Why Is It So Hard to Build the Electric Grid of the Future?
There is little doubt that the electricity system of the future will look very different from the system that we have today. In the U.S., a growing number of states and the federal government have set 100% clean energy goals for the middle of this century or earlier. The growing demand for clean energy is already evident in fact that wind and solar power now account for the overwhelming majority of new additions to the nation’s power generation fleet.
Yet building an electricity grid to accommodate large amounts of renewable energy raises a host of challenges. The most important of these will be to manage the intermittent nature of wind and solar energy to ensure that reliable power is available 24 hours a day, 7 days a week.
Rob Gramlich, President of Grid Strategies and a former economic advisor to the chairman of the Federal Energy Regulatory Commission, discusses strategies to manage all that clean energy, and the hurdles that will need to be overcome to expand the nation’s electric grid and allow wind and solar power to be reliably transmitted, often over hundreds of miles of power lines, to markets throughout the country. To reach this goal, existing frameworks used to plan and pay for electric transmission may need to be fundamentally reworked.
Andy Stone: Welcome to the Energy Policy Now podcast from the Kleinman Center for Energy Policy at the University of Pennsylvania. I’m Andy Stone. There’s little doubt that the electricity system of the future will look very different from the system that we have today. In the US, a growing number of states and the federal government have set one hundred percent clean energy goals for the middle of this century or earlier. The growing demand for clean energy is already evident in the fact that wind and solar power now account for the overwhelming majority of new additions to the nation’s power generation fleet. Yet building an electricity grid to accommodate large amounts of renewable energy raises a host of challenges. The most important of these will be to manage the intermittent nature of wind and solar energy, to ensure that reliable power is available 24 hours a day, 7 days a week.
On today’s podcast, we’ll look at the main strategy for managing all that clean energy and at some of the hurdles that need to be overcome to make the strategy a reality. To point, we’ll look at the need to dramatically expand the nation’s electric grid so that available wind and solar power can be reliably transported to wherever it may be needed. To reach this goal, existing frameworks used to plan and pay for electric transmission may need to be fundamentally reworked. Here to discuss the challenge of building the grid of the future is my guest, Rob Gramlich. Rob is President of Grid Strategies, which provides economic policy analysis for the electric power system. Rob is also Director of Americans for a Clean Energy Grid, the WATT Coalition, and he is a former Economic Advisor to the Chairman of the Federal Energy Regulatory Commission. Rob, welcome to the podcast.
Rob Gramlich: Thanks, Andy. It’s great to be here.
Stone: To get started, Rob, I wonder if you could give us an introduction to your policy work, particularly as it relates to the electric grid and accommodating zero carbon energy?
Gramlich: Sure. Good strategies provide engineering, economic and policy analysis for a variety of entities, on both the selling side of the market and the buying side of the market and great operators and public agencies, national labs. We usually try to look at the 2030 needs. What is the grid going to look like, and what is required to achieve the carbon economic and reliability objectives of a 2030 grid, to really do low-cost de-carbonization recognizing that the grid is really central to making it all work?
Stone: For context, can you tell us about the fundamental changes that are taking place on the grid today in the drive to lower greenhouse gas emissions?
Gramlich: The market is changing the grid more than anything else. Natural gas prices really made a big dent in the coal fleet, so that was happening independently. And then renewable energy — wind and solar costs –started precipitously falling, and storage costs started falling over the last decade or decade-and-a-half, to the point where regardless of environment policies, we were seeing significant change. We are seeing and will see, no matter what, significant growth of renewables and storage into the power sector. And then enter carbon commitments which could be federal policy, but state policies are very significant all over the country. Consumer goals and utility goals are very significant all over the country. So even if we don’t pass any significant federal policy, there are all these drivers pushing for greater renewable energy penetration above just what the market would do by itself.
Stone: So we’re getting more renewables, we’re getting a decline of, for example, traditional coal fire generation. Also I wanted to bring up the point that it looks like we may have more electricity demand generally in the future, as we get more electric vehicles and as this push to electrify everything happens, the demand for electricity is going to generally grow, right?
