NESCOE and ISO-NE Trailblaze on Transmission Planning and Procurement Ahead of FERC Ruling

Posted by Alex Lawton on Apr 18, 2024 10:00:00 AM

New Procurement  Framework to  Deliver Future Grid for New England

With the Federal Energy Regulatory Commission’s (FERC) much-awaited final rule on Transmission Planning and Cost Allocation imminent, New England’s grid operator, ISO-NE, quietly prepared to file at FERC its own hugely consequential, self-initiated Longer-Term Transmission Planning (LTTP) reforms. The problem it seeks to address? With peak demand for electricity set to double to 51 – 57 GW in the region by 2050, planners recognize the current grid’s transmission capabilities are ill-equipped to ensure reliability while handling the transition to an emissions-free electricity sector. ISO’s LTTP filing establishes a framework for procuring, building, and funding transmission projects and follows the inception of a new paradigm for long-term electric system planning. Combined, these solutions promise to propel us towards the much-needed build-out of the future grid and help us reach urgent state energy and climate policy requirements. In recognition, Advanced Energy United, along with a number of other allied organizations, wrote to ISO-NE and the New England States Committee on Electricity (NESCOE), commending their efforts while urging them to leverage this process as soon as it is effective.   

While the compliance and implementation process for FERC’s final rule may take years to be implemented and practically effective, New England’s LTTP framework will become effective in August 2024, pending FERC approval. With its implementation near, we asked: how was this framework developed, how does it work, and will it deliver on New England’s urgent need for new transmission infrastructure?  

ISO-NE and NESCOE, the regional state body that interfaces between state officials and the grid operator, worked closely together to pursue LTTP in two phases. Phase 1 of this project was the adoption of a long-term planning process that incorporates input from the New England states (a proposal that United supported and FERC approved in 2022). This led to the completion of the 2050 Transmission Study, which quantified our transmission needs to achieve a clean energy future by 2050 and identified the potential pathways for getting there. Phase 2, the LTTP framework ISO-NE just filed, outlines a transmission procurement process to identify, select, fund, and build new transmission solutions to meet our 2050 goals. Under this framework, NESCOE will direct key decision points throughout, starting with identification of public policies driving transmission needs. ISO’s role is to provide technical guidance on transmission solutions, administer the RFP process, and coordinate the power system engineering considerations of a transmission project’s construction. 

Perhaps the most significant aspect of Phase 2 is that it solidifies an agreement amongst all six states on cost allocation. Agreement on who pays and how much for new interstate transmission projects has been a sticking point, subverting efforts for many years to build new transmission solutions to advance state policies. In recognition of the broad benefits longer-term regionally planned transmission projects provide to each state via regional energy security improvements writ large, the states have now formally agreed to share costs proportionately based on the total amount of electricity each state consumes respectively (known as a “load share” basis or regionalization of costs). With this agreement, one of the largest obstacles to building critical transmission infrastructure has been removed. 

One elegant feature of the Phase 2 framework is NESCOE’s supplemental process, which allows states to pursue transmission projects that promote their own state policies in a way that reflects the relative costs and benefits to both the state(s) with the public policy need and those without. Under Phase 2 generally, each New England state agreed upon a core set of shared criteria or “benefits” associated with transmission projects. The ISO uses those criteria to determine through a cost-benefit analysis (CBA) whether a project is cost-effective. NESCOE’s supplemental process will enable the pursuit of projects that some states value that would have otherwise failed under the CBA criteria used for the core process. By allowing states to advance projects that satisfy their own criteria by paying an increment more through NESCOE’s supplemental process, costs are shared equitably and projects that would otherwise be forsaken are resurrected and viable once again.

Unlike the state agreement approach that has been used in PJM, where one state pays the entire cost of a project to serve its public policy needs even if other states in the region benefit, all states pay for the regional benefits they receive under the NESCOE supplemental process, while one or more states pay their regional share plus an additional amount to make the project(s) viable. This cost allocation solution could serve as a model for other RTOs where state disagreement on cost allocation forestalls progress on transmission development. 

Looking ahead, the LTTP process can and should be refined after its implementation to ensure the process for selecting a transmission developer is competitive and fair. In addition, NESCOE should work with the states to explore expanding on the core benefit criteria, which currently omits benefits like health impacts. For now, the framework implemented as is can nevertheless be effective and represents crucial progress. 

The New England region will face many discrete transmission challenges in the future. Grid planners anticipate an emerging constraint on lines delivering energy to load centers in Boston and further south once a huge influx of offshore wind interconnects to New Hampshire and Maine coastal points. Abundant onshore renewable energy resources like wind and solar exist in northern New England (i.e. Aroostook County, Maine), but lack the transmission capacity to send their energy to end-users around the region. Meanwhile, the region will need to expand its small handful of interregional transmission connections, each capped at 1200 MW.  

Addressing all these transmission challenges by building new transmission infrastructure is essential to meeting our 2050 grid goals, and their solutions can now be unlocked through the LTTP process. Implementing this framework could not be more timely and is poised to finally deliver where other processes have failed. While the real work of leveraging the process still lies ahead, we tip our hats to NESCOE and ISO-NE for implementing this new and innovative framework expeditiously and look forward to seeing the process used to deliver new transmission to New England.  

Topics: Wholesale Markets, Transmission



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