Our electric grid faces an uncertain future, with challenges stemming from rising demand and rapid retirements of critical resources exacerbated by aspirational policies that frequently race ahead of operational and engineering realities.
In the second installment of our three-part series on how to power the economy of the future, in which EPSA is offering perspective on the most important energy policy issues yet to be addressed and potential for progress, we’re delving into an issue that, if resolved, can add more of the clean and reliable resources needed to power the nation today and tomorrow: permitting and interconnection reform.
Unreliable Permitting Is a Barrier to the Energy Expansion
With forecasts showing a sustained rise in electricity demand for the first time in decades, the energy transition must be an “energy expansion.” Regulators and grid operators must continue to ensure the future of existing dispatchable generation, while also enabling a rapid buildout of all types of new resources to meet this growing demand. The need for an energy expansion comes as electricity demand increases with the rise of electric vehicles, greater home electrification, artificial intelligence (AI), data center growth, and onshored manufacturing. However, grid reliability will be at risk if policies continue to force the retirement of existing generation capacity.
PJM Interconnection, the largest power grid operator in the United States, again raised concerns in recent weeks about the growing gap between electricity supply and demand. It highlighted that just 2,000 MW of capacity has been added to the grid serving more than 65 million in 13 states and The District of Columbia – down 5,000 MW from 2013 even though demand is rising at an unprecedented rate.
Getting through the interconnection queue – the waiting list and approval process to connect a new power resource to the grid – remains a challenge in RTOs and ISOs throughout the U.S. PJM has taken significant steps to reform its process. But even once cleared, developers still face significant hurdles to getting projects underway and completed – 37.2 GW of capacity with interconnection agreements in PJM remains unbuilt.
The need for effective permitting and interconnection processes for new energy infrastructure is clear. Whether it’s intermittent solar and wind resources, or dispatchable natural gas, nuclear, and battery resources, all projects face similar challenges when it comes to navigating a complex, inefficient, and counterproductive permitting process. Long approval processes and byzantine requirements at different agencies and levels of government add years to construction times and sharply increase development costs.
See EPSA’s policy recommendations for meaningful permitting reform.
According to the Permitting Institute’s testimony to Congress, it takes 7-10 years on average for new power plants to be designed and to complete all the required permitting reviews. Similarly, it can take up to a decade or more to build new high-voltage transmission lines. Lack of coordination and communication between cooperating federal agencies, endless cycles of litigation, and inadequate staff resources are key factors slowing down development.
Pipelines face similar challenges, including the CO2 pipelines that will be necessary for using carbon capture to reduce emissions, which the current Administration is poised to mandate in its Greenhouse Gas Emissions Standards.
New projects of all types are subject to permitting process delays that make it harder to build the infrastructure that a reliable, cost-effective energy expansion requires.
Bipartisan Efforts to Reform Permitting Are Gaining Momentum
While the passage of the Inflation Reduction Act (IRA) provided some funding to speed up the permitting process, it did not resolve the larger challenges. The Fiscal Responsibility Act of 2023, also enacted some minor changes. White these efforts representing an improvement on the status quo, further efforts must be enacted to improve the permitting process.
In July, Senators Joe Manchin (I-WV) and John Barrasso (R-WY) introduced the Energy Permitting Reform Act of 2024 to speed up federal permitting processes without bypassing environmental protections by setting clear deadlines for courts and regulators. This bipartisan bill is a promising sign that legislators are recognizing the barrier that a dysfunctional permitting system poses to energy projects of all kinds.
EPSA voiced support for certain provisions of the legislation in a letter to Sens. Manchin and Barrasso sent this week, including its focus on electric grid reliability, cost efficiency and fair cost allocation for consumers, and the success of the nation’s clean energy expansion. We noted that “Of particular interest to EPSA is providing greater certainty to the timing of the judicial review process (Title I), as well as engaging the expertise of the electric grid’s federal regulator and the nation’s Electric Reliability Organization to highlight possible reliability concerns stemming from proposed federal rulemakings (Title V).”
Congressman Bruce Westerman (R-AR) has also introduced new legislation to change how the National Environmental Policy Act (NEPA) functions. NEPA reviews are a key factor in long, expensive, and litigious permitting processes for resources of all kinds. As Rep. Westerman has noted, there are more renewable energy projects than traditional energy projects being delayed by NEPA reviews today.
Permitting reform is also attracting some bipartisan support on the campaign trail. While Vice President Harris had previously supported policies that would add additional requirements to the permitting process, she has recently called the time it takes for projects to be built a “national problem” and has supported efforts to “cut red tape and get things moving faster.” In a 2020 executive order, President Trump also took steps to fast-track the federal permitting process as part of his administration’s goal to build more critical infrastructure. Time will tell if campaign promises translate into tangible reforms.
How Can Permitting Be Reformed?
Permitting reform must strike a better balance between robust environmental protections and the essential need for critical infrastructure. The current permitting process often renders the projects needed to meet energy independence and clean energy goals nearly impossible to build in a reasonable timeframe, if at all.
Reforms should modernize federal policy under NEPA, the Endangered Species Act, and the Clean Water Act to make permitting more efficient, predictable, and legally certain while preserving key protections for the environment. Definitive timelines for environmental reviews can be done without compromising protections for a clean environment. Those definitive timelines would provide the clarity and efficiency needed to enable investments into energy expansion.
Reforms should also improve intra-government coordination among relevant agencies and enhance efficiencies by encouraging coordination between investors and those conducting environmental reviews.
Well-designed, competitive markets are the optimal way to drive investment in policy goals – whether those goals are reliability, affordability, emissions reduction, or other priorities. However, even a well-designed market sending accurate and efficient price signals is meaningless without the ability to execute on the investment decisions indicated by the market.
Building new infrastructure to keep pace with rising load growth will require stakeholders across competitive power markets to reevaluate prior policy and market structure decisions. Investors require a higher level of certainty and transparency that regulatory processes will be fairly completed within a reasonable, predetermined time frame.
By creating predictability around the regulatory process, permitting reform would dramatically improve the efficiency of building new projects and ensure that the U.S. maintains a reliable, clean, and cost-effective energy system capable of meeting new demand.
The clock is ticking when it comes to Capitol Hill action on these critical priorities in 2024. The Federal Energy Regulatory Commission addressed reliability concerns at its annual technical conference in October and potential new solutions like co-location agreements at an upcoming conference in November. Meanwhile, EPSA and our member companies will continue the work to uncover and advocate for solutions that support the development of reliable, cleaner, and cost-effective energy.
The Bottom Line
- A successful energy expansion relies on building large amounts of new energy infrastructure that face costly delays without permitting reforms.
- Permitting reform for all generation types can promote reliability, reduce costs, and bring certainty to a complex process without sacrificing environmental considerations.
- There is bipartisan acknowledgment that permitting reform is essential to meeting both climate goals and rising demand.
More in this Series:
The missing pieces may be falling into place to meet the needs of the future. Increasingly realistic rhetoric and policies and new reforms are showing that the right things in energy policy are finally happening. However, there’s a long way to go before customers can be assured the electric grid can meet long-term needs reliably through competitive markets that function well.
More remains to be done, but there is a growing sense that a viable roadmap exists. In this three-part EPSA Explores blog series, EPSA offers its perspective on the most important issues that still need to be addressed—and the signs we’re seeing today that demonstrate progress.
“A well-functioning market balances supply and demand. But a mixture of out-of-market subsidies and increasingly disruptive market operations has kept prices artificially low. Now, companies are beginning to see the price signals they need to invest and be compensated for the risks involved.”
Coming Soon: EPSA Explores – Part Three
