give me a couple of million dollars to figure out the answer to this question.

David Roberts

Excellent. Excellent idea for all my wealthy listeners.

Liza Reed

Yes, I'll take them $5 at a time. We'll put them in a little. But it is that we need to be engaging in these conversations, right. That I want policymakers to have a sense of what questions they should be asking. Right? That this is a business model question, that this is a speed question, that we need to be having these difficult conversations and then figuring out what the path forward is. And I don't think those difficult conversations are happening.

David Roberts

Right? And just sort of as a final question, obviously, to take any action on a national plan is going to require law. It's going to require statutes. This is something that's too big and comprehensive to be achieved through executive level, like executive action, just tweaking agency rules. You're going to need Congress to take hold of this and run it. And I don't know if you've met Congress, but it's not distinguished by its —

Liza Reed

Yeah, no, I invited them to my last birthday party, and they were pretty dull.

David Roberts

Not super sharp, not super fast, and unable to come to agreement on almost anything. So what is your sense of the partisan valence of this? Is this one of those rare, rare issues that you might actually see some productive bipartisan discussion on, or is this just going to ground out in some stupid culture war whatever?

Liza Reed

I do think there's a real opportunity for bipartisan efforts here. We already have some transmission in the bipartisan infrastructure bill. Those discussions recognize transmission as infrastructure. Identified permitting — they worked on permitting through strengthening backstop authority. There's a paying piece in there, the transmission facilitation program. So there is clearly — that is a signal that there's a bipartisan opportunity here.

David Roberts

Can I pause there? What's the steps they've taken in the bipartisan infrastructure bill? There's money, but money is just one thing. In terms of those other reforms relative to all the things we need, how far down the line have they gotten? Are you impressed with what's in the bipartisan infrastructure bill? Or is this sort of like barely a first step kind of thing?

Liza Reed

Can I say both? Since we have taken no steps in 15 years, the first step is the biggest, but it has to keep moving, right. We can't wait another 15 years. Right. So this has to be the beginning of that recognition, right? We had this bipartisan agreement. We recognize that transmission needs more attention. And this is where I know, in fact, that we at Niskanen and Clean Air Task Force see this as a call to action to be continuing to engage in these conversations. Clean Air Task Force and Niskanen do not come at this problem from the same perspective.

But we both see the need here. We both have folks that we are trying to talk to and folks that we are trying to learn from and there is real opportunity for bipartisan, attractive solutions here, right? We are talking low cost power, we are talking rural economic development, we are talking reliability and resilience in cities. I used to live — I just moved to DC but prior to that I was in Cleveland, Ohio where reliable power was a real challenge.

David Roberts

I mean this is frustrating in so many areas of climate policy, right? I mean you can sort of envision big things happening that are absolutely of benefit to almost everyone. This is what's so frustrating. No one is, but maybe like a few utilities, is benefiting from the sort of current constipated system but it's just like trying to get everyone to look past their immediate proximate interests to this larger interest is always the policy challenge.

Liza Reed

Indeed. It is not a small issue and you're right to point that out. But this report hopefully raises — god, raises awareness. Yeah, raises awareness.

David Roberts

The dread phrase.

Liza Reed

I know. I hate myself. I take it back.

David Roberts

Well in this case it's true. I mean I will say normally I hate the phrase raises awareness but in terms of transmission's role in decarbonization I feel like the past several months, even past year maybe, really has seen a huge leap in awareness about this. When I first started writing about it on Volts, not even a year ago, even then it felt pretty obscure. But even since then it's just like it's become a front burner topic. So this might be one of those rare areas where you can say raise awareness without —

Liza Reed

Thank you.

David Roberts

without shame.

Liza Reed

I think I've used this phrase before, and now I'm going to get it on the record here. I agree with you. Transmission is having a moment, but it needs to turn into momentum.

David Roberts

Turning a moment into momentum. Oh, that's pretty good. That's a good slogan.

Liza Reed

Thank you. Yes, thank you.

David Roberts

That's why you deserve these millions of dollars to move this forward.

Liza Reed

I think one of the barriers that transmission has also had in the past is that it is very easy to get pulled down into the technical. And one of the things that this report I think does really well is keeps it up at the policy, right? That we can move forward with policy while figuring out the technical. We don't need to have them so bound together that it essentially becomes gatekeeping about who's allowed to talk about transmission.

David Roberts

Yes, I meant to say that earlier, actually. I read this report and it's really for being about such a technical area it's remarkably readable like I encourage if you're listening, just go read the report. It's not that long, and it's all pretty plain language, and it really gives you a global sense of what a mess this all is and what the need for reform is.

Liza Reed

Thanks, Dave. I really appreciate that.

David Roberts

Well, thanks for coming on and taking all this time, Liza. I appreciate it.

Liza Reed

Yeah, no, this is great, Dave. Thank you.

David Roberts

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