Gramlich: Exactly. And that’s the most recent change, that electrification goals seem to be rising dramatically at the state level and certainly now at the federal level with the Biden administration and their interest in electrifying transportation and other sectors. I think it’s going to be one of these S Curve-type things where once people get used to driving electric cars, I just don’t think they’re going to go back — but it takes a while for people to get to that point.
Stone: So even with energy efficiency which has become a bigger drive lately, we’re still going to have more demand for electricity, bottom line?
Gramlich: Yes, I think we’ll have significant increases in electricity demand which will be new. We haven’t seen that for quite a long time, but it will be back.
Stone: In one of your reports on the changes that need to happen to the electric grid, there was a quote that I just thought was really elegant, and it got to the essence of the problem. In that report you state that the existing grid is a poor match for future needs. We just mentioned how the grid is changing — the resource mix is changing. How is it that the existing grid today is really not set up to accommodate this change in the type of resources and clean resources that we expect to see?
Gramlich: Yes, we built the grid 50, 60, 70 years ago to deliver mine mouth coal to population centers. And then 20 years ago, we were building tons of gas plants, so the grid really wasn’t designed for the future resource mix. If you were going to design an optimal grid for a renewable energy future, it would have significant capacity within and across regions because there are connectors and collectors — I think is the easiest way to think of them. The collectors go into the really rich resource areas where you get super high capacity factor wind and solar power, and you have relatively cheap land. That’s the equation that renewable developers are putting together.
So you collect that renewable resource up and deliver it up onto the main grid, but then what you also have are these connectors between utilities, between regions, and even between the three interconnections of the country, the Eastern, Western, and Texas grids — because you end up moving power back and forth. One thing about wind power is if you have two wind farms 400 miles apart, they are usually operating at completely different times, and so if you connect them and you connect wind farms all across different areas, in aggregate, you get a very steady supply. Of course you can only do that with transmission, and then solar is similar, not quite as pronounced as wind, but you have solar in different time zones. You have cloudy areas and sunny areas connected by transmission, and then, of course, the solar and the wind together balance each other out. So the more you diversify across multiple types of renewables, and you bring geothermal and hydro into the picture, the more you can get a steady supply and meet load at all times.
Your smart listeners will think to themselves right now, “Okay, but what do you do about the 3-day periods when you don’t have much wind or sun?” And that is absolutely a planning issue, I think. Our current gas fleet largely will be around, and as long as existing nuclear plants stay around, will be available to ramp up at those times. Demand response, more active demand side flexibility, will come into the picture. And then over time, there are all these candidates for what the clean firm resource will be — if it’s hydrogen or we end up tapping into Canadian hydro more. There are a number of other candidates, but to significantly de-carbonize over this decade, we can still have some fossil plants around that are just operating at low capacity factors, but having them around for that capacity is part of the picture.
Stone: Let’s take a step back for a moment. You mentioned wind farms being, for example, sited 400 miles from each other, and this distance is a good thing, right? Having wind turbines in diverse areas helps to ensure that wind will always be available in some areas so that power can be produced. But these new wind farms will need to be interconnected and connected to customers through long distance power lines that don’t yet exist. Part of the reason the lines don’t exist is because a wind farm may be sited, for example, on a mountain ridge or on a wide-open plain, where there hasn’t been generation in the past, where existing coal and nuclear plants are sited on bodies of water, and that water is needed to cool the plants. So really what we need here is new transmission and many miles of it to accommodate the new clean energy resources.
Gramlich: Yes, that’s right. One example is the Texas Competitive Renewable Energy Zones. There were tremendous wind resources in West Texas and up in the Panhandle. Back in 2006 or 2007, the state passed a law requiring that the Commission work on a proactive plan to build out transmission to those areas. And that has been a model for many other areas to proactively plan to those resource areas which, in the transmission planning world, is completely different. We just haven’t done that for decades, ever since we built lines out to mine mouth coal plants.
