The new acting chairman of the Federal Energy Regulatory Commission wants to use "creative mechanisms" within the agency's authority to promote energy efficiency and renewable energy.

As the head of FERC, Jon Wellinghoff said he will prioritize infrastructure efficiency and the integration of renewable energy into the grid, and will support the use of distributed and demand-side resources, which he described as "very underutilized in this country."

"These are very consistent with the new administration's goals," Wellinghoff told reporters at a Platts Energy Podium event yesterday. The acting FERC chief said he would meet with Energy Secretary Steven Chu and Carol Browner, the White House coordinator for energy and climate policy, next week.

Distributed and demand-side resources includes energy efficiency, residential solar panels, combined heat and power, and plug-in electric vehicles  – areas over which FERC has very limited direct authority, as their use is largely left to state regulators, regional operators and the market to determine. Renewable energy generation is also relatively out of the purview of FERC.

Wellinghoff said FERC has some options, though, notably from incentives provided under the 2005 Energy Policy Act and its authority over tariffs set by the regional independent system operators and regional transmission organizations (ISOs/RTOs).

The integration of renewable energy into the grid is an important underlying issue to address if the United States is to fully utilize these sources of clean power. First, transmission lines to reach the remote sources of energy must be built – stirring up questions over siting and cost allocation. Wellinghoff said he is interested in exploring expanded federal siting authority (E&ENews PM, Feb. 12).

FERC has already exercised incentive power granted in the 2005 energy law to grant higher return rates for the construction of about 10 transmission lines that it felt were important and would likely not be built otherwise. But Wellinghoff and fellow Democratic Commissioner Suedeen Kelly have not always agreed with their Republican colleagues on what projects should receive the incentive treatment.

Wellinghoff said he expects to approve more incentive rate cases, but he will maintain strict requirements for them, including some combination of the following: an extraordinary voltage, which tends to be more expensive to build but goes longer distances; promotion of renewable energy sources; and utilization of smart-grid technologies.

"I hope we can work with fellow commissioners to come to some consensus proposal on incentives," Wellinghoff said.

Other areas where FERC can flex some muscle are in the interconnection of transmission lines to the grid. It is typically a "first come, first serve" process, but Wellinghoff said he would look at changing the order to accommodate "anchor" renewable energy suppliers – similar to natural gas "anchor shippers" – that could buy a majority of the capacity. This would bring project cash up front, addressing a barrier for companies looking to build transmission.

Efficiency and demand-side resources Another obstacle to a surge in the use of renewable energy is that grid operators need to have the flexibility and backup resources to compensate for wind and solar power's intermittency, Wellinghoff said.

FERC can apply some pressure on this issue, as it authorizes and consults with ISOs/RTOs on their consideration of resources that smooth volatility in their capacity markets, including compensating for intermittent resources, Wellinghoff said. FERC has done some work already in this area – for example, in the New England ISO – but Wellinghoff said all of the regional markets should equitably treat supply and demand resources.

Currently, gas turbines – the electricity supply – often ramp up or down with demand to keep the electricity on. But more and more, demand-side resources such as demand response capacity – the ability for consumers to cut electricity use if called upon – are playing an equivalent role and should be included in the capacity markets, Wellinghoff said.

When electric vehicles hit the market in a few years, it will be a serious tool for grid operators to use for "fast response regulation service," he added.

Wellinghoff said FERC also needs to do a better job assessing a community's need for a project – in particular, for liquefied natural gas terminals. To date, FERC has mainly considered safety and security, largely relying on the market to decide if projects are necessary.

While safety and security remain top priorities, Wellinghoff said, "a primary concern for me is ensuring that we look at the need in the region" for these facilities, which should include a rigorous analysis of how energy efficiency and demand-side resources could be utilized.

And then there is always the "bully pulpit." Wellinghoff said FERC should use its collaborations with state regulators – there is currently one on smart grid and another on competitive procurement – to facilitate energy efficiency and demand-side resource use both on the retail and wholesale levels.

"It gives consumers choices," he concluded.

Reprinted from Greenwire with permission from Environment & Energy Publishing, LLC., 202-628-6500