Large wind and solar farms are widely viewed as the core building blocks of the energy transition; however, all building blocks need a foundation. For wind and solar power, that foundation is electric transmission, and we aren’t on track to build sufficient additional transmission capacity to realize the full potential of low-cost renewables.
Much ink has already been spilled about why we’re falling short on transmission build. I won’t spill much more here. In sum, the problem is the NIMBY (not in my back yard) mentality and regulations which give effective veto power over nearly any big energy project to state and local permitting authorities.
The question before us is: What consequences should we expect from bottlenecks in transmission development?
One somewhat positive consequence is an opportunity for new technology that will “do more with less.” At Energy Impact Partners (EIP), we see several categories of technology which have the potential to make the most of every permitted transmission corridor. Solutions generally fall into one of two buckets: 1) new sensing, analytics, and control tools for grid operators to maximize the capacity of the lines we already have; and 2) higher capacity conductors which are able to carry more energy via a less imposing physical footprint (e.g. smaller towers and narrower corridors).
While new technology can surely make a difference, I won’t sugarcoat the difficulty of implementing new solutions in the electric transmission business. Frankly, it’s among the most risk-averse segments of an (appropriately) risk-averse industry. I’m hopeful that new tools can be validated and adopted at scale in the coming decade, but still hold the expectation that we’ll be left with a major transmission gap.
The most obvious second order consequence of transmission falling short is that renewables, too, will fall short. But … not uniformly. In the near-term, I still expect to see more and more renewables crammed into areas with the strongest wind and solar resources with lots of open space left over. In the U.S., wind and solar projects subsidized by federal tax credits in these regions are so cheap that they can be financed fully anticipating that there will be frequent periods when they’re forced to curtail their output due to surplus generation.
In the long-term, though, transmission constraints will ultimately limit the growth of renewables, which will lead to untapped potential and an economic loss for society as a whole. When energy system modelers develop scenarios with high levels of renewable power generation, those scenarios also inevitably include a massive expansion of transmission capacity. One study from MIT found that a slate of “Big Transmission” initiatives could nearly halve the cost of delivering zero-carbon electricity to consumers. Similarly, the landmark Princeton University “Net-Zero America” study found that we’d need to more than triple current U.S. transmission capacity in order to achieve the most affordable, fully decarbonized energy mix, which also happens to be a mostly renewable one.
These dynamics suggest a complicated third-order impact on the emerging opportunity for energy storage technology. Transmission and storage are in some ways substitutes, and in others complements. For areas with especially high renewables penetration, new transmission reduces the need for storage by enabling wind and solar intermittency to be balanced across a bigger system. Yet transmission is also ultimately required to support higher levels of renewable power penetration everywhere. Hence, in the long run, a loss for transmission is also probably a loss for storage.
In the near-to-medium term, though, transmission’s loss is going to be storage’s gain. In the U.S., inadequate transmission expansion means more wind power bottled up in the Plains, and more solar energy stuck in the Southwest. The opportunities for grid storage to profit from this volatility will be plentiful. My view is that the biggest winners will be today’s leading storage system integrators like Powin Energy, which is ready to deploy lithium-ion-based systems rapidly, at massive scale. (Note: Powin is an EIP portfolio company.)
Another second-order effect of transmission shortfalls might be additional economic divergence between cheap renewable “haves” and “have nots.” If large energy consumers can’t access cheap, clean power via transmission, perhaps they’ll go directly to the source. For example, by working with a company such as Rondo Energy, also in the EIP portfolio, large industrial heat consumers could set up shop in locations with the very best wind or solar resources, and perhaps skip the need for a grid connection altogether. Going to the source is also a smart move for hydrogen electrolysis, which can really only be done cost-effectively at large-scale, with the cheapest possible renewables.
Lastly, failure to build sufficient transmission will accelerate the need to turn to alternative zero-carbon primary energy resources—preferably, geography-independent, low-land-utilization resources. Nuclear is of course the most proven, and still the most likely candidate. But a dearth of renewables also leaves a bigger gap for novel geothermal power or carbon capture and sequestration technology to fill.
Building a large-scale energy grid the first time around certainly wasn’t easy, but it was obvious that the benefits outweighed the costs. Hopefully, the second time around we will come to a consensus and realize the benefits of clean energy outweigh the costs of transitioning our outdated grid.
—Andy Lubershane is a partner leading research and innovation for Energy Impact Partners.