- Heather Payne, Reliance and Reliability, UC Irvine L. Rev. (forthcoming), available at SSRN (January 30, 2024).
- Joshua Macey, Shelley Welton, & Hannah Wiseman, Grid Reliability in the Electric Era 41 Yale J. on Reg. 163 (2024).
Electricity is at the center of decarbonization and climate change policy. With the rise of renewable energy, we have made the most progress in decarbonizing the electricity sector. The primary approach for decarbonizing transportation and buildings is to electrify vehicles, space and water heating, appliances, and cooking. But the race to move more and more of our activities to a clean electric grid also means that the electric grid is all the more important to our day-to-day lives. A power outage today can thus have much more of an impact – not just darkness, but also interruption of communications (by shutting down internet access), the ability to cook and stay warm, and the ability to move to a place with electricity service.
Yet, climate change is increasing the challenges of maintaining a reliable electric grid. Climate change raises the probability and severity of extreme weather events – such as heat waves – that can stress electric grids and heighten the risks of power outages. Moreover, more intermittent renewable energy on the grid itself can pose challenges to grid reliability. Consumers who are concerned about the reliability of the grid may be wary of increasing their reliance on electricity for home appliances and heating. Reliability is therefore a central issue for decarbonization. It is thus heartening to see two recent pieces of legal scholarship that highlight the issue, beginning the process of thinking about how to make progress on reliability as we move towards decarbonization. There are both federal and state-level angles to thinking about reliability, and both are important. Macey, Welton, and Wiseman focus on the federal aspects in their article, while Payne focuses on the state aspects in her article.
Both pieces highlight how current incentives in federal and state law do not encourage incumbent utilities to effectively address reliability issues. The dominant player at the federal level in addressing reliability is the North American Electric Reliability Corporation (NERC) – a non-profit that under federal law has broad powers to set standards for the reliability of the electric grid. However, as the authors note, NERC is primarily controlled by the incumbent electricity utilities, who have most of the voting power in NERC decision-making. The authors make a strong, circumstantial argument that utility dominance of NERC has meant that the NERC standards have not adequately addressed how to ensure the reliability of the electric grid given the increase in renewable energy or the increased likelihood of extreme weather events, and that NERC has disproportionately focused on relying on traditional baseline electricity power plants, such as coal and natural gas, to advance reliability.
At the state level, Payne describes how state public utility commissions and the incumbent utilities they regulate play a key role in determining whether utilities provide adequately reliable service to their customers. Payne makes a persuasive case that state regulators and utilities have been using outdated measures of reliability – measures that focus on average performance, and ignore the extreme outages that can result in some customers living without electricity for extended periods of time. As Payne notes, these extended losses may be particularly damaging to customers, and may disproportionately affect those with fewer resources.
Payne also explains how the traditional rate-making process by many state public utility commissions encourages utilities to invest in large-scale capital projects, like hardening transmission and distribution infrastructure, because the utilities can pass those costs (and associated profits) on to ratepayers. While Payne notes that these investments can provide reliability benefits, she argues that utilities are not incentivized to consider other, potentially cheaper, and more effective options for reliability, such as supporting microgrids and customer energy storage.
These two pieces provide valuable contributions to the scholarly literature by highlighting the importance of reliability in energy and climate change policy, and also by identifying important ways in which our current system is falling short in addressing the problem. As always, identifying solutions is in many ways more difficult than diagnosis, but both pieces at least help us start thinking about possible solutions.
Macey, Welton, and Wiseman propose exploring reforms at NERC that would reduce utility power, or the possibility of greater control over reliability by a publicly accountable government agency, the Federal Energy Regulatory Commission. Payne suggests using different metrics to measure reliability that would provide greater weight for extreme events and long-term outages and raise the possibility of utility liability to customers for damages from outages. All of these suggestions are helpful, though the authors also note significant political feasibility constraints for these options. There is more work to do in the area of reliability, including the role of increased baseload generation from sources such as nuclear and geothermal, but these pieces are an excellent start to a necessary conversation.
