High-Voltage Transmission is a Critical Component of the Energy Transition
The missing piece from the Inflation Reduction Act's overhaul of investment tax credits & actions Congress can take to enhance the impact of renewable energy
Inflation Reduction Act
There is an abundance of commentary on the climate & energy provisions within the Inflation Reduction Act of 2022 (IRA). Rather than posting my own overview, I will share why I feel that the omission of transmission projects from the bill’s overhaul of investment tax credits (ITC) is a glaring flaw.
Before I elaborate on why, allow me to clarify what ITCs are. In the United States, ITCs are subsidies which reduce the tax obligation on projects outlined in an act passed by a state legislature or by Congress. These projects are deemed worthy of incentivizing or accelerating by the legislature. For clean energy projects, the rationale is emission reduction, job creation and cost reduction long-term.
The following are types of projects that have access to ITCs in this bill:
Solar
Wind
Geothermal
Hydroelectric
Some nuclear reactors
Biogas
Any other miscellaneous energy project that can qualify as low carbon (ex. tidal)
Standalone energy storage (ex. battery storage and pumped hydro)
Clean hydrogen facilities (hydrogen captured via electrolysis using electricity from low carbon sources, not fossil fuels)
Carbon capture for fossil fuel power stations
Microgrid controllers
Residential (ex. residential solar, battery storage and heat pumps)
Manufacturing and recycling facilities (included under a different section of the bill with similar rules, ex. electric vehicle batteries, solar panels, and wind turbine blades)
Overview of the new ITC system:
The ITC baseline is 6% but increases to 30% if a prevailing wage requirement and an apprenticeship requirement are met
An additional 10% is granted if the project uses a specified amount of domestically sourced material
For some projects, another 10% is earned if the project is built in an energy community (an area which previously had high employment levels in the fossil fuel industry) or low-income community
ITCs have a long history of incentivizing the development of projects that otherwise would not have happened or accelerating the timeline for projects that keep getting pushed off into the future. The first federal ITCs for renewable energy projects began with the Energy Tax Act of 1978. The original purpose for them was to incentive businesses to use solar or wind to reduce U.S. consumption of fossil fuels and begin the process of commercializing solar and wind. The IRA’s overhaul of ITCs for clean energy projects is effectively a revision and extension of the Energy Policy Act of 2005. Developers of clean energy projects who accept the ITC would have to forego the production tax credit (PTC), which grants credits per kWh of electricity produced.
The most notable new addition is the ITC for standalone energy storage projects. Battery storage (and pumped hydro in very limited geographies) allows for less energy to be curtailed when there is no demand. Energy stored for later use can compete in the market with natural gas peaker plants. From a local (microgrid) perspective (for your own home, neighborhood or county) batteries matter more than building new transmission lines but from a national electricity reliability (macrogrid) perspective transmission matters much more.
Unfortunately, only small-scale projects can receive an ITC for interconnection costs:
“Costs of interconnection property would be eligible for clean electricity projects smaller than 5 megawatts. This credit would be available for facilities and property placed in service after December 31, 2024” (Congressional Research Service).
Why High-Voltage Transmission is Critical
Before continuing, consider watching this overview of how transmission works from Practical Engineering. The video provides a simple explanation for why high voltages matter for reducing energy losses over long distances.
The United States has a segmented and aging electricity grid designed for centralized thermal power stations. The lower forty-eight states effectively have three separate grids that are lightly stitched together. Interconnections to transfer excess supply between regions are very limited. Having more extensive interconnections would allow for regions with excess energy resource to lower costs or help meet demand during extreme weather events in nearby regions. Currently, excess from renewable energy projects is simply curtailed and (in limited instances) stored in grid-scale batteries for later use.
To get maximum value from of renewable energy projects, the United States should build more regional and interregional high-voltage direct current (HVDC) and high-voltage alternating current (HVAC) transmission. These connections alleviate price spikes, reduce wasteful overbuilding and increase reliability.
