FERC Deep Dive on Performance Incentives Raises Few Challenges, No Alternatives
Shared Savings Incentive for Grid Enhancing Technologies Would Unlock Consumer Benefits
September 10, 2021, Washington, D.C. – Today the Federal Energy Regulatory Commission held a Workshop to Discuss Certain Performance-based Ratemaking Approaches, specifically a shared savings incentive proposed by the WATT Coalition and Advanced Energy Economy, to encourage the deployment of Grid Enhancing Technologies (GETs). The proposal is supported by American Council on Renewable Energy, American Clean Power Association, the Solar Energy Industries Association, the Renewable Energy Buyers Alliance, the Natural Resources Defense Council and other industry groups
Throughout the day, 28 experts testified to the benefits and potential downsides of a shared savings incentive as a solution to the slow adoption of GETs in the United States.
Rob Gramlich, Executive Director of the WATT Coalition, summarizes the discussion:
“Studies show that widespread adoption of Grid Enhancing Technologies will reduce consumer bills and significantly accelerate the energy transition. Congress gave FERC a mandate 16 years ago to set an incentive for technologies that “increase the capacity and efficiency of existing transmission facilities” and improve their operations. Given the successful deployments of GETs abroad, it is time for FERC to implement this law, and I commend the Commissioners and the FERC staff for their attention to this issue.
“The WATT Coalition developed the shared savings incentive proposal with industry input over two years ago. Since then, no alternative proposal has been raised and the evidence that incentive misalignment holds back GETs in the U.S. has grown.
“Today, executives from U.S. utilities National Grid US, Duquesne Light Company, and PPL and Belgian utility Elia shared strong endorsements of the value of GETs on their systems. Officials and regulators from Massachusetts, Connecticut and Colorado spoke to the urgency of finding a solution that leads to the wide deployment of GETs to the benefit of their constituents.
“Concerns were raised about additional work by RTOs and other stakeholders to study Grid Enhancing Technologies, and to integrate them and their real-time data into the system. Sure – no significant change to electricity system operations will be entirely seamless.
“It may be easier to continue operating the transmission grid as if its capacity and topology is static and immutable – but to continue as we have been for 140 years is to leave consumers paying billions of dollars for congestion every year and leave interconnection queues to balloon with renewable energy projects facing massive upgrade costs.”
Hudson Gilmer, CEO of LineVision, shared these comments on the need to align incentives in the final panel of the workshop:
“Throughout the day there were a number of questions, explicit or implicit, around the theme “is a separate incentive required?” and one way of phrasing that is “shouldn’t utilities do the right thing already under the existing rate of return-based model?” another wrinkle on that might be “is a mandate sufficient?” and I want to address that.
“The most incontrovertible way of saying “no” is by looking at history.
“Dynamic line rating is certainly the grid-enhancing technology that I’m most familiar with, and it has been around for 20 years.
“And yet, in the U.S., despite countless pilots, there is not a single instance of dynamic line ratings being put into operations.
“Whereas, if we look at the rest of the world where incentive structures are different, either because there are performance-based incentives such as in the U.K. and Australia or vertical utilities where they serve internal issues of how to get their generation to their load, we see widespread deployment of these technologies.
“I think it’s very clear that the difference is that we operate in this rate of return-based model which favors capital intensive projects.
“If there is a mandate without incentive, this world is complex enough that if utilities don’t want to do something and are not incented to serve the needs of shareholders to do it, there are countless reasons they can cite such as cybersecurity, data integration issues, safety, limiting elements, etc. If there’s an incentive in place those oppositions melt away.
“We have alignment of interest and these are solved problems, and with the right incentives utilities will find a way to deploy them.”
Rodica Donaldson, Senior Director of Transmission Strategy for EDF Renewables North America, expressed confidence that RTOs could successfully model the benefits of GETs, and called for change:
“We’ve spent the last two years doing analyses and running production cost simulation models, specifically related to GETs, and there are ways to model the impact and benefits of advanced power flow control devices, dynamic line ratings, and topology optimization. We can easily model the change to facilities, grid reconfigurations, line outages and anything else.
“I don’t think that it’s the case that some Grid Enhancing Technologies are especially hard to model, and I think the RTOs can do it.
“I’m coming from the perspective of a beneficiary of GETs, and we’ve seen how significant the benefits could be, primarily looking at the short-term operation side dealing with outages on the system.
“I would be frustrated, and I think other stakeholders on the industry side would be too, if this status quo continues, because there are so many benefits that could be achieved. I understand there is a lot of discussion on the right level of incentive, but I think we need to start somewhere. It will be a shame if we leave all those benefits on the table for the sake of perfectionism or other delays.”
Jay Caspary, Vice President at Grid Strategies LLC and former head of transmission at the Southwest Power Pool said:
“RTOs and ISOs have the expertise, data and knowledge to be actively engaged in integrating Grid Enhancing Technologies onto the system and can leverage existing systems for success. It will take staff resources to do, but we cannot continue to leave the system efficiencies from GETs on the table.
“Operator buy-in is critical to access the broad benefits of GETs and ensure that these technologies are fully utilized in markets and, where appropriate, planning. The more U.S. utilities and system operators familiarize themselves with GETs and put them into practice, they’ll see less friction and more value will come out of their work.”