Grid Modernization and the Energy Policy Act of 2005 PSERC Summer Planning Workshop August 1, 2005 Grid Modernization and the Energy Policy Act of 2005 David Meyer Office of Electricity Delivery and Energy Reliability U.S. Dept. of Energy

Overall Office Mission Office of Electric Delivery and Energy Reliability (OE) Overall Office Mission Lead national efforts to modernize the electric grid, enhance security and reliability of the energy infrastructure, and facilitate recovery from disruptions to energy supply.

Office of Electricity Delivery and Energy Reliability (OE) Office of the Director Resource Management Staff Permitting, Siting, & Analysis Infrastructure Security & Emergency Response Research & Development Transmission Reliability Electric Distribution Transformation Electricity Storage Superconductivity GridWorks GridWise Infrastructure Security Technology Visualization and Decision Analysis Tools Analysis and Modeling Electric Markets Technical Assistance Electricity Exports/ Presidential Permits Power Marketing Administration Liaison Energy Infrastructure Protection State/Local Gov’t Partnerships Training and Exercises Visualization Critical/Vulnerability Assessment Emergency response support Here’s how we are organized. Yada yada yada

Grid Modernization – A Presidential Priority “…We have modern interstate grids for our phone lines and our highways. It's time for America to build a modern electricity grid.” April 27, 2005 President George W. Bush

Transmission: Uncertainty Breeds Under-Investment Uncertainties Long-Term Under-Investment Public Interest at Risk Annual Average Growth Rates in U.S. Transmission Capacity and Peak Demand Economic growth, jobs creation Stability of regional wholesale power markets Consumer electricity bills Public health and safety Energy security and reliability Environmental quality Industry structure– who will build/own/operate new transmission? Financial risks and regulatory uncertainties Protracted siting and permitting processes States - “Patchwork quilt” Federal – legislative logjam Growth Rate (%/year) Transmission (GW-miles) Summer Peak (GW) Source: Hirst, E. “U.S. Transmission Capacity: Present Status and Future Prospects.” June 2004. Note: Regional circumstances vary – but all regions face transmission shortfalls and need to plan capacity expansion programs

Major Congested Grid Paths, 2002 Transmission bottlenecks are extensive. Several can be classified as “national interest” bottlenecks. Economic growth and security issues threatened unless they are addressed. Source: National Transmission Grid Study, DOE, 2002

PSA Strategy: Forge concerted efforts at regional level to modernize nation’s electric grid, using new technologies to best advantage. Show need for new grid, urgency of using current window of lead time effectively. Build partnerships with national, regional and state organizations that have key roles in electricity markets; foster regional plans. Use outstanding experts from labs, universities, other sources to provide objective technical assistance.

Energy Policy Act of 2005: Reliability Creates legal foundation for mandatory and enforceable national electric reliability standards Establishes FERC jurisdiction for reliability ERO will develop and propose technically sound standards FERC will review, approve, and enforce standards OE will provide technical support to FERC and ERO Next steps: FERC to issue rules re certification of ERO within 180 days. NERC likely to apply for certification. Regional councils likely to become “regional entities” under ERO.

Energy Policy Act of 2005: Transmission Investment DOE (OE) to do transmission congestion study and designate “National Interest Electric Transmission Corridors (NIETCs)” every 3 years FERC given backstop siting and permitting authority for facilities in corridors DOE (OE) to coordinate federal review of non-NIETC transmission projects, at applicant request

Regional Energy Planning (1) Substantial amounts of new generation will be needed in all regions over the next two decades. Much of this generation will be coal, renewable, nuclear, and Canadian imports – sited distant from load and requiring new transmission capacity. Result: Regional planning is essential. Time is short. Penalties for inaction could be severe.

Expected Capacity Additions by Region and Fuel, 2004-2015 (Gigawatts, EIA, AEO 2005)

Expected Capacity Additions by Region and Fuel, 2015-2025 (Gigawatts, EIA, AEO 2005)

Regional Energy Planning (2) OE support for institutionalization of planning in West FY03-05 multiyear grant to the Western Governors Association In-kind technical assistance by LBNL and Regulatory Assistance Projects experts to WGA coordination and planning committees Western Governors approved June 13 resolution calling for a west-wide fee on electricity to fund regional planning (nickel per customer per year) Supported initial efforts to identify Western “pre-approved energy corridors” across federal lands

Regional Energy Planning (3): Rise of Proposed Mega-Projects Frontier Line Project: ~12 GW (Wyoming coal and wind) to serve loads in Utah, Nevada, California Northern Lights: Cogeneration at Alberta tar sand sites, other generation to serve loads as far south as Phoenix Mountaineer Project: Midwestern coal to serve loads in mid-Atlantic region

Regional Energy Planning (4): Objectives An industry-based group (RTO, regional council) should be balanced by some state-based policy group (RSC, other). Industry group should develop a technically sound conceptual design for next-generation electric infrastructure. Policy group should identify the 10-15 major policy obstacles to bringing plan to reality. OE can assist these processes and solution of policy obstacles – but state-level leadership is essential.

Regional Energy Planning (5) Mega-projects, if they go forward, can become laboratories for many OE/PSERC efforts: -- Support for open, transparent planning processes; regional cost-allocation plans; regional siting protocols; consideration of non-wires alternatives -- Use of new OE-supported technologies to best advantage -- Incorporation of concepts and technologies for improving physical and cyber security of grid