As a follow-up to our June 2021 white paper, “What Makes Building Electric Transmission So Hard?”, this paper reviews developments over the last three years and assesses whether they will help address the issues we identified.
Transmission in the United States is a critical piece of the clean energy transition. As has been stated many times, “there is no transition without transmission.” The 2021 White Paper described the challenges associated with building transmission in the following areas: U.S. transmission planning, cost allocation, transmission interconnection queues, ratemaking and incentives, and siting and permitting. In the last three years, we have seen important progress in transmission planning and cost allocation, backstop siting, and interconnection queues.
Since 2021, FERC has initiated several dockets to address both historical issues, such as a lack of interregional transmission, and new issues, such as the rapidly changing resource mix. As described later in this paper, FERC has issued some important orders in the last year: Orders 2023, 1977, and 1920. However, the power industry continues to face tremendous pushback on siting and permitting across the myriad jurisdictions that can weigh in. Continued uncertainty in rate-making and incentive treatment may make investing in transmission less attractive at a time when the industry has agreed that more is needed.
While the power industry continues to invest in transmission infrastructure, it is not investing at the pace needed to meet the ambitious clean energy targets set forth by the current administration, investor-owned utilities, state legislatures, and various private companies. Importantly, the cost to build transmission (as with other infrastructure) is rising, which means that less is built for the dollars allocated and the anticipated costs of the transmission build-out needed to continue to increase.
In addition, the pace required to meet the needs of the energy transition is accelerating due to the large number of loads seeking to interconnect with the grid across the country. Demand is increasing at a rate not seen in decades, putting pressure on utilities to increase the capacity of their systems (both in generation and grid infrastructure).
In summary, the changes made over the past three years are a start toward the kind of reform necessary to build more transmission, but they are inadequate to do so as quickly as needed. The emergence of large loads only increases the urgency of this build-out.