Navigating the Future: FERC Order No. 1920 and the Call for Diverse Scenarios

The energy landscape is evolving rapidly, and with this transformation comes the need for robust planning. The Federal Energy Regulatory Commission's (FERC) Order No. 1920 addresses this by requiring transmission providers to develop multiple long-term scenarios during regional transmission planning. This order aims to ensure our energy infrastructure can adapt to the dynamic changes in resource mix and demand.

The Need for Multiple Scenarios

FERC's rule initially proposed that transmission providers create at least four distinct long-term scenarios. This proposal was widely supported by stakeholders, with entities like the U.S. Department of Energy (DOE) suggesting standard scenarios such as the following:

• Business-as-usual
• High, medium, and low load growth
• High, medium, and low reliance on distributed energy resources (DERs) and demand response
• Decarbonization of the electric system

The logic behind this is clear: more scenarios mean better preparedness. By examining a range of possibilities, transmission providers can identify the most efficient and cost-effective solutions for future energy needs. However, some transmission providers opposed requiring any minimum number of scenarios.

Striking a Balance

In its final rule, FERC only requires the development of at least three distinct scenarios, rather than four as originally proposed. FERC asserts that its decision balances the need for comprehensive planning with the practicalities of scenario development. While three scenarios are the minimum, FERC encourages transmission providers to go beyond this if feasible. FERC also required transmission providers to consider the following seven specific categories of factors when developing their three or more scenarios:

1. Laws that affect the future resource mix and demand;
2. Laws and regulations on decarbonization and electrification; 
3. State-approved utility integrated resource plans (IRPs) and expected supply obligations for load-serving entities; 
4. Trends in technology and fuel costs within and outside of the electricity supply industry, including shifts toward electrification of buildings and transportation; 
5. Resource retirements; 
6. Generator interconnection requests and withdrawals; and 
7. Utility and corporate commitments and federal, state, and local goals that affect the future resource mix and demand. 

SREA's Recommendation

The Southern Renewable Energy Association (SREA) strongly recommends that transmission providers develop at least four scenarios that are both plausible and diverse. As outlined in SREA’s comments filed with FERC, this recommendation aligns with established practices in the utility industry, where evaluating multiple scenarios is a standard part of the IRP process. For example, Duke Kentucky's 2024 IRP modeled six different generation expansion plan scenarios, including variations in fuel forecasts and environmental policy scenarios. Likewise, Tennessee Valley Authority’s 2024 IRP also uses six unique scenarios to evaluate the IRP process: Reference (without Greenhouse Gas Rule), Higher Growth Economy, Stagnant Economy, Carbon Regulation, Carbon Regulation Plus Growth, and Reference (with Greenhouse Gas Rule). This robust approach helps utilities anticipate a wide range of future conditions and make more informed decisions. Given that generation planning and interconnection planning are inherently interconnected processes, it makes sense for transmission planning to incorporate equally robust scenarios and sensitivities.

The Importance of Plausibility and Diversity

FERC Order No. 1920 emphasizes that scenarios must be both plausible and diverse. This means avoiding redundant or unrealistic scenarios. For instance, adding a negative load growth scenario just to meet a quota wouldn't be useful. Instead, scenarios should reflect the best available data and credible future trends, which indicate rapid increases in load growth.

The Plausibility of High Load Growth Scenarios

A 2023 National Load Growth Report from Grid Strategies, titled The Era of Flat Power Demand is Over, indicates a significant rise in electricity demand, with forecasts jumping from 2.6% to 4.7% growth over the next five years. The study forecasts peak demand growth of 38 GW through 2028, and indicates this is likely an underestimate. This surge in demand is partly driven by the rapid expansion of data centers (i.e., FERC’s factor # 4: “trends in technology”), as well as domestic manufacturing facilities incentivized by the federal laws such as the Inflation Reduction Act (i.e., FERC’s factor #1).  Electrification (including adoption of electric vehicles) is expected to increase electricity demand even more in the 2030s. 

Additionally, a recent Topic Brief from the DOE: How Clean Energy is the Solution to Rising Electricity Demand, found that "Electricity demand is expected to grow ~15-20% in the next decade and double by 2050 – driven by economic development (manufacturing and industrial growth, data center expansion) and beneficial electrification (transport, building, industrial)." The DOE brief further found that "solar PV, land-based wind, battery storage, and energy efficiency solutions are some of the most readily scalable and cost-competitive resources to meet rising demand." 

​​Lagging Behind: MISO's Low Load Growth Scenarios

The Midcontinent Independent System Operator (MISO) already considers three future scenarios covering four factors: additions, retirements, net peak load, and carbon dioxide reductions. Currently, MISO's Futures Report scenarios include annual energy growth rates of 0.22%, 0.8%, and 1.08% for future scenarios 1, 2, and 3 respectively. A variance of less than 1% does not show a great deal of diversity. Likewise, these figures are not sufficiently “plausible” bookends given recent trends in load growth and corresponding generator additions.  As outlined in the Grid Strategies Report, forecasts by national modeling experts suggest that electrification and industrial growth will increase annual electric system growth to 1.5%. MISO’s growth rate projections focus only on electrification, while failing to consider the larger impact of data centers and manufacturing loads. As noted in the DOE's August 2024 report: Clean Energy Resources to Meet Data Center Electricity Demand, the Electric Power Research Institute (EPRI) estimates that data centers could grow to consume up to 9% of U.S. electricity generation annually by 2030, up from 4% of total load in 2023. For instance, Amazon's commitment to 100% renewable energy, coupled with its data centers' load growth, could drive annual energy growth far beyond MISO's projections. In Mississippi alone, Amazon’s Web Services data centers are projected to add the equivalent of load growth of 303,000 homes. Likewise, in 2023, Georgia Power Company experienced “rapid economic growth” that far exceeded its previous forecasts, in part driven by an influx of data centers, resulting in an expedited 2023 IRP Update filing to match increased load with additional generation.  
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Therefore, MISO should consider increasing the growth rates in its current three scenarios to reflect a baseline annual growth rate of at least 1.5%. Additionally, MISO should consider incorporating a 4th scenario with a substantially higher growth rate to reflect the reality that current growth rate projections (e.g., those covering the next 5 years) do not capture all of the plausible growth possibilities for demand over the useful life of transmission projects, which is approximately 40 years. These modifications would not only align with the latest data, but would also enhance the diversity and plausibility of MISO's planning scenarios, consistent with FERC Order No. 1920.

Incorporating State and Corporate Clean Energy Goals

On the other hand, MISO already does a good job of incorporating state and corporate clean energy goals as drivers in transmission scenario planning, as required by FERC’s factor # 7 in Order No. 1920. This is an area where other transmission providers in the South should follow MISO’s example as they seek to develop more diverse and plausible scenarios to comply with FERC Order No. 1920, including transmission providers outside of a Regional Transmission Organization (RTO) that participate in the Southeastern Regional Transmission Planning (SERTP) process. This could come from utilities that have clean energy goals providing more detailed information on how they plan to meet those goals. For example, if the strategy for a utility is to add 5GWs of solar and 5GWs of wind by 2030, it can be drastically different from say 7GWs of solar + storage and 3GWs of wind. When factoring in corporate clean energy goals, it is also important to not only rely on information from utilities that may be reflected in the integrated resource planning (IRP) process, but to also consider corporate commitments from non-utilities that may fly under the radar, but still impact the transmission system.  Many corporate entities, such as Google and Walmart, have clean energy goals that are more aggressive than utility resource plans, such as Walmart’s goal of enabling up to 10 GWs of clean energy projects by 2030. Transmission providers have an obligation to consider these corporate goals in the transmission planning process, even if they are not being properly considered by load serving entities in the IRP process. For example, General Motors recently announced that it signed a 15-year power purchase agreement (PPA) with a 180 MW solar project in Newport, AR.  Although this 180 MW solar project has not yet been accounted for in Entergy Arkansas’s 2024 IRP, it will nonetheless need to be accounted for in the regional transmission planning process. 

Moving Forward

To truly prepare for the future, MISO and other transmission providers must embrace both the spirit and the letter of FERC Order No. 1920. This means developing scenarios that are diverse, plausible, and grounded in the best available data, including the DOE's topic brief on Rising Electricity Demand. Whether it's accommodating new data centers or supporting the rise of electric vehicles, our energy infrastructure must be ready for what's next.
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By pushing for more comprehensive and varied scenarios, we can ensure that our energy systems remain resilient, efficient, and ready to meet the demands of the future. 

Author

Whit Cox is the Regulatory Director of the Southern Renewable Energy Association.