So instead of just sitting back and reactively letting generators come to the system and request service, this was a proactive plan to the resource area, and it’s a vast resource area — 15, 18 gigawatts or something like that of wind was connected. As soon as the lines were operational, the wind generators were flocking to it, and the whole thing got fully subscribed very quickly, before anybody thought. The only regret they have in hindsight is they should have done the higher voltage version of that. The same dynamic happened in the Upper Midwest delivering a lot of renewable energy out of the Upper Great Plains states and towards Chicago and points east.
Stone: So the way the grid is built right now — it’s not built with these long distances in mind, right?
Gramlich: That’s right. Those are those collector-type lines, and so the grid needs to be updated to add those. And then the other type of thing we need is if you think about the Eastern and the Western interconnection, roughly the Eastern and Western half of the country, there’s all this opportunity to send power back and forth. In fact, the National Renewable Energy Lab’s Seams Study looked at what day-to-day operation would look like. It turned out that instead of the roughly one or two gigawatt capacity that we have to go back and forth today, that the model said really the optimal size would be sending 30 or 40 gigawatts, 30 or 40 times the current capacity, back and forth on a daily basis.
So you might have Southwestern solar power during the day being sent east, and wind power at all the other times, from the East to the West, back and forth — which is the same way, it’s interesting. The Pacific DC intertie is one of our longest lines. It may be the longest single line in the country. It’s 50 years old. It had its 50th birthday last year. President Kennedy got it going, and it was designed to bring Northwestern hydro to Southern California and the growing demand and load down there. But you look at the way it’s operated today, it still brings Northwest hydro and wind down South, but it does that at night. And during the day, they’ve got surplus solar in Southern California that they’re sending up north. So that line is fully used up to its capacity in one direction during the day and the other direction at night. And that’s the way to think about a renewable energy grid. That’s how we’re going to see the grid used, and we need those long interregional, high-capacity lines in order to enable that.
Stone: I also understand that this isn’t simply about interconnecting all these resources, but it’s also about making the grid more resilient in the future. So if we have an enhanced web, particularly of long-distance power lines that can bring energy from far-away places to far-away demand centers, that also provides additional advantages to the grid. Can you tell us a little bit more about that?
Gramlich: Sure, I like how you put that because it is a completely independent consideration. I’m in the Washington area, and I do a lot of work with policy-makers, and obviously some of them love to talk about climate, and others don’t really want to talk about climate at all. But everybody loves to talk about resilience because everybody saw what happened in Texas when you didn’t have much interregional capacity. The little known fact of these severe weather events that have happened over the last ten or fifteen years is that what saves everybody’s bacon, what keeps the lights on are large, interregional movements of power.
So when the polar vortex was centered on the Mid-Atlantic, you had almost 10 gigawatts flowing in from the Midwest. There’s always available power. The weather patterns are big, but they’re not as big as the grid, right? So the Mid-Atlantic can have a polar vortex, but the Midwest has power. And then during this winter storm Uri in February, it was the opposite direction. The event was centered in the Central Region, and we had all this available power in the Mid-Atlantic that ended up shooting west. So you need those interregional capacity lines to do that.
It’s interesting — I mentioned a few minutes ago the Upper Midwest lines that were built to deliver renewables from the Upper Great Plains to Chicago and points east. Well, those exact same lines were used to keep the lights on in the Upper Great Plains because they had this frigid cold and generators failing, so they were importing power from the Mid-Atlantic all the way across on those same lines to keep the lights on. So that’s an important factor for future transmission planning. You have to take into account these potential scenarios. It’s hard to put a real probability on them or say exactly what’s going to happen because obviously nobody knows. But there are going to be severe weather events. We’ve always had them, and they are increasing in severity and frequency. So if we plan for those potential situations, we’re going to find that there’s a very high value of interregional transmission, and so we need to incorporate that when we’re doing our benefit/cost analysis of how much we need.
