The Renewable Energy Supply Chain Problem: A New Geography of Power Supply and New Species of Electricity Transmission

02 February 2022
Dr. Jeff D. Makholm

In the February issue of the Electricity Journal, NERA Managing Director Dr. Jeff D. Makholm examines the renewable energy supply chain problem facing the United States, which he observes is rooted in the geography of the country. The best low-cost, renewable generation sites (in the country’s interior) are inconveniently located far from the population load centers. To transmit renewable power from generation sites to consumers often necessitates crossing state lines and various organized regional wholesale power markets—a trip that existing US transmission networks (designed first for reliability and second for low-cost regional wholesale power markets) were not designed to accommodate.

Dr. Makholm notes that utilizing competitive interstate transmission investment to overcome geographical entry barriers poses a huge challenge; however, both Congress and the Federal Energy Regulatory Commission (FERC) have experience meeting such a challenge, yielding trillions of dollars in competitive energy prices for US consumers (compared to their European counterparts). Indeed, the FERC has had great success fostering competitive interstate pipeline transmission in the US gas market, which should be instructive as Congress and the FERC face similar transmission investment and siting problems regarding the new geography in renewable generation.