What Should Obama Do First? Modernize the Electric Grid

Wed, 07 Jan 2009 21:46:53 +0000

Continuing the series, it is all well and good to talk about switching from fossil fuels to renewable energy, but little progress will be made if the electricity cannot be transmitted from the location of the renewables (sun in the Southwest, wind in the Midwest) and the location of the electricity demand. From an interesting article in the Jan/Feb issue of Technology Review:

The U.S. grid's regulatory structure is just as antiquated. While the Federal Energy Regulatory Commission (FERC) can approve utilities' requests for electricity rates and license transmission across state lines, individual states retain control over whether and where major transmission lines actually get built. In the 1990s, many states revised their regulations in an attempt to introduce competition into the energy marketplace. Utilities had to open up their transmission lines to other power producers. One effect of these regulatory moves was that companies had less incentive to invest in the grid than in new power plants, and no one had a clear responsibility for expanding the transmission infrastructure. At the same time, the more open market meant that producers began trying to sell power to regions farther away, placing new burdens on existing connections between networks. The result has been a national transmission shortage.

Researchers at the National Renewable Energy Laboratory in Golden, CO, have concluded that there's no technical or economic reason why the United States couldn't get 20 percent of its elec­tricity from wind turbines by 2030. The researchers calculate, however, that reaching this goal would require a $60 billion investment in 12,650 miles of new transmission lines to plug wind farms into the grid and help balance their output with that of other electricity sources and with consumer demand. The inadequate grid infrastructure "is by far the number one issue with regard to expanding wind," says Steve Specker, president of the Electric Power Research Institute (EPRI) in Palo Alto, CA, the industry's research facility. "It's already starting to restrict some of the potential growth of wind in some parts of the West."

The Midwest Independent Transmission System Operator, which manages the grid in a region covering portions of 15 states from Pennsylvania to Montana, has received hundreds of applications for grid connections from would-be energy developers whose proposed wind projects would collectively generate 67,000 megawatts of power. That's more than 14 times as much wind power as the region produces now, and much more than it could consume on its own; it would represent about 6 percent of total U.S. electricity consumption. But the existing transmission system doesn't have the capacity to get that much electricity to the parts of the country that need it. In many of the states in the region, there's no particular urgency to move things along, since each has all the power it needs. So most of the applications for grid connections are simply waiting in line, some stymied by the lack of infrastructure and others by bureaucratic and regulatory delays.

[...]

Utilities, however, are reluctant to build new transmission capacity until they know that the power output of remote wind and solar farms will justify it. At the same time, renewable-energy investors are reluctant to build new wind or solar farms until they know they can get their power to market. Most often, they choose to wait for new transmission capacity before bothering to make proposals, says Suedeen Kelly, a FERC commissioner. "It is a chicken-and-egg type of thing," she says.

That chicken-and-egg type of thing is a coordination failure. The federal government is the entity that can resolve that failure, by taking the lead and making those expansions itself. It can recoup its costs by levying a fee on subsequent power consumed through the grid. I hope the fact that we need this investment isn't a reason for it to be excluded from plans for fiscal stimulus.