New Report: How to Overcome “Right of First Refusal” Obstacles in America’s Energy Grid 

NEW YORK, NY — The U.S. electrical grid is at a critical juncture; the rapid growth of renewable energy sources and the rising demand for electricity from data centers and artificial intelligence have exposed vulnerabilities in the existing grid infrastructure. At the same time, state and federal Right of First Refusal (ROFR) laws are slowing progress, increasing costs, and hindering competition—delaying essential transmission projects needed to modernize and strengthen the grid. In a new Manhattan Institute report University of Tulsa professors Jason Walter, Meagan McCollum, and Eric Olson address the tensions in grid development and propose solutions to improve reliability, efficiency, and competition. 

To ensure a reliable and efficient electrical system, the U.S. must make significant investments in grid modernization and transmission infrastructure. This requires a delicate balance between comprehensive planning and market competition, a balance that has been significantly undermined by both state and federal ROFR laws and regulations. State ROFR laws give incumbent utilities the first right to construct, own, and operate new transmission lines within their service territory. These laws make it increasingly difficult to implement large-scale, multistate transmission projects, which are crucial for enhancing grid reliability and facilitating the integration of renewable energy sources. They also suppress competition from independent transmission developers who might propose more innovative and cost-effective solutions. To address these obstacles, the authors propose the following key policy recommendations:  

• Remove both state and federal ROFR provisions to allow competitive bidding on interstate transmission projects, introducing market forces into the sector.  
• Form macro-regional planning entities spanning multiple Regional Transmission Organizations / Independent System Operators to facilitate better interregional transmission planning and operation and create a national planning process for certain transmission lines. 

By fostering greater competition, streamlining processes, and promoting regional cooperation, policymakers and stakeholders can create a more conducive environment for developing a robust and efficient transmission grid. This, in turn, will enable the seamless integration of clean energy resources, unlocking their full potential and accelerating the transition toward a sustainable and secure energy future. 

Click here to view the full report.