WIND

Can the US take a giant leap to fix transmission?

US renewables developers and investors have long complained about long interconnection queues and the difficulty of building transmission lines. But a new report says there are reasons to be hopeful.

RICHARD HEAP

November 29, 2023

  • The Inflation Reduction Act has increased already-long US grid queues
  • However, US law firm Troutman Pepper has shared reasons to be hopeful
  • It said closer federal-state cooperation should unlock transmission upgrades

Death and taxes are the two famous certainties in life. For those working in US wind there is a third too: a transmission system that doesn’t work as well as it should.

The difficulty of connecting renewable energy projects to the US grid has long been a source of frustration for wind and solar developers. In 2000, companies spent two years waiting in line for a grid connection for a project, according to the US Energy Transitions Commission, but this had risen to nearly four years in 2021. Estimates today suggest the figure is now closer to five years.

These lengthening queues are the result of a few factors. First, transmission system operators were set up to consider a handful of large centralised fossil fuel plants per year, and are poorly-equipped to consider hundreds of renewables projects. Second, the longer queues have prompted developers to add more speculative projects into queues for consideration, which further clogs up the system. Only around one fifth of schemes that enter queues for grid interconnections in the US actually get built. And third, TSOs now have to plan grid upgrades too, rather than simply manage queues.

This is an over-simplification. The challenges facing the US grid are as complex as they are entrenched, but the result is that over 2TW of projects – mainly solar, wind and storage – were stuck in queues in April 2023, according to Lawrence Berkeley National Laboratory. The passage of the Inflation Reduction Act in August 2022 has caused a further rush of developer interest that adds more pressure on the grid, and one way to help alleviate this pressure is to build more transmission lines.

In its ‘2023 National Transmission Needs Study’ that came out last month, the US Department of Energy spelled out the need for physical upgrades to the US grid. It said upgrades were needed across the US to improve the reliability and resilience of the system; reduce grid congestion; and deliver cheaper power across the US.

However, building these upgrades is far from straightforward. US law firm Troutman Pepper spelled out some of the biggest challenges in a report called ‘Unlocking US Transmission Upgrades – Are We On The Cusp of Real Progress?’ that came out on Monday. It spoke to industry experts to discuss four main areas where development work on new transmission lines can stall. It called them the ‘four Ps’:

  • Planning: Long interconnection queues make it hard for transmission system operators to plan where grid upgrades are most needed.
  • Permitting: Transmission developers can spend many years trying to secure all of the permits they need for large infrastructure projects.
  • Practicalities: Transmission developers face further challenges with securing the parts, materials and skilled workforce that they need.
  • Paying: The cost of transmission upgrades ends up on energy bills, and so transmission developers have to show why they represent value for money.

Challenges in these four areas mean that transmission upgrades are not being built. Think tank Americans for Clean Energy Grid reported in 2021 that 22 transmission projects in the US were ‘ready to build’, but said in its follow-up report this year that construction work has only started on ten of them. This is a concern for developers and investors in the renewable energy industry who are relying on those upgrades.

Federal and state coordination

Yet the analysis from Troutman Pepper suggests there are reasons for developers and investors to be positive. It said that the US federal government is taking steps to improve the way transmission upgrades are planned, including by fostering greater cooperation between federal and state governments in recent infrastructure laws.

It argued that the Federal Energy Regulatory Commission has taken steps in recent years to address the problem of long interconnection queues, but said that the Order No. 2023 that was released in July could lead to significant improvements. Order No. 2023 said that projects waiting in interconnection queues should be considered on a “first ready, first served” basis. This would help to reduce interconnection queues by enabling transmission system operators to focus on the projects that are most viable commercially, and thus help them plan for grid upgrades taking that into account too.

The report also highlighted that the federal government is seeking to establish FERC as lead agency to coordinate and accelerate the award of vital permits for backbone transmission developments; and that policies in the Inflation Reduction Act and the Infrastructure Investment & Jobs Act have been geared to improving coordination between state and federal policymakers and regulators. Its actions have included setting up a Joint Federal-State Task Force on Electric Transmission in 2021.

The report concluded that US policymakers are aware of the joint problems of long interconnection queues and sluggish processes for building new grid links, but that a new era of federal and state coordination on transmission lines could be starting.

We expect wind developers and investors to remain sceptical. Only the most positive market watchers would expect to see large improvements in the system before 2026, and there is plenty that could happen to derail progress before we get there.

But after years of industry complaints, it is good that the US Government is listening.