Stone: So again, we’re going to need this much more robust, more complex, longer-distance grid to balance wind and solar in all places so that there’s always clean energy available or mostly available when the wind isn’t blowing and the sun isn’t shining in certain areas. We’re also going to need it to make sure that there’s always other sources of energy, should there be local failures to the grid. Even things like cyber attacks are obviously a growing concern. But it seems to me from my understanding the problem is how do we get that grid? We very much do not have that today. You mentioned that there’s no real connection between the Western half of the United States’ electric grid and the Eastern half, right? So you can’t get California solar to the Midwest, for example. The current planning structure doesn’t really allow for that kind of national electric system to be envisioned, planned and implemented. How is transmission planned today, and why is the current framework really not ideal to get us where we need to go?
Gramlich: Yes, you have to consider how we got here. And the way we got here was a whole bunch of small utilities serving local load with local generation. So you can think of them as vertical silos in all of the communities around the country, the cities and communities, each one having either a public power or an investor-owned utility serving it. Only over time did they start to increase their connections, their horizontal connections between each other through transmission lines. And they did that for the same reason that we’re talking about, which is if something happens to the generation in one place, you rely on your neighbors to back you up. And so neighbors are all backing up neighbors, but that was never the primary source of power. Those were the afterthought.
Then as electricity restructuring came, and attempts to rely on competition in generation in the 1990s and early 2000s, we started to develop these regional transmission organizations that were put in place in two-thirds of the country — California, Texas, parts of the Central and Midwest, and then the Northeast — but not the West or Southeast. And these regional transmission organizations started to do regional planning, but even in that case, it was relatively weak because the only way they can plan any transmission is if they can get everybody to voluntarily agree on who pays how much. And that’s, of course, tremendously difficult. Nobody wants to pay for public goods like transmission. Everybody wants somebody else to pay for it.
So we have this relatively weak system with what I think are very weak planning criteria and methods of these regional transmission organizations, and then in some areas — the West and the Southeast — we don’t even have those. We don’t even have the RTOs, regional transmission organizations. So they have some planning authorities that are really just places where utilities can compare notes, but they don’t actually do any planning. So that’s where we are and why we’re here. Now going forward, of course, there are ways to change that. FERC has quite a lot of authority, and we can talk about what they can do with it.
Stone: FERC does regulate the electricity markets, the RTOs and the ISOs, and there are, as you said, mechanisms within the footprints of those markets to actually incentivize new transmission. But again, there’s nothing on a national scale that can really look at the whole map of the United States and say, “Hey, it would be advantageous overall to build lines here, here, and here.” When those lines go beyond the borders of these individual markets, things get a lot more complicated, right?
Gramlich: That’s right. We’re a long way from having national planning. We don’t even have functional interregional planning. We don’t really have functional regional planning in most regions. Outside of the RTO/ISO areas in the Southeast and West, we don’t have any kind of planning outside of just what individual utilities do.
Stone: You mentioned also briefly who is going to pay for this stuff, right? So it’s not just about planning it, but who’s going to pay for it if we do build it?
Gramlich: Right, so there are some discussions within the Infrastructure Bill in Congress and in Washington right now about that. But that’s a brand new idea for the whole history of the industry, really. Transmission costs were recovered in rates, and both distribution and transmission were largely covered in local rates, and then increasingly over time, there’s more of a regional cost recovery. But still the basic problem is that utilities have ways to recover costs on their local systems, but there’s not really a functioning way to recover the costs of the interstate highway-type lines. So that’s a point we’ve been making in these Washington policy conversations of, “Look, transmission is as close to the classic, pure definition of ‘infrastructure’ as anything is.” In fact, it’s arguably more necessary to modern life — both home life and business life — than any other form of infrastructure, partly because every other form of infrastructure relies on electricity.
And so it’s essential. And the only reason it hasn’t ever been really funded in any federal infrastructure legislation is just because we had this local rate recovery mechanism. Well, again, we don’t have a regional interstate highway rate recovery mechanism. We certainly don’t have a national planning entity or a national planning cost recovery mechanism, so there’s a role for Congress to help here and at least push us in that direction and help pick up the tab for some of those costs.
