Integrating renewables into US utility portfolios

Don C. Smith

One of the most vexing challenges facing US utilities in integrating more renewable energy sources into their energy portfolios can be summed up in two words: improving transmission...

Irrespective of how many wind farms or solar parks are built and how much energy they generate, the fact remains that the electricity generated in these facilities will be of relatively little use unless it can be transported to demand centres across the country.

A key hurdle related to substantially increasing the role renewable energy will play in America's future energy portfolio is one that at first appears simple and yet on further examination is perplexing. Put simply, energy generated from renewable energy facilities must be transmitted to population and industrial centres where the demand is highest. The current transmission grid was never intended to serve such a purpose, a matter that the utilities, policymakers, and other stakeholders must successfully address if renewable generation is to reach its full potential.

The underlying problem – which some have called the ‘dirty little secret of clean energy’ – is illustrated in a new report by Boston-based consultancy the Analysis Group. Authored by Susan F. Tierney, who was a member of the energy-related issues transition team for President-elect Barack Obama, the report concludes the US will not fully exploit its “rich domestic renewable resources in the near term without strategic improvements to the electric transmission system.”

For example, wind farms must be located where the wind blows, and consequently “wind power development is inextricably tied to electric transmission,” Tierney writes. “Many recent studies have concluded that ensuring adequate transmission is built to deliver power from remote renewable projects to consumers in distant markets, is just as important as developing the renewable resources themselves,” she says.

There is widespread agreement that constructing this ‘super transmission grid’ needs to be addressed now. A recent report by the North American Electric Reliability Corporation (NERC), the self-regulatory non-profit organisation for bulk power system reliability in North America, concludes: “The existing bulk transmission network is inadequate to reliably deliver power from new renewable resources to demand centres.” Rick Segal, the President and ceo of NERC, has bluntly stated: “We believe that inadequate investment in transmission lines will be the primary limitation to delivering clean, reliable power to consumers. Indeed this issue is already occurring in some areas, with forced curtailments of wind generation due to insufficient transmission capacity.”

The new transmission system would preferably be an extra high voltage (EHV) supergrid, which would overlay and easily integrate with the current lower voltage electricity grid. As an example it would allow for the efficient long distance transmission of electricity generated by wind farms in, say, western Kansas or eastern Colorado to Atlanta, Miami, and New York.

Energy company AEP, which has experience with its own existing EHV 765 kilovolt (kV) network, says that the nation's transmission system “must be developed as a robust interstate system, much like the nation's highways, to connect regions, states, and communities.” Such a system, consisting of 19,000 miles of transmission lines, would establish a combined additional capacity of perhaps 200-400 GW of bulk transmission, thus spurring significantly increased levels of wind energy in the overall energy portfolio. The cost, as estimated by AEP, would be in the range of US$60 billion (in 2007). By comparison, the US military budget for fiscal year 2009 is more than 10 times that amount.

Two key issues in developing a super transmission grid involve dealing with transmission line siting decisions and providing for reasonable and equitable policies to allocate the costs of building the new transmission system. In both cases, what is needed is a federal response, specifically giving the Federal Energy Regulatory Commission (FERC) authority to take bold and decisive action. This will, of course, raise the long-standing controversy surrounding federal versus state powers, but there is no compelling reason not to hand the responsibilities for these matters over to FERC. Despite states' assertions to the contrary, the development of the supergrid cannot be left to the vagaries of 50 state responses.

The siting of transmission lines has traditionally been handled by state level public utility commissions, and these commissions have tended to aggressively protect their corner when it came to anything that could be interpreted as reducing the states' powers. While such an argument might have been reasonable years ago when the overall energy stakes were much lower, in today's world the possibility (indeed probability) that individual states may be able to subvert the needs of the nation as a whole are as antiquated as the concept that states should have their own currencies.

Moreover, investors in a supergrid would unquestionably be unwilling to even consider funding such efforts if the projects faced a veritable maze of state-level decision making processes. As such, FERC should have the sole responsibility – although after seeking the advice of the states – for making transmission line siting decisions.

Similarly, FERC should decide on cost allocations for building the supergrid transmission lines. At the heart of this should be costs allocated on a regional or even nationwide basis, not on a local or state basis.

Admittedly, this approach reflects a new paradigm in thinking about transmission-related issues. Historically, electricity typically involved moving the fuel to the consumer (for example, building coal-fired plants near demand centres and transporting coal in often enormously long train routes to the plants). Now, however, utilities must be encouraged to generate the electricity where the ‘fuel’ is (i.e. where the wind blows in the case of wind power) and deliver the electricity to the demand centres.

One context in which to consider the challenges and opportunities associated with a new supergrid transmission system involves looking back at the philosophical underpinnings of the US Interstate Highway System, an effort begun nearly a half century ago by Republican President Dwight D. Eisenhower. As Susan F. Tierney writes, the vision then was to unite the states in a ground transportation system that would hasten commerce, recreation, and development. “It is easy to believe that the original estimates of the system's value barely scratched the surface of the actual returns we have realised from the nation's investments in our interstate highway system,” she writes. Similarly, “A national EVS overlay built to connect the nation's … wind, biomass, and solar resources … will help to produce economic development, strengthen energy independence, and satisfy customer demand in markets throughout the country,” she concludes.

There are indications that the Obama Administration clearly understands the opportunities at hand. As a presidential candidate, Obama said last September: “We're going to have to rebuild our infrastructure, which is falling behind … making sure that we have a new electricity grid to get the alternative energy to population centres.” In January, Rob Church, vice president for the influential American Council on Renewable Energy (ACORE), said: “The Obama Administration is very up to speed on this issue and we understand it's very important to them.”

And this was also confirmed in a speech of 8 January, in which Obama made it clear that renewables – and updating the grid - would play an important part in “saving” the US economy. Outlining his American Recovery and Reinvestment Plan, which could see spending of up to US$775 billion and the creation or saving of three million jobs, Obama said that energy is one of his priorities. But as well as using “clean energy” as a job creation tool, he addressed the need to upgrade the American transmission system, pledging to start building a new smart grid. According to a report from consultancy KEMA, an investment of US$16 billion in smart grid incentives over the next four years could work as a catalyst in driving associated smart grid projects worth up to US$64 billion. It also predicts that by the end of 2009, over 150,000 of the 280,000 new direct jobs will have been created.

Despite the many compelling reasons to move ahead quickly and aggressively with a new supergrid, there will be many political issues to address not least of which is the matter of providing legislative authority to FERC to make the difficult decisions related to this effort.

States and many local politicians will criticise this approach, but such criticism needs to be set in the context of similar objections raised 50 years ago by those who opposed the US Interstate Highway System.

Even Joseph Kelliher, who was appointed FERC's Chair by President George W. Bush, agrees that the additional authority should be mandated by Congress: “Without that authority, we are actually not going to develop a grid that this country needs to ensure reliability, to support wholesale competitive markets, but also to meet the climate change challenge.”

About the author

Don C. Smith is renewable energy focus' US correspondent. He serves as Director of the Environmental and Natural Resources Law & Policy graduate programme at the University of Denver Sturm College of Law, and as Editor in Chief of Utilities Policy, a peer-reviewed journal focusing on the performance and regulation of utilities. He can be reached on +1-303-8871-6052.



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Energy efficiency  •  Energy infrastructure  •  Geothermal  •  Policy, investment and markets  •  Solar electricity  •  Wind power



sterilizers said

11 June 2009
Its interesting that no mention is made of the option of first building massive electricity/energy storage plants that could have the effect of substantially reducing the size and cost of the proposed super grid while also substantially increasing the quality and value of the output power.

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