Renewable energy and grid expansion – tied at the hip across America

Investment in the nation’s power grid has been necessary to enable the recent high wind and solar capacity growth across the United States.  Today, there is widespread support for modernizing and growing transmission and distribution systems.  For more than a year, the Federal Energy Regulatory Commission (FERC) has been studying the merits of revising the current electric transmission incentives policy to make transmission development even more attractive to investors.  As a result, there are a tremendous number of renewable enabling transmission projects in power market interconnection queues waiting for approval.  The hope is that these projects will become a reality with federal, state, local, and corporate support.  In addition, meeting the ambitious carbon reduction goals, including the recently announced federal mandate to produce 100% of the country’s electricity from carbon-free resources by 2035, depends on a reliable modern grid.

Moving renewable electricity from resource-rich rural areas to urban demand centers involves an expansive sophisticated web of high-voltage power lines, many that were built years ago to move power from large baseload power plants to urban areas.  The combination of optimizing existing transmission with newly added infrastructure has enabled the rapid growth in wind and solar resources in several areas of the country, including the windy central plains states, Texas, and solar-rich areas like California, the southwest, and the southeastern United States.

The data supports the effort

According to data compiled by the Hitachi ABB Power Grids’ Velocity Suite research team, since 2010, the cumulative transmission and distribution (T&D) annual plant in-service additions by the nation’s major utilities has been a robust $470 billion.  The team derived the statistics from filings made by the largest electric holding companies in America.  Electric plant in-service additions include the original cost of new infrastructure added during the year, making it a great indicator of company investment in the electric grid.

U.S. electric utility T&D in-service plant additions, $

During the same period, the cumulative increase in wind and solar capacity was about 142 gigawatts (GW).  Since 2010, the average annual growth rate (AAGR) in T&D investment has been a robust 9.2%, while wind and solar capacity has grown at an AAGR clip of 25.5%.  The chart below provides a breakout of wind and solar capacity added to the grid between 2010 and 2020. 

U.S. wind and solar capacity additions, 2010-2020, MW

The four organized markets with the highest build-out include the renewable resource-rich Electric Reliability Council of Texas (ERCOT), the Southwest Power Pool (SPP), the Midcontinent Independent Service Operator (MISO), and the California ISO (CAISO), all large wind resource areas, except for California, where solar rules supreme. 

ISO/RTO map

Outside of California, the most recent solar development has occurred in the unorganized regions of the west, southwest, and the southeast U.S. The leading wind and natural gas generating state, Texas, is on a fast track to becoming a supersized solar generator like California.  Today, nearly all future development is expected to come from wind, solar, and natural gas. 

U.S. wind and solar additions by organized market, 2010-2020, MW

Large grid expansion projects in the central and western states have driven some of the largest buildouts in wind power.  One of these efforts stands out in terms of size and scope.

Texas CREZ project enabled huge growth in wind capacity

The Texas Competitive Renewable Energy Zone (CREZ) initiative serves as a classic example of how massive grid projects can become a reality.  The CREZ initiative was born in 2005 when the state passed legislation that established a ‘necessity for new service’ process, that by previous state law, allowed all ratepayers to share in the benefits.  A single agency ran the siting oversight, the Public Utility Commission of Texas.  To support the new policy and laws, local landowners and governments also cooperated and supported the effort. The underlying driver behind the legislation was to connect wind resource-rich areas located in west Texas and the Texas Panhandle with the highly populated urban areas in the central and eastern part of the state. 

The CREZ build-out resulted in more than 3,500 miles of new 345-kV high-voltage power lines across the state – enough to transmit up to 18.5 GW of electricity.  The project was approved and started construction in 2008 and completed, in a relatively rapid 5-year window, in 2013.  The total cost was roughly $7 billion.  Since then, operating wind capacity across Texas has nearly tripled, growing at an average annual growth rate of 13.6%, from 11.7 GW at the end of 2012, to 32.5 GW today. 

Texas wind capacity additions, MW

Some additional benefits derived from the grid build-out include lowering overall average wholesale electricity prices and a significant reduction in CO2 emissions.  Over the past decade, CO2 emissions from electricity production in Texas have declined by more than 20%.  The primary drivers behind these benefits have been the steady high growth in low variable-cost wind resources.  Along with the enablement of more wind resources in western Texas and the Panhandle, the growth in shale gas drilling across the region has benefitted from the increased availability of electricity from the power line build-out.  Based on the tremendous growth in wind capacity in Texas, it can be argued that the Texas CREZ initiative was a tremendous infrastructure success. 

Obstacles to development are many

There are many obstacles to the development of long-haul transmission projects, including the timely acquisition of regulatory permits, dealing with landowner activism, and determining the stakeholders – who will pay and who will benefit when the power lines are energized?  Projects are often prone to lengthy delays and even cancellations.  These factors, plus the high capital investment requirements, mandate that the regulatory process be predictable and supportive.

Lessons learned support grid expansion

The Texas CREZ initiative is a prime example of how massive long-haul transmission projects can be done on time and on budget.  Both developers and regulators have benefited from the lessons learned during this grid build-out.  The Texas effort was built to benefit ratepayers in Texas.  It will take a more complex but doable interregional planning and development process to enable the federal carbon reduction mandates.  Streamlining the development process with expedited permitting and right-of-way determinations and allocating the costs fairly will be keys to future project success. The benefits of grid expansion are many but most importantly include improved reliability and the building of adequate interconnections for wind and solar farms.  Grid investment is the best bet for achieving future carbon reduction goals and maintaining a reliable transmission system.