There's a "generational need" to invest in the nation's outdated electric grid to power a greener economy, says Allison Clements, a member of the powerful Federal Energy Regulatory Commission. A significant new federal policy could unlock those upgrades.
"It's pretty incremental but important," Clements said in Minneapolis on Monday. "It's in a lot of ways modeled after what [Midwest regional grid operator] MISO is already doing."
The policy requires electric grid operators to plan 20 years into the future for transmission line needs and costs. That could help add new transmission lines, growing wind and solar production in the U.S. since those projects often struggle to connect to the grid. The rule could also help address other challenges like extreme weather.
Democrats view the measure as an important way to help the transition away from fossil fuels, though many Republicans worry it will impose costs on states that don't want more renewable power for projects built in states that do.
Clements spoke to hundreds at a downtown Minneapolis hotel during a conference for state utility regulators in the Midwest.
Clements, who is leaving the commission later this month, spoke afterward to the Star Tribune about the new transmission rule, and about Allete's pending sale to Global Infrastructure Partners that would take the Duluth-based company private. GIP is being acquired by investment behemoth BlackRock. Both deals must be approved by the Federal Energy Regulatory Commission (FERC).
Some liberal consumer advocate and environmental groups have raised transparency questions about a private company owning a public utility and conflict of interest concerns about BlackRock's broad investment in the utility sector and Allete customers like iron mining companies.
The conversation with Clements has been edited for length and clarity.
Q: Can you touch on the importance of the new FERC transmission rule, especially for readers who wonder what it might mean for them or why it's a big deal?
A: Everyday citizens don't think about transmission lines and the process involved when they flip their switch or plug in their iPad. But it turns out big infrastructure is hard to build and it takes a long time. And so you have to start planning for the future now. It's the same as planning a family vacation. If you plan a year ahead, you can get the cheap flights, you can get reservations at the restaurants, you can get all the experiences. If you wait until the month before, you're a lot more limited in your options and everything's going to cost more.
When you're planning the grid, if you think forward 20 years, what is the economy going to look like? What kind of manufacturing and industry is going to be in my region? How much electrification is really going to happen? And we don't know the answer. All we know is that we're going to be wrong, right? But you try to use the best available information we have today, and then think across, we call them scenarios, a set of options.
So you think about, well, if gas prices stay high and inflation stays low, that's one scenario. If extreme weather is worse than we expected, that's another scenario. So you start to run these models and harness the uncertainty about what the future looks like. And that helps to make low-regrets, cost-effective investments in grid infrastructure to serve your families and your children's families.
Q: Do you feel like Minnesota or the Midwest is behind on some of this long-range planning? I know MISO does its own work on that. How would you characterize us?
A: Actually quite the opposite. I'd suggest Minnesota and the Midwest are ahead of the game and have provided a model for the rest of the country in that needed transmission has been planned for, built, and facilitated a great deal of economic development. And if the recent winter storms — Uri, Elliott — prove anything that those lines have kept the lights on for customers in Minnesota and around the Midwest. And so they continue to bear fruit. Our rule took a lot from what is happening in the Midwest and tried to apply it around the rest of the country.
Q: We're working through a $10 billion Midwest regional transmission plan through MISO, there's now another draft plan for up to $23 billion that might just be the first part of a bigger proposal. People might see that and think that's a big number, there might be some sticker shock there.
A: Grid investment is expensive: $20 billion to $40 billion ... is being spent annually already. Our grid is old. It's outdated. Most of it was built in the 1950s and '60s. So if you think about a modern economy and how important energy is and electricity is to a modern economy, it's the right scale, it's the right order of magnitude of spending, and it doesn't need to be spent every year indefinitely. But there is a generational need at this time to invest in the infrastructure that powers our economy.
Q: Allete is being acquired by Global Infrastructure Partners, which is being acquired by BlackRock. There have been some concerns raised at FERC about potential concentration of power issues. Can you talk about your views on that and if you have any concerns?
A: I don't want to speak to the specific proceeding. Even though I'm on the way out the door I'm still a commissioner ... but I do think that transparency and accountability is really important in corporate affiliation and in mergers and acquisitions in the energy industry. Customers have been served best for many decades by competition. And it's the regulator's role to really take a close look and carefully consider any transaction that comes for approval before us.
Q: Is it generally good or is it different in any way to have a utility be privately owned vs. publicly owned? Is it usually good for ratepayers?
A: I think you can protect customers under both publicly owned or a privately owned model. I think that publicly owned power, municipally owned power and cooperatives have a tremendous opportunity to innovate, to lead the charge on the energy transition because they are made up by the people they serve, by their customers, and have a different kind of relationship with their customers. ... I think across the board, whatever type of corporate entity you are, there's the ability to protect customers, keep the grid affordable and reliable.
