Keep grid modernization a national priority

 

As the possibility of national climate change legislation increases on Capitol Hill and captures the attention of the electric power community, I am concerned that regulators, legislators, and utility executives will forget the urgency of modernizing the U.S. electricity delivery infrastructure. On the surface, the issues of reducing greenhouse gas emissions and upgrading and expanding transmission grids seem to have nothing in common. That is certainly not the case.

Electricity planners are now deciding where, how much, and what kind of new capacity to build to meet future demand. More of that new capacity—wind farms, solar power arrays, and clean-coal facilities—will emit a lot less CO2 than power plants of the past. New transmission lines also will be needed to bring the output of those new plants to market because all three technologies work best in remote areas, far from load centers.

Current debate

I recently had the privilege of managing the 2007 National Electricity Delivery Forum. Attendees included CEOs and senior executives from government, industry, trade associations, and academia. What I found most interesting about public and private conversations at the forum was the overwhelming consensus that electricity delivery infrastructure must be built now, regardless of political industry drivers—such as the possibility of mandatory carbon caps.

For most forum attendees, the question was no longer whether new infrastructure is needed, but rather how to expand and strengthen the existing nationwide system to make it better able to serve growing U.S. demand. I was glad to note this sea change, and I hope that the enthusiasm for investment in transmission will not be overshadowed by calls for action on climate change.

Roles and responsibilities

What will it take to reverse decades of underinvestment in transmission? Capital is available, but Wall Street won’t risk investing it without greater confidence in the commercial viability of new, cleaner power production technologies. Utilities will continue to be tentative about investing until Wall Street responds. But Wall Street won’t favor transmission infrastructure and clean energy projects unless they reflect sound, certain public policy.

Regional planners will play a role, too. Most open-access regional transmission organizations (RTOs) are developing long-term plans that not only address how much new transmission capacity is needed but also how to use existing grids to implement demand response and energy-efficiency programs. In my opinion, all regions, regardless of market structure, must follow suit—and quickly. We can no longer allow certain regions to play politics with these issues to the detriment of overall national electricity service reliability.

Utility planners have the difficult task of solving the investment risk/reward equation to the benefit of their shareholders. To do a good job, they must be confident that the regulatory rules of the road will not change and that their investments will be rewarded by reasonable rates of return. Utilities are naturally risk-averse, and even more so in a climate of regulatory uncertainty. As economists tell us, you can price risk, but you can’t price uncertainty.

Individuals also have a responsibility: to weigh for themselves the pros and cons of a proposed transmission line or their participation in a demand response program. Consumers must understand that new electricity infrastructure must be built to support all their new electronic gadgets, and that they will have to help pay for that infrastructure. With a little help, consumers can become more educated users of the system.

But in the end, it will be state utility regulators, backed by the federal government and RTOs, who will shape the climate for investing in transmission infrastructure and cleaner, more-efficient energy technology. The latter category isn’t limited to renewable energy and clean-coal plants. It also includes advanced transmission and distribution technologies such as smart meters and high-temperature superconducting cables, both of which are ready for commercialization. State regulators must be willing to approve utility investments in these technologies. With reasonable rates of return on those investments, utility shareholders will be able to "do well by doing good."

Solutions are available

All of these actors must play their parts to ensure that the U.S. can produce clean, climate-friendly power and deliver it reliably at affordable cost to all users. Grid modernization is a key step toward that goal, so it must remain a national priority. In some cases, infrastructure investment decisions will not be popular. Nonetheless, it is imperative that decision-makers keep the momentum positive. The courage to make the right decisions today on grid modernization will benefit all of us for decades to come. I applaud those who are making these courageous choices.

Peggy Welsh is a senior consultant on electricity and clean energy technology issues in the Washington office of Energetics Inc., a full-service energy consulting firm. She has been the head of a trade association for non-utility generators, executive director of the National Association of Regulatory Utility Commissioners, and a senior vice president of a national energy consumers’ group, the Consumer Energy Council of America. Welsh can be reached at pwelsh@energetics.com.