Stone: In a few minutes, I want to get more into that issue of what regulatory solutions there may be for this, but I wanted to bring up another hurdle that you’ve mentioned a lot in your research. It’s called the “triple hurdle.” That’s what you’ve called it. So not only is there the question of who’s going to pay for these long-distance power lines, how is the cost going to be allocated? But there are also a lot of jurisdictional authorities that you have to deal with when you’re going across many states. And they all have to agree that this power line is going to be a good thing and that they’re going to let it pass through their territory. How has that tended to impact any efforts to put up more interregional lines?
Gramlich: Yes, there is a real clunky process for this interregional planning effort right now. The triple hurdle problem refers to this issue where you’ve got to go through the process with planner for Region A, then you’ve got to go through the process for the planner for Region B, and then you have to go through a third hurdle, a third process for a jointly-determined, new type of process, each of which has their own criteria.
You could have a great line that might jump over two of those hurdles but not the third. So it’s really clunky. A couple of the regions are now working together, MISO and SPP are the two in the Central Region that are now sort of working together, but there are a lot of other regions that are not doing anything. There’s quite a distance to go to sort it out and achieve a rational interregional planning process.
There are a lot of people talking now about, “Really, maybe we need a national planning process for the Macro Grid overlay that would really sit above all of these more regional lines.” And of course if you’re talking about lines that cross the East, West, and Texas interconnections, then really you’re looking at national scale. So there could be some type of hierarchical planning approach that kicks certain issues up to them, and then two regions working together on interregional can pursue their work.
Stone: You know, there’s a statistic that I saw, and it was comparing the amount of high-voltage, long-distance power lines that are being built in North America, the United States, in Europe, and in China. And China obviously has a central planning structure. This statistic that I saw said 80 times more high-voltage, long-distance power lines have been built in China, and it’s specifically to enable China’s energy system efficiency. It sounds like we need, optimally, some sort of system where there is a strong authority from above to say it’s in the national interest for a variety of reasons to have lines go from this place to this place around the country.
You mentioned some type of mechanism. What would that possibly look like? What agency might be able to direct this, and is there an agency that really has the authority to undertake that?
Gramlich: That statistic is actually from our report, Americans for a Clean Energy Grid.
Stone: Oh, sorry — it came from your report.
Gramlich: No, no problem. CleanEnergyGrid.org has a number of reports we put out over the last year, and one of them was called “Macrogrids in the Mainstream,” looking at various countries and continents and their macrogrid planning work. And yes, China is kicking everybody’s butt right now. There’s kind of a competitiveness issue with that, too, which is that the technology used to be dominated by American companies and some European companies. Now it’s really the Chinese who are leading on that, the 1,000 kV-type HVDC lines. If we start doing it here or in Europe and South America and North America, we can regain a foothold in that industry.
At any rate, your question is how to do that. The principal entities nationally are the Department of Energy and the Federal Energy Regulatory Commission here. FERC is an independent agency made up of Republicans and Democrats, and they’re more of a quasi-judicial type entity. They set the rules of the road, and they resolve disputes, and they set rates like a typical regulator. DOE could do probably more of the planning. They have dollars in funding. They can engage states. They can use the national labs. So you could see a sort of a partnership of DOE and FERC doing that, DOE maybe funding more of the technical work and the engagement of stakeholders, including states, and FERC being more the implementer of such a plan, or requiring regions to adopt the plans and put them into the tariffs.
So that’s one potential outcome. I think a lot of folks are watching to see what the administration does with this Grid Deployment Authority. It was a concept mentioned in the American Jobs Plan, the Biden/Harris Infrastructure Plan. There have not been many public details about that, but Secretary Granholm is all about deployment, deployment, deployment, and wants to use her tools to advance transmission. I’ve never seen a Secretary of Energy have so much passion about transmission, which is fantastic. That entity, whatever it turns into, could be a central place for that.
