Rethinking Grid Governance for the Climate Change Era
63 Pages Posted: 24 Apr 2020
Date Written: March 30, 2020
The electricity sector is often appropriately called the linchpin of efforts to respond to climate change. Over the next few decades, the U.S. electricity sector will need to double in size to accommodate electric vehicles, at the same time that it transforms to run entirely on clean energy. To drive this transformation, states are increasingly adopting 100% clean energy targets. But fossil fuel corporations are pushing back, seeking to maintain their structural domination of the U.S. energy sector. This article calls attention to one central but under-scrutinized way that these companies impede the clean energy transition: Incumbent fossil fuel companies essentially run the United States’ electricity grid, writing its rules in ways that favor their private interests at the expense of societal goals.
In most of the country, the electricity grid is managed by Regional Transmission Organizations (RTOs), which operate under Federal Energy Regulatory Commission (FERC) oversight. These organizations—formed in the late 1990s—have a distinct intellectual lineage in the privatization and new governance movements of that time. Most RTOs are structured as private industry clubs, in which industry members “vote” on the rules for regional electricity markets and grid operation. This governance arrangement has proven successful at maintaining a reliable grid but often serves as an impediment to progress on clean energy. Over the twenty years of their existence, many RTOs have resisted incorporating clean energy and energy conservation measures into their grids and market rules, despite strong evidence that treating these resources commensurately would lower costs and improve market functionality. Now, several regions are pursuing reforms in the name of “investor confidence” and “fuel security” that privilege coal and natural gas resources—the same fossil fuels that many states are trying to phase out of their energy mix.
This Article’s central contention is that it is time to reevaluate the United States’ functionally privatized mode of electricity governance, to make it work for an era in which regulatory priorities are shifting in response to climate change. U.S. electricity law suffers from a gaping and growing accountability gap, in which neither FERC nor states have the authority needed to make electricity markets bend to democratically established prerogatives that harm industry incumbents. To remedy the situation, federal and state regulators need more robust authority to shape energy market rules to public aims. Drawing from informative differences across RTOs, the Article concludes with four reform pathways, suggesting that FERC or Congress might (1) pare back RTOs’ responsibilities, (2) enhance state and federal oversight capabilities, (3) police corporate agglomeration in the sector, and (4) explore public ownership or control over the grid.
Keywords: climate change, electricity, energy law, regional transmission organizations, governance, new governance, privatization, boundary organizations
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