Take the ERCOT grid in Texas for example. The eastern side of the state, where most major cities are, often has substantially higher rates than the western portion of the state, where most of the wind resource and space for building large solar farms is. Building in-state HVAC transmission would alleviate that problem and last around 80 years. Additionally, interstate HVDC could benefit Texas by allowing the state to export on days where there is excess and import during extreme weather events. Winter Storm Uri in February of 2021 would have been much tamer had there been interconnections to Colorado (excess wind resource) and towards New Mexico, Arizona and southern California (excess solar resource).
The benefits go in both directions. When California inevitably has power shortages related to wildfires threatening major transmission lines, imports from elsewhere would help. Having the means to export excess would allow CAISO and ERCOT to approve more solar projects without worrying about what to do when other resources are already covering demand. CAISO is already having the ‘duck curve’ problem. Effectively the point where new grid scale solar projects are much less useful, provided the grid has little battery storage or export capacity. This phenomenon is thoroughly explained in Taming the Sun: Innovations to Harness Solar Energy and Power the Planet by Varun Sivaram (currently senior advisor to Climate Envoy John Kerry).
The nation’s highest populated states, California and Texas, are just two examples where the benefits are immediately obvious. Since modern HVDC only has losses of around 3% per 1,000 kilometers, every state would find financial, environmental and reliability benefits from a national or North American buildout. For example, New England states could integrate variable offshore wind into ISO-NE easier by procuring firm hydropower from Canada.
As seen with Maine’s recent referendum on a new high voltage transmission line to bring electricity generated by hydroelectric dams to Massachusetts from Quebec, there will be opposition from various groups of people. Not all routes are worth approving due to the possibility of unique environmental consequences, but NREL research shows that greater interconnection means less ‘overbuilding' of supply in every region of the country. Less land use and fewer raw materials used for powering society is unequivocally a good thing. Having a collective approach to transmission expansion is environmentally responsible and economically sound.
Congressional Action
Congress should start viewing high-voltage transmission as seriously as NREL researchers, the European Union and China view it: as a pivotal technology that will enable variable renewable energy to reach its potential for providing cheap, clean and reliable electricity. Battery storage dominates the conversation on what should be paired with variable renewable energy, but HVDC, HVAC and a base of firm clean energy (nuclear, hydroelectric and geothermal) will likely be the main technologies which enable low carbon grids globally.
Options Congress should consider:
Pass a bill granting the federal government veto power on transmission projects that are on existing rights-of-way (existing transmission routes, highways, and railways)
Pass a bill that gives transmission projects an ITC. Add benefits for using US-made steel, using low carbon steel, and using existing rights-of-way, where possible, to speed up project approval. This idea is not particularly new and should have been included in the IRA. Jay Inslee, Washington state governor and 2020 presidential candidate, included it in his climate platform. Inslee’s strong platform and persistence on making climate a debate topic at DNC primary debates famously led to President Joe Biden improving his own platform
Give states, counties or even specific landowners incentives for approving transmission projects that use new routes, provided that an environmental review has deemed the route acceptable
Allocate funding to Regional Transmission Organizations (RTOs) to collaborate on long-term transmission studies related to building a more interconnected grid. Plan to discuss the topic at least every two years
Look into how NEPA can be improved to save time while still allowing for reasonably detailed environmental reviews. Time is an important part of the equation in addressing climate change and for reducing electricity rates for consumers. The country should not accept major clean energy infrastructure being stuck in an environmental review + legal battle + landowner negotiation loop for over a decade like TransWest Express and Vineyard Wind, an offshore wind project off the coast of Massachusetts that has been in development since 2009. The European Union has streamlined the process for approving offshore wind projects. We should learn from their efforts and apply the knowledge to all clean energy infrastructure
One problem that lies ahead for permitting reform is that progressives and Republicans in Congress are annoyed with Senator Joe Manchin and Senate Majority Leader Chuck Schumer. Allegedly, there was a backroom deal that made permitting reform a priority this fall in exchange for Manchin agreeing to cooperate on passing the IRA. It will be interesting to see how much fossil fuel infrastructure permitting reform will be asked for in exchange for Republicans and Manchin agreeing to support clean energy infrastructure permitting reform. If Democrats can broker a deal where the benefits to clean energy heavily outweigh the benefits to fossil fuels, it may be worth making another compromise like was seen with the IRA’s lease offering conditions.
