On May 13, 2024, the Federal Energy Regulatory Commission (FERC) issued Order No. 1920, dubbed “Building for the Future Through Electric Regional Transmission Planning and Cost Allocation.” This order builds upon previous transmission-related orders: Order No. 888 (1996), Order No. 890 (2007), and Order No. 1000 (2011), as it seeks to realign the transmission planning process to better allocate capital expenditures, increase transparency, and require better coordination of transmission-related projects to pave the way for lower costs and overall better system reliability over a long-term timeframe.

This order is timely, as extensive capital will be poured into transmission projects through 2050 due to forecasted demand increases and a changing grid resource mix. Projected demand increases are being driven by overall emission reduction measures, electrification (such as electric vehicles (EVs)), and the industrial build-out of data centers. The changing resource mix is being partially driven by renewable mandates which require a greater composition of renewable sources such as wind and solar, which are non-centralized like the current capacity infrastructure and require transmission upgrades.

Currently, most transmission planning regions do not plan beyond a 10-year transmission planning horizon, and if they do, they still do not plan as long as needed. For example, ISO-NE undergoes planning for a 10-year period, and PJM was considering planning for a maximum of a 15-year horizon. Under this order, transmission providers will be required to plan for a minimum of 20 years and conduct this long-term planning at least every 5 years. This will provide an opportunity to re-evaluate transmission facilities that were previously chosen in light of delays or cost overruns. Per the order, all of this will allow for “Planning that will ensure the identification, evaluation, and selection, as well as the allocation of the costs, of more efficient or cost-effective regional transmission solutions to address Long-Term Transmission Needs.”

As a means to identify and evaluate transmission facilities to meet long-term transmission needs, transmission planning regions will need to develop and use long-term scenarios. Under each long-term scenario, they will be required to measure a set of seven benefits and create an evaluation process that includes the selection criteria. Below are the seven benefits to be considered:

1. Avoided or deferred reliability transmission facilities and aging transmission infrastructure replacement
2. (a) Reduced Loss of Load Probability and/or (b) Reduced Planning Reserve Margin
3. Production cost savings in fuel and other variable operating costs of power generation
4. Reduced transmission energy losses from generation to loads
5. Reduced congestion due to transmission outages
6. Mitigation of extreme weather events and unexpected system conditions
7. Capacity cost benefits from reduced peak energy losses

Transparency and coordination will share increased roles as the new order seeks to better coordinate long-term planning activities among regional and local transmission planning as well as incorporate relevant state entities in the process from the outset. The order will require that the evaluation of transmission facilities include a determination that is detailed enough to understand why a particular long-term transmission facility was or wasn’t selected. This increased transparency and coordination will also provide an opportunity for state entities or others to fund the cost of a transmission facility that would otherwise not meet the selection criteria. It will also help identify opportunities for “right-sizing” of existing transmission facilities and provide the incumbent transmission provider the first right of refusal to develop these replacements in kind.

Overall, FERC Order No. 1920 should pave the way for the long-term transmission planning that is needed and provide greater coordination among the stakeholders involved.