Modernizing and improving the grid will only happen if the private and public sectors work together to develop needed transmission.
When it comes to making the major grid improvements we need to prepare for an electrified future, time is not on our side.
The average electrical transmission project now takes a decade to complete, and it’s easy to see why. Every major transmission project must navigate a long and drawn-out planning process and secure layers of permits and approvals at every level. Meanwhile, opponents have become increasingly aggressive in their efforts to block projects they don’t like.
Modern transmission development has turned into a slog, but it doesn’t have to be. There are a number of policy and legislative approaches aimed at making this important work easier. One of these is the expansion of Right of First Refusal (ROFR) policies at the state and federal level.
Now law in nearly a dozen states, and under consideration by federal regulators, these laws encourage states, utilities and stakeholders to work together to identify what projects are needed and where. Once projects are identified and approved, ROFRs allow local utilities with the best knowledge of the local terrain to move into the permitting and construction phase without unnecessary governmental bureaucracy slowing the process down. This means electric customers receive crucial benefits from major transmission projects faster.
These benefits are not just theoretical. In recent years, areas of the country with ROFR laws have been the most successful at planning and approving major transmission projects, while other regions are still trying to get similar efforts off the ground. This is no coincidence; in the successful regions, ROFRs are the key to better planning and better projects. This approach serves the public good by allowing companies to build a stronger, more reliable grid, at a much faster pace. They are precisely the tool we need, at a time when new transmission construction sits at a decade low. Why is that?
1. ROFR projects move fast
By not allowing unnecessary bureaucracy to get in the way and decide which entities will build projects, states and utilities can get right to planning and building needed projects. This helps to identify needed projects, and cuts a year off a project’s development timeline, on average. As development proceeds, the law usually require that transmission operators provide regular public updates on cost and timeline, so developers are held accountable to the cost and schedule projections they issue.
2. ROFR PROJECTS encourage COMPETITION THAT MATTERS
Infrastructure projects opened to bidding draw a wide range of applicants, including developers with limited energy experience and a spotty track record. These companies may submit low-ball bids in an attempt to win the contract, but we know the final cost of that competitive project will likely be 6-19% higher than originally estimated. Is that real competition? Does it matter if the incumbent utility can perform the work faster, safer and at lower final cost? We think it does. So do our customers.
3. ROFRS BRING CERTAINTY AND STABILITY TO THE GRID
Competition is key to the economy overall, but when it comes to critical infrastructure, we know it makes more sense to establish trusted partners and rely on their expertise to keep the power flowing.
Unlike some developers who parachute in to build a project and then leave, incumbent utilities are members of the community and focused on protecting local interests. In the wake of a damaging storm or catastrophic event, you want a trusted, local partner who knows what needs to be done and can act fast.
4. ROFRS HELP US build a better grid
The fragmented nature of competitive transmission development often falls short of the regional, integrated approach needed for future grid development. By giving states more control over project decisions, ROFR laws make it easier for regulators to take a regional view of our transmission network; that in turn will help us build the grid of the future that our growing economy so badly needs.
These laws bring tangible benefits to our power grid in a cost-effective way, which is why they’ve been adopted by more and more states over the past decade. As the challenges facing the grid grow in the decade ahead, we expect more focus on ROFR as a tool for improvement.
