Monday Study – The Big Wires Needed To Make New Energy Work

Emissions reductions from electricity transmission provisions in energy permitting legislation

Michael Goggin and Rob Gramlich, September 2022 (Grid Strategies)

Summary

The electric transmission components of siting legislation proposed by Senators Schumer and Manchin could facilitate enough grid development to reduce U.S. carbon dioxide pollution by hundreds of millions of tons per year. This is a significant share of the 1.70 billion tons of carbon dioxide emitted by the U.S. electric sector in 2021, 1 and an essential portion of the emissions reductions that must be achieved to reduce U.S. total carbon dioxide emissions by 40% by 2030.

The transmission provisions in the bill are designed to facilitate the construction of new power lines by giving the Federal Energy Regulatory Commission the authority to permit and allocate costs for new transmission, and speed up processes under the National Environmental Policy Act (NEPA). These provisions would significantly reduce carbon dioxide emissions and consumer electric bills by enabling development of low-cost and highly productive wind and solar resources that cannot currently be developed due to a lack of transmission lines to deliver their electricity to population centers. New transmission lines will also facilitate the integration of larger amounts of wind and solar by tapping geographically diverse renewable resources, and ensuring more constant output by reducing the impact of localized weather events. Aside from the benefits driven by spurring renewable development, a stronger transmission system will reduce consumer bills and improve electric reliability by providing greater access to low-cost power, including during severe weather events that have led to blackouts like Winter Storm Uri.

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Introduction

The power sector offers the fastest and lowest cost means of major greenhouse gas reductions in the 2020s because of the affordability of carbon-free electricity sources like wind and solar, and because electricity can very efficiently displace fossil fuel consumption in transportation and heating in the 2020s. Renewable energy sources, however, are held up by transmission limitations. There are presently well over 1,000 gigawatts of wind, solar, and storage projects waiting in transmission interconnection queues, largely because of limited transmission delivery capacity.2 US transmission capacity will need to expand two to three times in order to decarbonize.3 Arguably, transmission is the biggest barrier to US emissions reductions.

We characterize the barriers to transmission as the “3Ps”: planning, permitting, and paying. Planning is required across large regions to produce the most efficient and reliable network, yet the electric industry only has relatively new regional institutions and regional regulatory policies layered on top of the hundreds of electric utilities around the country. Permitting is a barrier for long linear infrastructure because the regulatory authorities are largely local and state-level, and each authority operates independently from every other, making it difficult to acquire the rights for a contiguous plot of land across the hundreds of miles required for the needed lines. “Paying” is a barrier because transmission lines are a classic “public good,” with beneficiaries across many states, yet we do not have a wellfunctioning means of either taxpayer- or ratepayer-funding by all those beneficiaries.

These barriers remain despite recent legislation. A federal tax credit for regionally significant transmission lines could drive significant transmission investment, yet that policy has not yet passed.4 The US Federal Energy Regulatory Commission has proposed transmission planning rules, yet the current proposal would not account for all of transmission’s benefits, potentially resulting in few transmission lines passing benefit-cost tests. The Bipartisan Infrastructure Law contained only $5-10 billion for new transmission lines (despite general media reporting on the bill) which is only a couple months’ worth of national transmission spending. The Inflation Reduction Act included loans for transmission, but loans must be paid back of course, and most developers do not need or want loans or loan guarantees as the cost of capital is not the problem.

Thus, we still have significant planning, permitting, and paying transmission barriers that will prevent clean energy goals and carbon targets from being achieved.

The siting bill would allow proposed transmission lines to move forward while also enabling the development of new transmission lines that have not yet been publicly announced. To determine the emissions reductions from these provisions, we first analyze the policies and then calculate the impact from bringing proposed transmission projects online.

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Policy Description

The bill includes provisions to: • Enhance federal government permitting authority for interstate electric transmission facilities that have been determined by the Secretary of Energy to be in the national interest. o Replace DOE’s national interest electric transmission corridor process with a national interest determination by the Secretary of Energy that allows FERC to issue a construction permit. o Require FERC to ensure costs for transmission projects are allocated to customers that benefit. o Allow FERC to approve payments from utilities to jurisdictions impacted by a transmission project. • Designate and prioritize projects of strategic national importance • Set maximum timelines for permitting reviews, including two years for NEPA reviews for major projects and one year for lower-impact projects. The cost allocation provisions enable FERC to allocate costs to all who benefit from large-scale regional and interregional transmission that are determined to be in the national interest.

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The national interest determination would change the “backstop” federal permitting provisions in Section 216 of the Federal Power Act to no longer include the step of waiting to see what states do, and enable federal government designation and processes to permit in the near term. The permitting provision is project-based rather than corridor-based, potentially avoiding a time-consuming step in the process because ultimately projects need to be approved, and the step of designating a corridor before identifying a project creates a delay.

The “projects of strategic national importance” would apply to some number of transmission projects and speed up their processing.

The NEPA implementation timelines and accountability would codify in statute certain requirements intended to speed project processing and utilize practices that have been under development through the Obama, Trump, and Biden administrations related to accountability and inter-agency coordination.

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Policy Analysis

These policies are potentially very significant for deploying low-cost clean energy around the country. They address certain aspects of transmission planning, cost allocation, and permitting that could provide a pathway for transmission projects that does not presently exist. We analyzed the one page SchumerManchin proposal released in July and a leaked version of draft legislation, and confirmed our assessment of the bill when the bill was released.

Cost Allocation Policy…NEPA Changes…National Interest Designation…Strategic National Importance Designation…Emissions Reductions…

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Conclusion

Because permitting and cost allocation are the two main barriers to transmission development, and because the need for transmission is much greater than is currently being planned, in the absence of power system modeling results it is reasonable to assume that emissions reductions from siting and cost allocation legislation will be at least as large as those from currently proposed projects, if not several times larger. This indicates that total emissions reductions from the proposed bill will likely total several hundred million tons of carbon dioxide per year by 2030.

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