In the January 2024 issue of Wiley Journal Climate and Energy, NERA Senior Managing Director Dr. Jeff D. Makholm and Director Dr. Laura T.W. Olive explore the broad consensus calling for more US transmission infrastructure to speed up the entry of new renewables into the resource mix. Against that consensus is what the US electricity industry knows as “the queue”—a waiting line for renewables larger than the entire existing US generating fleet. The transmission needed to deal with that queue signals the country’s most pressing energy transition problem.
The Department of Energy (DOE) is trying to help, with $1.3 billion in recent commitments for three transmission projects, which reflects the agency’s goal of promoting clean energy in diverse forms. Those projects position the DOE as a helpful anchor tenant for innovative transmission capacity projects. As an anchor, the DOE boosts confidence in such projects, motivates additional parties to reserve their own participation, and reduces the risk for project developers seeking investment capital for ventures that can hasten the entry of renewable generation—thus shortening the queue.
The queue itself manifests as a failure of existing US regional transmission organizations (RTOs) to deal with the new interstate geography of renewable energy, where the supply of renewable power is both intermittent and unevenly distributed throughout the country. The creators of the federal legislation that defines the federal role in electricity never anticipated the kind of interstate commerce that renewable energy demands of the nation’s electricity grid.
In this article, the authors describe two possible paths for dealing with the queue: (1) scaling up the RTO model or (2) “contractualizing” new high-voltage, direct current (HVDC) links between resource-rich states and those lying in natural resource deserts (such as the Southeast, Upper Midwest, and New England).
The Federal Energy Regulatory Commission (FERC), as evidenced in its Notice of Proposed Rulemaking (RM21-17-000) on transmission planning, is all about RTOs—calling for more RTO planning and rules for “clustering” those projects in the queue. The authors find fault with that approach—referencing other scholarship pointing to the FERC’s failure to consider investment risk (contrary to the DOE) and the lack of RTO incentive to solve the queue problem.
Which path to take: Centralized or decentralized? “Clustering” or contracting? Federal or state planning on routes and rights-of-way? As evidenced by its actions in 2023, the FERC seems dedicated to centralized, federal planning and control. The other path, however, seems more consistent with the way that the US traditionally gathers the capital for investor-owned ventures to provide interstate energy services. This other path deals with contract-based risk reduction for investors—an explicit goal in DOE projects. To the authors, in a nod to Robert Frost’s poem “The Road Not Taken,” this latter path, representing the DOE’s work, could make “all the difference.”
Makholm, Jeff D and Olive, Laura T.W. (January, 2024). “The Road Less Traveled: Another Path for the Energy Transition,” Climate and Energy, 40/6, ©2024 Wiley Periodicals, Inc., a Wiley Company.