Grid operators and the overall energy ecosystem have been looking for indications of how the substantial changes in federal policy will affect how they operate and serve the goals and expectations of their communities. That’s why we invited U.S. Rep. Julie Fedorchak (R, N.D.) as a guest of the Grid Forward Forum podcast. Congresswoman Fedorchak knows this space well, having served as a commissioner of the North Dakota PSC for 10 years and now sitting on the House Committee on Energy and Commerce.
On the episode with host Bryce Yonker, Congresswoman Fedorchak discussed the need to approach grid modernization with a healthy dose of common sense—don’t retire energy assets too early, look at the lowest cost solutions and ensure any incentives are directed toward those who really need them. The Congresswoman also discussed onshoring the production of grid components, updating the tax code, using a ’scalpel’ to reduce federal expenditures and how to meet energy needs driven by AI increased demands.
Below we have excerpted two sections of the podcast episode in which Congresswoman Fedorchak explained how the state and federal incentives impact the grid, and how the new Congress may prioritize them. You can hear the entire episode on our website or by finding Grid Forward Forum on your podcast app.
The following sections are lightly edited for readability.
Bryce Yonker: I like to frame this topic around aligning incentives because operators deploy towards what they’re incentivized to do. So how do grid operators and organizations that are deploying this grid infrastructure get the signals, the necessary and the correct signals, that they need to make the investments that they’re making? And how are those the outcomes that the customers, the businesses and the communities that they serve are looking for? Aligning incentives is really the critical piece.
Congresswoman Fedorchak: I definitely agree with you on that. I see it working a little bit more in the reverse than what you said. How do you give them the incentives? At least MISO, SPP, I think PJM too, they’re responding to what their members are doing.
In MISO, the members are all vertically integrated utilities that are managed by state regulators mostly in the MISO system, except for Illinois. So the utilities with the state regulators develop their resource plans, and then they tell MISO, here’s what we’re going to do. MISO tells the utilities “Here’s what you all are telling us is your expected demand. And so… in order for us to as a group, as a 15-state region, meet this demand, you all need to bring forward this many resources, accredited resources.” And they even broke it down by seasons.
So they’re trying to send the signal to the utility that this is what you need to bring in, and it needs to be accredited, and then they have their rules for accreditation. The utilities decide how they’re going to meet that need. So the utilities get their incentives or their signals from the grid operator by how much capacity they need to bring, and then they get to decide how they’re going to bring that capacity.
Then those decisions are made with the regulator. If we need, say, 100MW, which is very small, how much of capacity do we want to bring in? 1500 megawatts of wind because you only get 15% capacity rating for wind? Do we want to do it with 120MW of gas because you get more like an 80% capacity rating for gas. How do we want to do that? And that’s a conversation that they have with their utility regulators.
So in terms of the incentives, I think where things get a little bit crossways is when you have state policy that’s directing certain things, and that sends a very clear incentive. You must do this. It’s not even incentive, it’s just a law, you have to meet this by this date. That starts driving what sort of resources get onto the grid, and how much they cost. So those are incentives that I think can get misaligned with running a low cost, reliable grid in our regions, and then across the country, and all these things connect.
Another big incentive that’s been created is the federal incentives. Those also can be misaligned when you’ve got production tax credits that are very, very generous in place, that is a very strong signal to the market that we want more of this. And they’re working. They’ve been in place a long time and they’re working. But right now, they are resulting in flooding the grid with almost 100% of the resources—solar, wind and batteries are not what we’re desperate for right now. Batteries, I would say, we’re pretty desperate for but they’re not long enough term yet. You know, they’re only two to four hour batteries. It’s not long enough duration to really meet the needs.
What the grid really desperately needs now is a more dispatchable resources to back up all the renewables that have already been added in a rapid pace over the course of the last 15 years. We need that, and we need gas infrastructure. We need some way to store gas. None of that is being incentivized by the federal government right now. It’s not really being incentivized by the grid operators to the utilities. So there’s some pretty big corrections that need to take place to get our incentives right, to bring forward the kind of resources we need to maintain reliability and affordability.
NOTE: Rep. Fedorchak’s office has an open Request for Information (RFI) available for download requesting insights around the energy requirements from the expanding AI industry.
Bryce Yonker: There’s been quite a portfolio of support to help advance the capabilities of the grid in recent years. From that perspective, where do you see priorities in this Congress as the administration addresses changes at some of the agencies right now? Are there aspects that you think are being prioritized, and are being continued to be invested in? Or maybe even areas that are further invested in?
Congresswoman Fedorchak: Well, again, there’s a couple of things with this that I think are important to remember. One of the big drivers of this demand increase is AI. It’s a huge driver. Those companies are not unable to pay for their own power needs. So I don’t think we need to be driving the federal government further into debt and taxing American citizens who don’t have deep pockets to pay for incentives to help these folks with deep pockets meet their energy needs. I haven’t heard a single one of them say they don’t want to pay for what they use. They want to. They are willing to pay for this stuff. And so I’ll be really careful and a pretty loud advocate for making sure that incentives we continue aren’t going to folks that can afford to pay for these resources on their own.
We need to incentivize technologies that aren’t proven yet that have promise to address future challenges and be used at scale. We need to incentivize with tax credits and investment investments from the private sector however we can with good tax code and policy.
I don’t see the need for significant grants and those types of giveaways to develop and deploy our energy systems. I don’t think that that’s really where we need to go. We need to streamline the regulatory process, make sure that the folks who have the resources to invest and want to invest can do so without having to spend a ton of money on federal regulations. I’d rather reduce regulations, make it cheaper for them to do business, then give them money to help them have to go through these expensive regulatory processes. So yeah, creating a better business environment that is lower cost has a good tax environment, and incentivizing this investment in that way, I think goes a long way while also helping and maintaining the other, more direct federal incentives that are needed to help stimulate the development of some of the technologies that aren’t commercially available yet.
Bryce Yonker: The pace of innovation in the energy space is exciting. A lot of these are sparked from the national labs or ARPA-E or National Science Foundation, and really great public private partnerships. As you well know, breakthroughs are hard, right? So the question is how do we really commercialize and scale the solutions that are most needed to move our grid ahead? And what does that look like with the federal partnership and working with industry to do that?
Congresswoman Fedorchak: We’re at such an exciting time right now because we do need solutions quickly. We need more power on the grid in a fast, fast way. And we have folks who are really interested in it who have the capability of investing in new technologies. So that’s just a great combination for getting results and proving out some of these new technologies faster.
I think we’re going to see SMRs proved out quickly, because you’re going to see people investing in them, and then taking what’s needed and learned from each project and applying it quickly to the next one to make it better, and deploying AI to make things better, faster.
I think it’s just a great you know, it’s a great combination of you have the people involved. They’re invested in and need this technology quickly. There’s a lot of new technologies that are on the verge of being commercially viable, so we’re going to have investors in those new technologies willing to deploy them. If we can get out of the way and get this stuff permitted quickly and have the supply chains in place to develop the actual physical resources to deploy them, I think we’re going to be in great shape.
You can catch the entire episode on our Grid Forward Forum podcast web page or on your podcast app including Apply, Overcast, Spotify and YouTube.
