Transmission Proposition

American Wind Energy Association CEO Denise Bode offers the case for new transmission infrastructure.

“Regulatory barriers to new transmission can and must be overcome if we are to undertake a major investment in new transmission infrastructure”
-Denise Bode

The United States is home to vast quantities of clean energy resources – wind, solar, geothermal and hydropower. Yet it lacks a modern interstate transmission grid to deliver carbon-free electricity to customers in highly populated areas of the country. The Obama Administration has called for a national energy policy that calls for the United States to double the production of renewable energy in three years and to obtain 25 percent of its electricity from renewable resources by 2025. Achieving this objective will require a cohesive effort from local, state and federal officials – including Congress – and significant new investment in our transmission infrastructure. But it is necessary.

The massive deployment of renewable generation envisioned by the Obama Administration cannot occur without a renewed investment in our country’s transmission infrastructure. The US Department of Energy (DOE) has identified transmission limitations as the greatest obstacle to realizing the enormous economic, environmental and energy security benefits of obtaining at least 20 percent of our electricity from the wind. Currently, almost 300,000 megawatts (MW) of wind projects, more than enough to meet 20 percent of our electricity needs, are waiting in line to connect to the grid because there is not enough transmission capacity to carry the electricity they would produce.

To promote the expansion of renewable energy, the transmission grid should be built to link areas with vast potential to generate clean electricity to the areas that have significant demand for electric power. ‘Green Power Superhighways’ is a term used to describe the power lines that would be carrying electricity from remote to populated areas. While different build-out plans can be envisioned for green power superhighways, the key to any cost-effective plan is the use of high-voltage transmission lines in place of the low-voltage lines common in the US today.

Efficiency
Outdated policies – not technical or economic barriers – are the chief factors impeding the construction of green power superhighways. However, some grid operational reforms could make better use of our infrastructure. The present patchwork transmission system makes it very difficult to move large amounts of renewable power around the country. A solution is to use the existing grid more efficiently through technology and new operating protocols. This is not a replacement for green power superhighways, but undertaking a set of reforms would allow more wind and solar energy to be integrated with the grid at lower cost. Increased efficiency would provide greater flexibility for changes in electricity supply and demand and would improve economic performance of the grid even without renewable energy.

Building a new transmission infrastructure will save consumers money. A robust transmission grid will give consumers access to lower-cost electricity. On a severely constrained transmission grid, as now exists in many parts of the United States, consumers are forced to rely on local power plants even though plants in other regions can produce power more efficiently and at lower cost. The effect of this squeeze goes beyond financial hardship for residential consumers: businesses pass higher electricity costs on to their customers, and electricity-intensive industries have a strong incentive to relocate to regions with lower electricity costs, taking jobs with them. New transmission infrastructure would increase competition in wholesale power markets. Just as consumers in a region with a single retailer and without high-quality roads to other regions would be at the mercy of the prices charged by that retailer, a weak grid makes it possible for power generation owners in constrained sections of the grid to raise prices beyond what they would be in a competitive market.

Recovering the costs
Studies have consistently found that the costs of transmission investments needed to integrate wind power and other renewables are significantly outweighed by these consumer savings.

For example, according to a recent study, a $50-60 billion investment to significantly reduce congestion and integrate 240 gigawatts (GW) of wind in the Eastern US would reduce electricity costs by enough to fully offset the cost of the investment,; meanwhile, according to studies by the Electric Reliability Council of Texas (ERCOT), the benefits of an investment in new transmission infrastructure for renewables in Texas would grow to be larger than the costs of the investment in less than three years; and, according to a recent analysis by Charles River Associates, International, an investment in a high-voltage transmission overlay to access wind resources in Kansas, Oklahoma, and Texas would provide economic savings of around $1 billion per year, more than twice the $400-500 million annual cost of the transmission investment,           

Although the benefits of transmission easily exceed its costs, few private firms have stepped forward to invest in transmission infrastructure. Why? Because the benefits are not adequately reflected in the incentive structure offered to transmission investors. In other words, the existing regulatory structure often gives companies little or no economic incentive to invest in transmission that will make consumers and society as a whole better off. State regulators, who in many areas have primary jurisdiction over what transmission gets built and who pays for it, are often required to weigh only the benefits that will accrue to residents of that state, thus ignoring a major portion of the benefits of a new system that also serves other states. 

Most state regulators have little authority or incentive to require ratepayers to help pay for an interstate network. Another major obstacle is that regulators in a single state can effectively veto a multi-state transmission network by refusing to grant the permits needed if they feel that their state would not receive an adequate share of the benefits.

These regulatory barriers to new transmission can and must be overcome if we are to undertake a major investment in new transmission infrastructure. Federal legislation is needed to provide new mission statements, adequate resources and specific timelines for action for federal agencies, such as DOE, the Federal Energy Regulatory Commission (FERC) and federal lands agencies. In particular, reform is needed in three broad areas.

The first step in building green power superhighways is to develop a comprehensive plan. This requires both the Western Interconnection and the Eastern Interconnection to develop regional transmission plans that identify where new or expanded transmission capacity is necessary to connect renewable energy resources to the grid and, ultimately, to load centers. 

Facilities identified in the interconnection-wide plan as necessary for the development of green power superhighways should be eligible for broad, regional cost allocation. Specifically, FERC should allocate, based on electricity usage, the capital and operating costs of these transmission lines across all load-serving entities on an interconnection-wide basis. In regulatory terms, the “determination of need” would be made in the regional plan, approved by FERC.

In addition to regional planning and cost allocation, substantial reform of the transmission siting process is required to meet national renewable energy goals. The most effective model is the siting authority that was given to FERC over interstate natural gas pipelines. For green power superhighways, the extra-high-voltage facilities defined in the regional plans would be subject to FERC approval and permitting. Separate siting approval at the state level would not be required. FERC would act as the lead agency for purposes of coordinating all applicable federal authorizations and environmental reviews with other affected agencies.

The Road Forward
Modernizing America’s outdated transmission infrastructure will not be easy. It will require bold, forward-looking action from leaders who recognize that addressing America’s economic, energy and climate challenges must be a top priority in the coming years. All three require new, innovative ways of thinking about energy policy at the local, state and federal level. And all three will require a modern transmission system that is able to deliver clean, abundant renewable energy to homes and businesses efficiently and reliably. These are challenges that we can and must address now.