Recent Media Attention
The most recent media attention on the topic of national or continental high voltage transmission grids is from Bloomberg Green’s senior reporter Akshat Rathi:
Recent Progress in the United States
Some recent progress has been made, although they are rare examples that are a culmination of years, if not decades, of work.
The Midcontinent Independent System Operator (MISO) recently announced a $10.3 billion investment in 18 high voltage lines for their Midwest region. That is enough transmission capacity to support 53 GW of renewable energy projects. The estimated financial benefits are significant (and likely conservative):
“While the projects were designed to maintain grid reliability amid a changing generation mix, MISO estimates that it will bring $23.2 billion to $52.2 billion in present value net benefits over 40 years, including up to $19.9 billion in congestion and fuel cost savings, according to a presentation by Aubrey Johnson, MISO vice president of system planning and competitive transmission” (Utility Drive).
MISO is the furthest ahead of any RTO on planning transmission upgrades that unlock the full potential of renewable energy. They intend to announce two more rounds of projects in the future to cover their other regions. Additionally, they expect to announce long distance projects (likely HVDC) to connect their Midwest territory to their southern territory and with Southwest Power Pool (SPP), which is struggling with transmission capacity and curtailment of renewable energy.
Listen to this Volts episode from David Roberts and Lauren Azar to learn more:
Two major transmission projects, TransWest Express and Sunzia, have made recent progress. TransWest Express, which has been in development for an incredible 17 years, has been resolving many of its last remaining disputes with
landowners and applied to partner with CAISO.
Sunzia is expected to start construction soon and was recently sold to Pattern Energy. These are two of the projects highlighted in a 2021 study showcasing 22 regional and interregional transmission projects that could be built in the near future.
Massachusetts’ new climate bill allows for, but does not require, approval of independent offshore transmission projects. This allows companies such as Anbaric to propose and build solutions for connecting planned and future offshore wind projects into New England’s grid (ISO-NE).
Final Thoughts
I credit two publications for sparking my interest in modern high-voltage transmission: Superpower: One Man’s Quest to Transform American Energy by Russell Gold and NREL’s Interconnections Seam Study. I recommend reading them to get a better understanding on how high-voltage transmission synergizes with renewable energy.
If you want to learn more from the largest companies working on modern HVDC and HVAC, check out their websites: General Electric Grid Solutions, Hitachi Energy (acquired ABB’s historic transmission business unit that combined with Westinghouse’s transmission business unit in 1989), Siemens Energy and Mitsubishi Electric.
Disclaimer: I do not work for or invest in any of the organizations mentioned throughout this post. Nothing I write here should be perceived as investment advice.
Thank you for reading my first Substack post! I hope the sources provided throughout the post were useful. Feel free to share this post and use the comment section.
I will leave you with a lo-fi song to listen to while pondering the future of high-voltage transmission. Since ~2017, I have almost exclusively listened to lo-fi while writing. I thought it would be a fun tradition to start on here.
https://emp.lbl.gov/news/regional-and-interregional-transmission-have
A recent study argues that the benefits of new transmission lines is often understated
One topic which I neglected to mention is the potential for undergrounding portions of high-voltage transmission routes. While it is more expensive, it could be a make-or-break condition for certain communities and landowners. It changes the political calculus a lot. And that's really what this whole topic is about. The technology exists. The economic rationale exists. But preferable politics and public opinion? That is rarely seen in every locale that a route crosses.
https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/study-details-benefits-of-burying-hvdc-lines-along-existing-rights-of-way-69780258