The following is an article written by Michael McKenna, president of MWR Strategies, who advises utilities, traders and transportation companies. McKenna previously served as Deputy Director of the White House Office of Legislative Affairs under Donald Trump and advised the President on energy, environmental and other matters.
While some in the United States advocate moving towards decarbonization and net greenhouse gas emissions and moving away from reliance on traditional fuels, it may be important to think about the unintended consequences of specific policies and policies. be careful what you want.
For example, what if you facilitate the construction of transportation networks and complicate the construction of gas pipelines?
There has been a lot of talk lately about the need for new transportation and how it will be critical to decarbonizing the power system. Several recent studies (E3, NREL, Stanford) have concluded that the United States will need to rebuild the current system and add between two and three times more transmission than currently exists to achieve the dual goal of electrifying the economy (including transport) and decarbonize the electricity system by 2050.
In addition to the increased demand, it’s also important to note that as electric cars and electric heaters are added to the grid, much of the increased demand will occur in places (think cities) that will require more. transmission.
The good news is that federal government officials seem to have several theories on how best to get people to build such transmission.
The first and most aggressive theory is to federalize the network. In the legislation currently under consideration in Congress, there is language to give FERC more or less complete control over siting and interstate transportation permits (other than environmental permits). So no more a backstop, now a front stop.
This new authority would be in many ways analogous to the commission’s current authority over pipelines, and it is not clear whether this regulatory regime has resulted in aggressive pipeline construction.
Those in favor of these provisions will soon find that anything federalized quickly becomes politicized. It’s hard to imagine that FERC will be excited about the advisability of mistaking it for a Congressional delegation from a state it is trying to steamroller.
There is an imprecise analogy on the environmental side, where the EPA has had, since the 1977 amendments to the Clean Air Act, the ability to withhold road funding from a state in cases where it deems a plan to implement. defective or insufficient state work. This authority was used once when the EPA attempted to impose the penalty on Missouri. The effort lasted three days; then the Missouri delegation took action and the EPA decided they would prefer to hunt other squirrels.
Lesson? Be careful what you want.
Ten years ago, the FERC, then as now, noting that transmission was a challenge to be built, built Order 1000. At the time, it seemed that greater federal government involvement in the process. transmission planning was not likely to speed up the process. Unsurprisingly, this is not the case. In addition, the promise of “competition” on the basis of price has fallen flat. It turns out that transmission builders tend to source a lot of their materials from the same handful of suppliers.
Lesson? Be careful what you wish for.
There are some who believe that FERC can solve the problem, spontaneous sua. The commission’s initial offer is excellent 137-page advance advice on proposed rule-making. The size of the notice, however, suggests that the process is unlikely to be quick or clean. On the contrary, it is more likely that there will be in-depth comments, then somewhere in-depth next year a proposed rule. Then more comments. Then a final rule, with luck in the course of 2023. Then the inevitable litigation.
It has been said before, but it bears repeating: if you rely on the federal government to fix your problem, you may wait a long time and then, possibly be disappointed. Again, be careful what you wish for.
Some believe that the real problem lies in the questions of cost allocation, who pays what. May be. But companies that really want to do something are usually negotiating to a point where both can make money on the effort. The involvement of indifferent third parties in the success of the effort in question seldom adds value to the negotiation.
If they did, the transmission building would become gangbusters in the regional transmission organizations. It’s not.
Advocates of specific projects that might not otherwise make economic sense have offered tax credits as a response. Those who have worked on transmission projects know that money is rarely the problem, unless and until the process of site selection and clearance spans over a decade. It is worth keeping in mind that Order 1000 was, to some extent, designed for projects that did not make economic sense but which otherwise supported public policy. Unsurprisingly, few developers have jumped at the chance to work on these projects.
The environmental authorization process and public opposition, of course, are the real issues impeding transmission. If we seriously wanted to speed up the building of transmissions in the United States, we would amend the laws on the organic environment (the Endangered Species Act, the American Historical Preservation Act, the Clean Water Act) and place the authority for the permits required by these laws in a single federal agency to prevent those who wish to stop projects from arbitrating the agencies and to ensure that responsibility and accountability for decisions is clear.
I might be biased, but my personal preference for the agency to handle all of these permits would be FERC.
But this administration is unlikely to improve or speed up environmental permit. While there are reasons to support FERC’s new Public Participation Office, it is easy to imagine that it, too, will become an obstacle to building infrastructure quickly and efficiently.
While all of this is happening, FERC is making pipeline construction more difficult. It is certainly their prerogative. As House Speaker Nancy Pelosi (D-Calif.) Likes to say, elections have consequences, and one of them is that the winners decide the rules.
If it is difficult to authorize and build gas pipelines, and if the federal regulatory process favors transport in the long term, and if gas production will be a necessity, especially as nuclear and coal-fired power plants are taking their retirement at an alarming rate, it seems reasonable to assume that eventually, companies will simply start building power plants at natural gas wellheads and connecting to the grid from those sites.
To assume otherwise is to assume that the people who run energy companies are incapable of second-order thinking. It must also be assumed that traditional fuels, which accounted for around 80% of primary energy consumption in 1970, 1995 and last year, will be phased out in the next few years.
Obviously, both assumptions are likely to be wrong. So it seems likely that we are heading towards a world of – backfire warning – gas by wire.
The lesson for this and just about everything in life? Be careful what you want.