Stone: There is another great quote that I pulled from your report, entitled “Planning for the Future.” This quote is from the MIT economist Paul Joskow. The quote addresses the question of whether we should regulate our way to the grid of the future or rely on markets and market forces to get us there. Joskow said — and this was in the early days of electricity market restructuring. He said, “The assumption that at the present time the market will provide needed transmission network enhancements is the road to ruin.” Tell us about the role of markets in driving the grid transition.
Gramlich: Right, this is an important point, and it’s confusing, I think, to a lot of people. We did, as an electric industry, move to competitive markets, at least in the wholesale generation sector. There was an assumption by a lot of people that we therefore shouldn’t be “planning,” doing a regulatory requirements-related transmission. We should just let the market decide, and if the market decided we need a generation over here versus over there, then the generator should go there. And the grid should just remain the grid and be sort of a static thing.
In the policy analysis — and that’s why I included the quote from Paul Joskow, who is probably the leading industrial organization economist working in electricity. If you look back at the academic literature that formed the basis for electricity restructuring, nobody ever claimed that the transmission sector was competitive or no longer had natural monopoly characteristics. And nobody ever claimed that the pricing of transmission through locational pricing would lead the market to produce the optimal amount of transmission. Everybody agrees you should be allowed to build merchant transmission, like any private developer should be able to build a transmission line and connect to the grid and get the value and sell capacity rights. That’s fine for private, third-party entities to do that. But nobody ever said that that by itself leads to the optimal amount of transmission.
It is quite clear that the optimal amount of transmission is more than what the market would do on its own like that, with just independent private parties doing what they have an interest to do, and so we really need to proactively plan the transmission system to provide the reliability we need, to provide an effective platform for competition, and to connect the optimal resource mix.
So there is this important planning function that some people think is a little bit inconsistent with competitive markets, but the distinction here is transmission is still a regulated industry that requires planning. Generation is structurally competitive, and we don’t need to plan generation anymore, and utilities don’t necessarily need to own the generation anymore. We can have competitive, independent third parties building the generation. So that’s the distinction, basically different regulatory constructs for the generation and the transmission sectors.
Stone: I want to bring up one more issue. What we’re talking about is pretty complex, but I’m going to stir the pot just one more time here, okay? We talked about cost allocation — who is going to pay for these lines that may crisscross the country delivering clean energy to market? There is one other cost allocation issue that’s really, really important, and I think we should probably reference it here. When you get a new power plant that wants to connect to the grid — it goes through what’s called the “interconnection queue.” The way the markets or the way the regulations work right now is that power plant or that proposed plant, wind farm, solar farm, whatever it may be, has to pay for the interconnection to the grid, which can really substantially increase the cost of that new plant because we’re not just talking about the turbines themselves but this long potential power line. That hurts the economics and can really slow the development of a new generation of clean resources. Can you tell us a little bit about this particular cost allocation problem and how it’s slowing things up and how it could possibly be resolved?
Gramlich: Sure, it’s a big problem. The interconnection queues, the line of all the generators trying to get connected to the bulk transmission system is very long. I think 680 gigawatts of clean energy generation are in those queues. The average time to complete the queue process is 3-1/2 years, so it’s really kind of a mess. And it is largely the result of that cost allocation problem you mentioned, as well as the lack of proactive planning to build the transmission ahead of time.
But the cost allocation issue is that the interconnecting generator — I mean, everybody agrees that you pay for your own driveway. If you’re a homeowner, you pay for your own driveway, but the interconnecting generators are also being asked to pay for the road system and the lane expansion of the highway that everybody else is going to use. So you might interconnect ten generators for a low cost, and then the eleventh generator — suddenly there’s not enough capacity left for that one. So that one gets sent this bill that could be 50 or 100 million dollars for a wind or solar project, which might be up to the cost of the project itself — whereas all the first ten had a 5 to 10 million-dollar charge. So suddenly costs go up 10x, and it’s just the unlucky generator based on the order in which it was processed. And then what happens is that generator says, “Well, then forget about it. I can’t make my economics work, so I’m going to drop out of the queue.”
