Can the web keep up with the demand for artificial intelligence and data?

America’s energy needs are growing. New data centers are straining the power grid in many parts of the country. According to a report by the International Energy Agency, artificial intelligence “already consumes as much energy as a small country,” and its demand is expected to double in the next few years.

The federal government and many states are also pushing for broader use of electric vehicles, which emit less carbon dioxide than gas-powered cars but require more power from the grid. At the same time, many countries are trying to wean themselves from traditional energy sources: fossil fuel power plants are gradually being closed, and new wind and solar power plants are being built.

The simultaneous increase in energy demand and the shift to renewable energy sources have raised questions about the reliability of the power grid in many parts of the country. Wind and solar sources produce energy differently than a traditional coal-fired power plant. However, grid reliability is not just about generating enough power. It’s also about transmission – the process of transferring electricity from a generating source to local utilities, which distribute it to homes and businesses. This requires expensive infrastructure, namely high-voltage transmission lines, which take a long time to plan and build. Anticipating future energy needs is the key to making profitable investments.

Recently, the Federal Energy Regulatory Commission (FERC) adopted a new order requiring long-term transmission planning in hopes of increasing the reliability and resiliency of the nation’s power grids. The order applies to transmission planners, including regional transmission organizations (RTOs) and independent system operators (ISOs), who identify and plan energy transmission needs. The new regulation states that when planning new transmission projects, these groups must look ahead 20 years, not the current five years. It also presents a scheme for sharing transmission costs between countries.

There are many little details in the 1,300-page order. However, its main goal is to improve the reliability of the power grid by encouraging countries to plan more proactively. “(FERC’s order) is intended to improve the planning and coordination of transmission system development in the United States,” says Greg White, executive director of the National Association of Regulatory Utility Commissioners. “Locating any energy infrastructure today is a challenge. People love the service, but they don’t want to see it outside the door.”

Looking to the future

Transmission projects take a long time to plan and build – more than a decade is the norm, according to regulators and researchers. In the case of renewable energy sources, the challenge is often to deliver energy from a source that produces energy in sparsely populated regions to remote, densely built-up places. “If you’re driving through multiple states or through different national parks, national forests, etc., the permitting process is difficult,” White says.

Stakeholders involved in transmission planning include local utilities, state regulators, transmission system developers, and power generators, all with different interests. Gearbox developers, for example, have a financial interest in building more projects. Energy producers may in some cases discourage the expansion of transmission capacity because it could introduce competition in the energy market. These interests are negotiated between the RTO and the ISO.

Anticipating future transmission needs can cause an RTO or ISO to make different decisions in the short term, which could save money and provide greater reliability in the long term, says Johannes Pfeifenberger, an economist who studies energy markets at Brattle Group. He gives an example: a group looking five years ahead may determine that it needs to build one new high-voltage power line based on anticipated short-term needs. However, looking back 20 years from now, two lines will probably be needed in most planning scenarios.

In this case, they could still complete only one line in the short term, but build it on infrastructure that could later support a second line. This would increase upfront costs, but would still be much cheaper than building all new infrastructure for the second line. “Transmission planning is currently very fragmented, which makes it quite inefficient,” says Pfeifenberger. “Ideally, the required long-term planning process would involve identifying all transmission needs over the next 20 years to then make better short-term investment decisions.”

Cost allocation

Determining long-term transmission needs requires taking into account not only the likely future energy demand, but also the development of new generating units and the retirement of old ones. Public policy set by states plays a role there. States with aggressive decarbonization goals are more likely to have new solar and wind installations that will need to be connected to the power grid, for example.

One criticism of FERC’s new order is that it would require some states to pay for the climate policies of others. Mark Christie, one of three FERC commissioners and the only one to vote against the order, said it would “socialize the costs” of some states’ climate programs.

The order is “a gift to solar and wind project developers at the expense of consumers and taxpayers,” one former energy regulator wrote for the libertarian Cato Institute.

Others, however, argue that FERC has been careful in allocating the costs of long-term transmission planning among states. Under the regulation, while there are still difficulties in determining what benefits a state receives and should bear, states only pay for transmission projects that will benefit them.

“It’s harder when you get the benefit, but maybe you wouldn’t have signed up for it (the project) to begin with, but it’s just hard,” says Dan Scripps, chairman of the Michigan Public Utility Commission, the state’s energy regulator. The alternative, he says, is to let states choose whether they want to pay for each transmission project, even if it would benefit them. This could lead to them holding off on paying for needed transmission projects in the hope that they will get the benefits for free, making planning for transmission needs even more difficult.

Some RTOs see real benefits in the long-term transmission planning that FERC requires in its order, says Claire Wayner, a senior associate at RMI, a clean energy think tank. Other ISOs, especially smaller ones, will likely follow the letter of the mandate but will not strive to realize its full potential.

In any case, FERC worked overtime to make the order independent of state policy, he says. If one state decides to build many more fossil fuel plants and another state benefits from the energy added to the grid, the responsibility for cost-sharing will also work this way. “States can pass whatever policy they want,” Wayner says. “It is then up to the planner to ensure that the network is reliable and that this reliability is maintained in an affordable manner. That’s what this order is all about. All of these short-term reliability challenges you point to are a direct result of a lack of long-term planning.”

Michigan is part of the Midcontinent Independent System Operator (MISO), one of the largest regional transmission organizations in the country, covering 15 states. It covers states with diverse political cultures and energy markets, from Minnesota and Illinois to Louisiana and Texas. During the last major transmission planning project, MISO applied many of the planning principles required in the new FERC order, including considering a variety of future energy scenarios and trying to find solutions that would work for most of them.

In that sense, FERC “saw what was happening at MISO and basically said this is what we want to see across the country,” Scripps says.

However, it will take some time to see how states and RTOs will respond to this order. “It’s one thing when it’s a requirement and another thing when we’re trying to accomplish something together,” Scripps says. “We are waiting to see whether (the long-term planning order) will speed up or shorten the process.”