According to the latest data from the United States Department of Energy, Americans used a total of 4.07 trillion kWh of electricity in 2022. While the U.S. population has nearly doubled since 1950, national energy use has increased by approximately 14 times. And as the nation transitions towards renewable sources of energy to fuel electric cars and data centers, experts predict a surge in consumer demand is imminent.
Ari Peskoe ’11 and other energy policy experts believe that a new rule approved by the Federal Energy Regulatory Commission, or FERC, in May is a potential game-changer in the effort to enhance domestic electricity distribution, ensure a steady energy supply, and combat climate change. Peskoe, who directs the Electricity Law Initiative at the Harvard Law School Environmental and Energy Law Program, recently spoke with Harvard Law Today about the new FERC rule, as well as electricity demand, regulation, and reliability as the need for a modernized power grid intensifies.
Harvard Law Today: On a very basic level, how does electricity get from a power plant or wind farm to my refrigerator?
Ari Peskoe: Almost all the electricity that we consume in the United States is generated at large power plants. Most of these are powered by fossil fuels or uranium, while about 20% of them are powered by renewable sources like hydro, wind and solar.
The U.S. electricity system is relatively unique compared to other commodity delivery systems. With natural gas or water, at least hypothetically, it’s possible to identify a single molecule from the original source and trace it all the way to your house. With electricity, though, once power is generated at one of these large, centralized sources, it enters the interstate transmission system and becomes part of a single pool of energy we all draw from at every instant. As a result, tracing electricity back to a single power source is virtually impossible once it enters the big pool drawing from multiple sources.
What you can know is the general mix of sources that is powering a particular region. And while you can’t draw a line from a power plant to your house, you can follow the low-energy wires outside your house to your nearest connection to this high-voltage interstate system that connects us to this pool of energy.
HLT: What are some of the benefits and/or shortcomings of the system that you just described? Is a national transmission system that provides power to a regional transmission system beneficial to consumers?
Peskoe: In the power system, bigger is better. The larger the transmission system, the more it can incorporate connections from different types of energy generators. The more flexible the transmission system, the more options utilities and other companies operating the system have for keeping the lights on. No power source is perfect and there are a variety of reasons they may not work at any particular moment — weather, lack of fuel, sun not shining, wind not blowing, etc. So, the more diversity we have feeding the system, the more reliable it becomes. Under a framework designed to accommodate a variety of sources, a diverse mix also becomes more cost-effective because we can pick from the cheapest sources of power at any given moment to power our homes and businesses. So, in general, more transmission is better because it gives us more options for where our power is coming from. That keeps costs low and keeps the system working for consumers.
“In general, more transmission is better because it gives us more options for where our power is coming from. That keeps costs low and keeps the system working for consumers.”
HLT: Is the existing transmissions system currently set up to accommodate the implementation of diverse energy sources, such as renewable energy?
Peskoe: The interstate high voltage transmission system — built piece by piece over the course of a century — has been designed around conventional sources of electricity, such as fossil fuels and uranium. As a result, the system needs to be updated to better accommodate new sources of electricity generation.
Here in New England, for example, we have a lot of potential for offshore wind power. Because that source of electricity simply didn’t exist a generation ago, none of our existing transmission infrastructure is built to receive electricity generated offshore. As the region contemplates getting more of its energy from offshore wind, decisionmakers have to plan out the most efficient approach to connecting these sources to consumers onshore. That could mean a single line from each new offshore wind project to the shore, or it could mean a whole new network in the ocean that would deliver that power to consumers more cost-effectively and more reliably.
HLT: How expensive are the changes needed to create a more optimal transmission network and how long do they take to complete? Is there a concern the amount of work needed would delay the implementation of renewable energy, like offshore wind?
Peskoe: Transmission lines can be very expensive to build. High voltage, long distance lines cost in the billions of dollars and completing a project — from planning and permitting to construction — can take more than a decade. Upgrades are imperative if we want consumers to enjoy the benefits of a modernized grid that would ultimately eclipse the initial cost of investment. The amount of time this planning can take is all the more reason to get started as soon as possible. We know that there’s a lot of low-cost energy available, so building a network to connect to that potential opens the door to so many new opportunities.
Typically, these infrastructure needs are financed through utility bills. There have been proposals in Congress to provide funding for transmission, but thus far federal resources committed to transmission have fallen short of providing transformational financial backing. For individual projects, the money that Congress has provided can make a meaningful impact. But on a national basis, the level of resources that have been set aside for transmission investment falls short of that transformational potential we could otherwise fulfill.
We have a solid existing system in the United States, but it’s getting old and it’s not designed to meet 21st century energy challenges. At the center of those challenges is the need to decarbonize our power sector while simultaneously accounting for significant increases in electricity demand from electric vehicles, building electrification, and new uses like powering data centers for artificial intelligence. Electricity is still our is our best source of energy, so as we attempt to phase out other traditional sources of energy, we need to make sure the electric power system is robust and reliable enough to meet our long-term needs.
“We have a solid existing system in the United States, but it’s getting old and it’s not designed to meet 21st century energy challenges.”