Well then, that one drops out of the queue. Then the grid operator has to restudy all the other projects remaining in the queue, and some other unlucky customer has to foot that bill. And then you get this endless cycle of churn leading overall to an incentive for these generators to put in multiple requests in multiple places, hoping they get lucky at one of them. So the grid operators don’t like that the generators do that, but the generators are saying, “Well, what else am I supposed to do? It’s the only way to get through this process. It’s a dysfunctional process.” So my point, and we put out a report also on CleanEnergyGrid.org called “Disconnected,” my colleague Jay Caspary and I and Michael Goggin on this dysfunctional process and how really this process was designed for gas generators. I was there at FERC in the Chairman’s office when we were designing the rules. Everything in the queue at that point was gas generators, and everybody was designing rules for gas generators, and arguably the rules worked okay for gas generators.
Now we’ve got a completely different fleet that is location constrained, as we’ve discussed. Each one is smaller than big, central power plants. Sometimes they’re big, but they could be a bunch of small ones distributed across an area. At any rate, the process doesn’t really work, so we need to get rid of that full allocation of shared network upgrade costs to individual generators. That’s called “participant funding,” and there’s actually about to be a bill introduced in Congress to do that.
Stone: Just to do away with full participant funding?
Gramlich: Yes, to just ban the hundred percent participant funding option — take that one off the table. It would allow for other shares of costs to be allocated, and FERC is in charge of this and will still have to decide. I think the current FERC is getting ready to introduce some actions related to this. It’s not that generators have to pay zero for the shared network, but right now it’s completely disproportionate, and it leads to this dysfunctional system. So that really needs to change. And I think both Congress and FERC are interested in changing it.
Stone: It’s also the conversation about where the benefits go, right? Traditionally, it’s like, “Okay, you built the wind farm. You’re going to make money off of it, so you build the driveway and the reinforcing of the existing system.” But I think as we’re looking to the future, we’re seeing that these benefits are — we’re talking about climate benefits, other benefits that come with a clean energy system. These benefits accrue to everyone, so the costs shouldn’t just fall to limited parties — maybe everybody, whatever “everybody” is defined as — everybody should somehow be paying for these because it’s a “global” benefit. Is that right?
Gramlich: Yes, that’s right. And that’s what our few successful examples proved and did, and they worked. The Texas Competitive Renewable Energy Zones spread the cost to all the load in the area. The MISO Multi-Value Projects in the Upper Midwest went through a process with the states to agree on who pays how much, which load zone pays how much. Basically the costs were allocated to some group of load.
The law of the land in FERC-world, the FERC jurisdictional world, which is the continental US, outside of Texas, is that the costs have to be allocated according to the beneficiary pays. But it can be roughly commensurate with that, to measure every electron. So that framework can work, but to make it work, you have to recognize that a lot of people benefit across a lot of areas. Load across the whole region benefits from all the reliability you get. All of the various states that have public policy goals and all the consumers that have clean energy goals — everybody is trying to get that. So the cost shouldn’t be stuck on the next generator in the queue. The costs should be shared by all of these users who will benefit from the transmission over time.
Stone: Talking about expanding transmission generally — there are a number of options or combination of options to reduce the carbon footprint of our electricity system. One obviously is to move to renewable energy, which will require a more robust grid. There are other options, as well. There are fossil resources with carbon capture storage and other possible examples. How do the economics of an expanded grid compare to these other options on a benefit/cost basis? Is the expanded grid the cheapest option or a more expensive option going forward?
Gramlich: Clearly wind and solar are very cheap now, and storage. And transmission seems expensive, but it’s really not when you look at the total delivered cost of what you’re getting, and you look at the 50, 60, 70-year life of these lines and you look at the economies of scale. So you do it high-voltage, then the cost per delivered megawatt is much lower. So it’s really hard to beat the cost of the wind/solar/storage transmission portfolio.
