Carbon-Free Power Requires a Green Connected Grid

Source: By Editorial Board, Bloomberg • Posted: Wednesday, March 24, 2021

That will take federal investment and states willing to cede some authority.

It’s all about networks.

It’s all about networks. Photographer: Bing Guan/Bloomberg

The sharing economy, from taking Uber rides to uploading our lives to the cloud, seems so 21st-century. But electricity has been all about networks since 1909. That’s when Thomas Edison’s protege Samuel Insull began tying farm towns into his nascent Chicago grid. He found that by serving different patterns of demand, shared generating stations could deliver more power, cutting the price of modernity for everyone.

This founding principle should be rediscovered — both to fight climate change and to make energy supply more resilient.

The Biden administration has called for a zero-carbon grid by 2035. It’s a stiff challenge, one that would require years of sustained effort uninterrupted by changes of political control in Washington — and the cost would run into trillions. But the goal is right, and settling for the status quo really isn’t an option. The question is how to make progress toward carbon-free power as quickly and as cost-effectively as possible. And part of the answer is renewed attention to networks.

Texas’s recent energy crisis offered a brutal reminder of their importance. More interconnection of the state’s famously isolated grid would have helped stave off disaster. The widespread ice storm hit neighboring networks, too, but better linkages with the wider U.S. allowed them to move scarce power around, limiting the severity of their own blackouts.

The grid has a less recognized role in fighting climate change. An example: Virtually all U.S. onshore wind-power potential and more than half its solar potential lie in 15 states between the Rockies and the Mississippi (including Texas). Yet those states account for less than a third of U.S. electricity demand. Linking those clean resources with demand elsewhere in the country is critical to cutting emissions. Tying intermittent renewable sources together over larger areas also enhances resilience: Wind farms hundreds of miles apart spin at different times but supply the same grid.

As Insull discovered more than a century ago, networked power sources also enjoy higher utilization, reducing the cost of each kilowatt-hour. In a reportpublished last August, researchers modeled linking the separately managed southeastern grids under a single regional operator. Their conclusion? The move would save consumers almost $400 billion by 2040 while cutting carbon emissions roughly in half. Similarly, the National Renewable Energy Laboratory considered a scheme to strengthen connections between the Eastern and Western grids covering most of the lower 48 states (excluding much of Texas), and found this would yield up to almost $3 for every dollar invested.

The economic aspects of interconnection are straightforward, but its regulation is not. Reforms since the 1990s have brought about two-thirds of U.S. electricity consumers under competitive wholesale markets, some of which span multiple states. Yet the Federal Energy Regulatory Commission’s push for further integration and regional planning has met local resistance and stalled — in the process, slowing efforts to address climate change. For example, at the end of 2019, some 734 gigawatts of proposed generating capacity — most of it in the form of renewables or storage — languished in queues awaiting connection.

FERC’s powers may be limited, but it can do more. Taking a firmer line on transmission investments proposed by utilities could push more of them to put their planning in the hands of independent regional bodies. In addition, the 2005 Energy Policy Act grants the Department of Energy the power to designate priority transmission corridors; if states refuse to comply, FERC has the authority to approve projects. Court challenges stymied early efforts, yet the legislation remains on the books. The Biden administration should work to revive it.

The best way to knit the U.S. grids together would be for Congress to set a net-zero goal via legislation and empower FERC to impose bigger regional transmission operators. Biden’s Build Back Better infrastructure plan could be turned to that end. The promise of new federal investment in a more connected grid might persuade states to cede some planning authority.

New federal funding should aim to bring in private capital. And this support should be conditional on projects conforming to national climate goals and long-term planning. Similar to existing renewable portfolio standards, this approach could grant states flexibility in how they procure cleaner energy, while building efficiency of grid operation and bang for the buck into their calculations — thereby favoring region-wide plans. And then there’s job creation: Transmission, distribution and renewable energy account for more than half the construction jobs in the U.S. energy sector.

A green grid is a giant investment, making it an easy target for opponents. But the benefits greatly outweigh the trillion-dollar costs — and tapping the scale economies of networks would maximize the return on private and public money spent. What was true a century ago, surprisingly, remains true today.

To contact the senior editor responsible for Bloomberg Opinion’s editorials: David Shipley at davidshipley@bloomberg.net .