HLT: How do new federal rules for the electrical grid fit into this equation?
Peskoe: The latest FERC rule is intended to remedy widespread deficiencies in utility industry planning. Over the past decade, utilities across the country have primarily focused on small scale, low voltage projects that effectively rebuild transmission infrastructure from the previous century. These projects have been prioritized because they provide lucrative financial returns for utility shareholders. However, they’re not forward-thinking, they’re ill-suited for clean energy implementation, and they fail to account for increases in consumer demand that will come from electrification. The new rule attempts to fix this problem by requiring the industry to engage in long-term planning that considers both the change in the generation mix as more wind, solar, and storage come online and the increased consumer demand for electricity.
The integration of wind, solar, other forms of generation require additional transmission capacity and FERC has tried to address this capacity shortfall with two separate rules. Last year, they issued a rule about the interconnection process requiring transmission owners and operators to assess whether the existing system can handle energy from new generators and calculate cost estimates for whatever upgrades are needed to accommodate those new generators.
The new rule FERC issued last month recognizes that we don’t have enough capacity on the transmission system to accommodate all of these generators. Instead of hoping utilities plan for what we know is coming, this rule directs utilities to take a realistic look at the future with long-term plans that sufficiently account for the upgrades our transmission system needs.
As a regulatory entity, FERC’s mandate is to ensure affordable prices and reliable delivery. FERC is most effective when it’s ensuring that the transmission and market rules it regulates can accommodate industry trends. In this new rule, FERC has identified industry trends toward cleaner generation and the new sources of power as well as new challenges to system reliability, are incompatible with the industry’s transmission planning practices.
HLT: Will anyone oppose the new rule? And if so, what legal grounds would they likely rely on to challenge it?
Peskoe: This rule will almost certainly be litigated in a federal appellate court and the likely litigants will be Republican states and segments of the utility industry that would prefer not to operate under any rules. Certain utilities around the country simply reflexively oppose FERC rules, EPA rules, really any federal agency rule that might subject them to regulation. There may very well be other interests opposing this rule as well, but those two camps are sure to be filing in federal court soon, if they haven’t already.
“Certain utilities around the country simply reflexively oppose FERC rules, EPA rules, really any federal agency rule that might subject them to regulation.”
The challengers will most likely argue FERC lacks authority to regulate transmission planning at all. A 2014 D.C. Circuit Court of Appeals ruling — South Carolina Public Service Authority v. FERC — held the commission does, in fact, have authority to regulate transmission planning. So, the litigants will most likely try to get this case into a different circuit court to see if they can obtain a different result. Since 2014, we’ve also had the emergence of the major questions doctrine, which essentially allows federal courts to supersede executive agency decisions on issues the court declares to be “major” in the absence of explicit congressional action. Litigants will argue FERC is mandating sweeping changes to our energy system without congressional authorization and the rule is therefore invalid. Even under the major questions doctrine as the Supreme Court has outlined it, I think that argument ought to be rejected. Nevertheless, some federal appeals courts may be more open to that argument than others.
HLT: Could litigants delay the implementation of the FERC rule by challenging it? If the litigants successfully challenged it in federal circuit court, what would be the likely next step? Do you see the Supreme Court taking this issue up?
Peskoe: FERC rules typically are not held up due to judicial stays, so it would be very unusual if implementation were delayed by litigation alone. Anything is possible in the event of a circuit split [when two different federal circuit courts issue conflicting opinions on the same legal issue], but the Supreme Court rarely takes FERC cases. The Court did take two cases back in 2016, but that was a real outlier year.
If the rule was struck down by a federal court, the consequences may not be confined to this rule. Litigants may try to convince a court to invalidate an entire class of rules, which could permanently dismantle FERC’s regulation of interstate transmission. That outcome would be extremely damaging to consumers. If FERC doesn’t have the tools to regulate monopolies, suddenly utilities would have countless ways to take advantage of consumers. We would be left with a regulatory vacuum, where nobody has any legal authority to regulate the development of transmission and it would be a nightmare.
HLT: Assuming the new FERC rule remains in effect, though, what happens next?
Peskoe: The rubber meets the road with the compliance process. Each alliance of regional utilities will develop a proposal for how they will implement the long-term planning process. Over the next year, groups of utilities will be hammering out these proposals, which they will then file at FERC. That process, whereby FERC reviews and then approves or rejects those proposals, will tell us a lot about whether the spirit of this rule will actually be implemented because there’ll be a lot of opportunities for the industry to try to water this down and avoid serious long-term planning. But there’ll also be opportunities to strengthen the rule and make sure that long-term planning and development are actually happening.
LISTEN: CleanLaw — FERC’s New Approach to Improving Transmission Investment
In an episode of EELP’s CleanLaw podcast Ari Peskoe and guests discuss how the utility industry thinks about building new high-voltage transmission lines, and how FERC Order No. 1920 attempts to push the industry to develop more transmission to accommodate new, clean sources of electricity while maintaining a reliable and affordable power system.
Want to stay up to date with Harvard Law Today? Sign up for our weekly newsletter.