Carbon capture should be pursued, like hydrogen and like lots of other options. Nobody knows what the costs will be. Small, modular nuclear reactors — all of these technologies that are not quite commercially ready yet, not quite cost-competitive — well, very much not cost-competitive yet. So R&D and pilot projects can help bring those costs down, and hopefully they will, but carbon capture is also a location-constrained resource. You can’t put the carbon just anywhere, so transmission will be likely useful for that scenario, too. Under just about any resource scenario, transmission is a great risk management option. Every generating resource has its issue. When there are droughts, then nuclear plants don’t have their cooling water, and coal piles freeze. So we’re never going to have a hundred percent generation operating a hundred percent of the time. We’re always going to need to move power around between resources and between regions. Again, it looks like the optimal solution is a whole lot of wind and solar power over the next decade, and we’re definitely going to need a lot of transmission for that.
Stone: Let me ask you a final question here, if I may. Today is June 18th, and the debate over the Biden infrastructure package is raging right now in Washington. How important is Biden’s infrastructure plan going to be to the funding and the regulatory changes that will be required to develop the grid of the future? How important is the package itself?
Gramlich: I think it is very important. Again, the President puts transmission into the category of infrastructure. Secretary Buttigieg from Transportation does the same and is looking at transmission corridors along highway and rail. Secretary Granholm, as I said before, is the biggest champion for transmission we’ve ever had in that office. So that’s where the leadership is. They drive the policy agenda more than anybody else in Washington, and their direction is clear. There are a variety of specific proposals. One is a tax credit for transmission that the administration supported and Senate Finance included. It would apply to the large-scale regional and interregional lines.
There’s also potential for direct funding of the grid or for planning for the grid. We haven’t talked yet about grid-enhancing technologies. We can get to that, but you can imagine funding for these bulk power system technologies that can deliver a lot more power over the existing wires. Then of course, those are cheap and relatively quick, a lot easier than going through the sometimes 10-year process for new transmission lines. So that’s another area with some stimulus and funding that could come in. There are a couple of other policy ideas to deal with the sort of “chicken and egg” problem with transmission. Do you plan the transmission first, or the generation first? There are ways to have upfront funding that gets paid back over time. It’s sort of a loan program explicitly for that type of situation. So that’s another opportunity that you could imagine getting into an infrastructure bill.
Stone: Rob, I had said that I have one more question, but in fact I’ve got one more. A moment ago, you mentioned grid-enhancing technologies as an important enabler of a cleaner grid. What are grid-enhancing technologies?
Gramlich: There is a set of technologies that are commercially available now. They’re being used in other countries, and what they do is deliver more over existing wires. I work on three of those technologies a lot, and they are dynamic line ratings, power flow control, and topology optimization. That’s a lot of words to define, but essentially you can kind of think of them as monitoring and control systems for the high-voltage grid. Some of them are like the GPS app for navigating your car around traffic because we do get congestion on the grid, just like we get congestion on roads. And we actually can push and pull electrons around those congestion points, and we can free up capacity by operating the system more efficiently.
I think it’s important in any transmission conversation to include that because there are a lot of costs and there are a lot of landowner and community issues with building transmission, so we need to be able to say we’ve done everything we can to use the existing wires as efficiently as possible.
So those are the grid-enhancing technologies that I work on. I think FERC might have included storage as a transmission asset in that list. FERC coined the term “grid-enhancing technologies” in the context of incentives, which is actually pretty exciting because a special proceeding on incentives for these technologies with a conference is coming up in September. So I’m pretty excited about those. I work on that issue through the WATT Coalition, WATT-Transmission.org, and there are a lot of resources there, if folks are interested.
Stone: Rob, thanks for talking.
Gramlich: Great, Andy. Thanks a lot.
Stone: Today’s guest has been Rob Gramlich, President of Grid Strategies. If you enjoyed this podcast, you may also like other episodes, all of which are available on the Kleinman Center’s website, Apple Podcasts, and other apps. We have a recent episode on the efforts of coal communities to stake out their post-coal future. There’s a podcast on the Federal Energy Regulatory Commission’s drive to be more accountable to environmental concerns, and we also have a recent episode on the potential risks of nature-based climate solutions.
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