Transmission 101: Transmission Planning

Transmission lines, which deliver power from power plants to electricity distribution networks (see Electricity 101), are an essential component of the electricity grid. Transmission investment has the potential to increase reliability, lower electricity prices, and lower emissions. But transmission lines take a long time to approve and build (see Transmission 102), and their value depends largely on the types of power plants in the area and electricity demand on the other end of the line.

The transition to a decarbonized economy will influence where generation will be built to utilize renewable energy, and what future electricity demand will look like as electric vehicles, heat pumps, and other low-carbon technologies become more popular.

Transmission infrastructure plays an important role in connecting customers and suppliers. Transmission infrastructure, or lack thereof, has the ability to make or break opportunities for new and existing power plants. An insufficient transmission network can lead to inefficient use of generation resources or a slower transition to low-cost technologies. Because transmission infrastructure is a natural monopoly, there are structured and regulated transmission planning processes, whereby regional transmission organizations (RTOs), utilities, and even federal agencies determine where the power system is strained, when and where transmission needs to be built, and who ought to pay for it.

This explainer discusses the nuts and bolts of the transmission planning process, who is involved, and the latest policy developments.

Transmission planning occurs at various levels. RTOs and independent system operators (ISOs), which are different types of organizations that operate the grid but do not own power lines, power plants, and other resources, identify new transmission needs in their territories.

Utilities that own transmission lines, also play a role in transmission planning. Utilities may identify when a line is facing significant congestion (meaning more generators want to use the line than can be accommodated) or when limited transmission access is preventing new generation projects that could lower electricity costs or offer greater reliability. In regions without an ISO, utilities are the main entity responsible for planning transmission.

Transmission planning led by utilities, RTOs, and ISOs is generally focused on reliability-based transmission needs. A recent Brattle report found that of the approximately $25 billion in transmission investments between 1996 and 2020, 90 percent were driven by local or regional reliability needs. Furthermore, about half of that investment only involved incremental upgrades to meet local utility needs (which did not require an in-depth planning process).

Federal agencies also play a role in transmission planning. The Federal Energy Regulatory Commission (FERC) has a broad oversight role that has guided transmission planning policy over the past decades. FERC regulates public utility transmission providers to ensure rates are “just and reasonable” and practices, including access to transmission services, do not discriminate or give preference to certain actors. For example, FERC Order 1000, passed in 2010, directed transmission providers to upgrade their regional planning approaches to improve transmission planning. Among other improvements, the order required accounting for how public policy impacts transmission needs and including provisions for how costs of new lines would be shared by those who benefit from the addition of new lines.

Agencies also conduct analysis and research to identify long-term interregional transmission needs. Examples of such analysis are the national transmission needs study (formerly the national transmission congestion study) conducted by the US Department of Energy, and the recently congressionally mandated transfer capability study to be completed by the North American Electric Reliability Corporation (NERC). This work helps to identify investment needs but does not direct funding to projects or mandate that certain transmission lines be built.

While transmission providers have been largely successful in identifying lines needed to maintain system reliability, there has been limited success in identifying lines that could provide other benefits. In order to meet future demands on the electric grid, experts believe a broader and more proactive planning approach is needed.

A proactive approach requires ISOs and RTOs to take a long view on what lines will be most beneficial to the system in the future. Multiple analyses posit that long-term planning based on multiple potential future scenarios that accounts for a wide variety of benefits could find more efficient solutions to congestion, reliability and new generation needs relative to more reactive transmission planning strategies. Of course, long-term transmission planning is a complex task that requires data, modeling, and impact assessments. The following considerations are critical to developing a vision for the future in a long-term planning context:

• Generation mix and capacity: To understand the size and location of new lines needed, planners need to have a vision for what new generation technologies (like renewables) may be used to power the grid. These technologies may be driven by policy (like a clean energy standard), changing costs (like the declining cost of renewables), or increased demand in certain regions (due to factors like electrification growth). It's uncertain how renewables and fossil fuels will be used in the energy mix over the coming decades, so planners should consider several of the most likely future outcomes in their planning. Lines that analysis indicates would be valuable across multiple scenarios may receive higher priority than lines for which the value is dependent on a small number of generation projects.
• Demand patterns: Different regions may experience different changes in electricity demand due to population trends, or different demand patterns based on time zone, weather, and even the degree of regional electrification. Transmission plans should consider when different regions connected by transmission lines will experience surges or lulls in demand to find opportunities to connect power supply with demand more efficiently.
• Weather and resilience: As climate change continues to impact extreme weather events, certain regions may become more vulnerable to power outages. Connecting regions with un-correlated risks of power generation disruptions and risks (such as regions with strong wind and regions with ample solar) may become an increasingly important consideration in long-term transmission planning. Additionally, the placement of lines may need to account for evolving natural disaster hazards like hurricanes and wildfires.
• Policy goals: Policy goals are important to consider to the extent they impact the generation mix and to the extent that transmission congestion and constraints could hinder policy goal achievement. Transmission lines can be used to help states meet decarbonization goals by connecting more renewable resources. For example, New York is building an underground transmission line connected to a vast Canadian hydropower resource. This transmission line will contribute significantly to NY achieving its goal to completely decarbonize its power sector by 2040, by meeting about 20 percent of New York City’s electricity needs.
• Access to cheaper resources: Transmission lines can also help consumers access cheaper electricity by transporting power from areas of low demand and abundant power supply to centers of high demand. For example, ERCOT (Texas’ ISO) invested in a large transmission project connecting west Texas (a low-population region with lots of low-cost wind energy) to east Texas (a higher population region where power generation is more expensive). This project simultaneously supported Texas’ compliance with their renewable portfolio standard and lowered the average electricity costs for consumers.

While RTOs have implemented transmission planning frameworks since FERC Order 1000, many are still making changes to their planning processes to meet FERC standards. For example, PJM, a multi-state RTO in the Northeast, is actively modifying its transmission planning process to include more analysis on anticipated future changes- like the evolving generation mix and increasing electrification. While PJM plans to consider a broad set of benefits when building new lines, it remains focused on reliability as a core goal of its planning. This highlights PJM’s challenge of balancing different state perspectives on the role factors should play in transmission planning. For example, many states disagree on whether meeting decarbonization goals should be considered a meaningful benefit of new transmission. Across jurisdictions, there is substantial variation in the extent to which policy goals, resilience, and cost minimization affect transmission plans.

In 2021, FERC and the National Association of Regulatory Utility Commissioners established the Joint Federal-State Task Force on Electric Transmission, which aims to bridge the gap between federal and state policymaking on transmission. The task force convenes to discuss a variety of transmission issues, including transmission planning and navigating the overlap in federal-state regulatory processes.

Federal legislation has also impacted the transmission planning process, with the Infrastructure Investment and Jobs Act ordering an expansion of the National Transmission Needs study (formerly the National Transmission Congestion study) to include forward-looking estimates of weak points in the national grid. Previous studies focused only on historical data about congestion and did little to highlight the importance of long-term transmission planning. The new analysis offers greater insight into how the changing energy mix and fluctuating demand will impact transmission system strain.

Even if ISOs, RTOs and federal regulators successfully plan for new transmission needs, there is a large gulf between a solid transmission plan and the construction of proposed new lines. In Transmission 102, we discuss the variety of obstacles to actually building transmission, including regional cost allocation, siting, and permitting.