Updating the grid is going to be expensive: at least $150 billion of investment and probably closer to $200 billion. That’s a lot of coin, but here’s the good news: These investments will earn 9 to 11 percent because that’s the regulated return on transmission assets. This is what’s allowed under the regulatory compact that was first laid out in the Binghamton Bridge Supreme Court case of 1865 because transmission is a natural monopoly. This isn’t like the deregulated power generation market; there’s actual competition there so independent power producers like Calpine Corp. can — and do — go bankrupt. Investors can lose everything. Not here — these returns are guaranteed.

The formula is pretty simple. I won’t bother to explain it:

Total revenue requirement = rate base × allowed rate of return + expenses

Biden just unlocked private investment in the grid. It is the most fundamental infrastructure there is — a giant power cord that connects supply with demand. These are valuable assets so the private sector should be lining up to invest. David Swensen made his reputation by championing investment in novel asset classes, and this one is sitting right in front of us: X marks the spot. Pensions and large companies like Apple, