Federal Policy Options for Improving Grid Reliability and Reducing Costs with Transmission

Improving the US electric power system would provide many benefits, whether the goal is to keep up with projected demand growth and spur economic development, to lower household energy costs, to bolster the system’s resilience to natural or nefarious disruptions, or to achieve certain environmental outcomes. In particular, increasing transmission between different regions in the power grid would dramatically improve grid reliability during extreme weather events, lead to cost savings in the electric power system, and reduce air pollution and greenhouse gas emissions.

Researchers at the Massachusetts Institute of Technology developed a grid modeling tool to empower policymakers and regional transmission planners to evaluate a variety of electric power system policies. Using this model, they evaluated four unique policy options for increasing interregional transmission:

1. Establishing a uniform minimum transfer capability requirement for all transmission planning regions
2. Providing a transmission investment tax credit for interregional and intraregional projects
3. Combining a uniform minimum transfer capability requirement with a transmission
investment tax credit
4. Authorizing the Federal Energy Regulatory Commission (FERC) to determine unique, region-specific minimum transfer capability requirements that optimize for system-wide cost and reliability.

This report by MIT researchers Audun Botterud, Christopher R. Knittel, John E. Parsons, Juan Ramon L. Senga, and S. Drew Story explains the projected impacts of each policy choice in terms of improvements to grid reliability, cost savings, and reductions in air pollution and greenhouse gas emissions. As policymakers and stakeholders evaluate transmission policy options, the tools and resources developed by researchers at MIT are available to perform additional analysis.