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USA update: Transmission top of the agenda?


Don C. Smith

In 2008, the United States Department of Energy (DoE) reported that the US could generate 20% of its electricity from wind energy by 2030, though noting that transmission issues represented a key challenge in meeting this target. One year on, some political steps have been taken – but what happens next? Don C. Smith examines the current status of the transmission issue and forecasts the possible road ahead.

Without adequate transmission, the US Department of Energy (DoE) has cautioned that the integration of significant amounts of renewable energy into utilities’ generating portfolios would be virtually impossible. And for the US to expand its generation and use of renewable energy, the country’s antiquated and rickety transmission system must be overhauled.

On publication of the report, 20% Wind Energy by 2030, DoE’s Assistant Secretary for Electricity Delivery and Energy Reliability, Kevin Kolevar, went on record to say, “greater penetration of renewable sources of energy – such as wind – into our electric grid will have to be paired with not only advanced integration technologies but also new transmission. In many cases, the most robust sources of renewable resources are located in remote areas, and if we want to be able to deliver these new clean and abundant sources of energy to population centres, we will need additional transmission.”

Unfortunately, progress on the transmission issue over the last year has not been as fast or significant as necessary to put the country on a track to meet the 20% target. As one indication of this, the American Wind Energy Association (AWEA) recently released a “report card” that ascribed a grade of “C minus” to the progress on transmission and integration as they were set out in the '20%' report.

Among other things, the AWEA report card said, “isolated positive developments occurred in 2008 and 2009 that reflect a significant change from transmission policy in 2007 and 2008, but given the urgency and scope of changes outlined by the “20%” report, the changes still fall well short of what is needed.”

So why is the world’s richest country still operating with a largely inflexible transmission grid? And what needs to be done from a policy standpoint to address this major impediment to increasing integration of renewable energy? Understanding these matters sheds considerable light on what challenges and opportunities lay ahead.

"The Renewable Electricity Standard (RES) would provide potential investors the confidence they need to invest major sums in an updated transmission grid."
 

First, the matter of why the transmission grid is organised as it is requires a look back to the very beginnings of the US electricity sector. As Kate Marks, Managing Director of the National Association of State Energy Officials, explains, “initially the power system was distributed and generators were located where electricity was used. This all changed in the 1890s when stronger transmission lines were developed that could transfer electrons much longer distances. The economics and ability to serve more people with more power led to consolidation of the smaller, more distributed generation companies into larger monopolies. States, in turn, extended their regulatory power from railroads to electricity and by 1914, 43 states regulated electric utilities.”

During this era, state utility commissions – which regulated the monopolies – acquired the authority to regulate most transmission issues.

By contrast, the Natural Gas Act of 1938 gave the Federal Power Commission (FPC), the predecessor of today’s Federal Energy Regulatory Commission (FERC), the power to decide transmission issues - including where gas-related transmission lines should be located.

According to John A. Carver Jr., who was a member of the FPC from 1966-1972, “the idea [of federal jurisdiction for gas-related issues] was that the industry could only work if you had a transmission system that was, in effect, a country-wide system regulated by the FPC. You needed a way to bring the gas from where it was – southern Louisiana and Texas – to where it was needed in places like Pittsburgh and Chicago.”

Put another way, today the transmission of electricity continues to be largely handled by the states while the transmission of natural gas is primarily handled by FERC. What has worked so well for the transmission of natural gas has never been adopted in the electricity setting.

A second major consideration in tackling the transmission issue relates to the lack of a federal renewable electricity standard or RES. Currently the Federal Government does not require utilities to derive a certain percentage of their electricity from renewable sources. Despite the absence of federal law on this issue, more than half the states have enacted “renewable portfolio standards” (RPS). Nevertheless, this brings to mind what the federal interstate highway system might resemble today if it existed in some states but not all states – at a minimum, it would be a wildly inefficient system as compared to what it now is.

Whether a strong Federal standard is in the offing remains unclear. In May 2009 the US House of Representatives passed an Energy Bill that will require utilities to derive 20% of their electricity from renewable sources by 2020. However, the Bill also allows for 8% of the 20% to be obtained from energy efficiency.

Meanwhile the US Senate’s Energy Committee has approved a Bill that calls for a renewable electricity standard of 15% by 2020, but it also allows for 8% of that to be met through energy efficiency. Whether the Senate will pass a measure resulting in a conference committee (in which the conference would try to work out the differences between the Bills) between the two houses of Congress remains uncertain.

How to remedy the situation

Bearing all of this in mind, there are several ways to 'remedy' the situation in order to vastly improve the chance of success in meeting the 20% target. The logical place to begin is for Congress to place in Federal hands the authority for planning, permitting, and paying for an overhauled transmission grid. Part of this would necessarily mean that the siting of transmission lines – long a cherished power of State authorities – would need to be given entirely to FERC.

"It is time for the USA to put into place the underpinnings for a new generation of energy based on renewable sources. The road begins with a new transmission system and a strong Federal RES."
 

In addition, the Congress needs to establish a nationwide renewable electricity standard (RES) that is strong but fair to those regions of the country where renewables might not be as available (such as the southeast). The House bill’s 20% and the Senate bill’s 15% are entirely too conservative, particularly when taking into account that a large portion of those numbers can be achieved with energy efficiency.


Instead, the Congress should enact legislation calling for a 20% RES by 2020 and 25% by 2025. In the short term, there may be difficulties in meeting this target. But in the longer term, the nation will benefit hugely from an aggressive target established now. How different the US energy economy would look today had the nation followed through on previous calls for energy reform in the Nixon and Carter administrations.

The RES would also provide potential investors the confidence they need to invest major sums in an updated transmission grid.

Looked at together, an overhauled transmission grid combined with a strong RES will go a considerable distance to ensure that greater amounts of renewable energy are integrated into utilities’ generating portfolios.

And there is a final step too: Congress needs to establish a price on emitting carbon. The House bill includes a cap-and-trade system, unambitious as it might be. A Senate committee continues to work on such a provision. By October or November 2009, it should be clear what Congress is going to enact (or not as the case may be).

All too often US politics does not distinguish itself when it comes to making difficult decisions. And as a result, some major opportunities for progress have been left undone. But in this instance, it is difficult to see the wisdom in not moving ahead aggressively and quickly. A strong, flexible, and vibrant transmission system would benefit the entire economy. Similarly, a strong but flexible renewable electricity standard would generate the clean electricity that will flow on an advanced grid. The two concepts work hand-in-hand.

In February 1955, President Dwight Eisenhower said an interstate highway system was vital, telling the nation, “together, the uniting forces of our communication and transportation systems are dynamic elements in the very name we bear – United States. Without them, we would be a mere alliance of many separate parts.”

Obviously, the comparison between the interstate highway system and a new transmission grid is not perfect. But the underlying logic is the same: it is time for the US to put into place the underpinnings for a new generation of energy based on renewable sources. The road begins with a new transmission system and a strong federal RES.

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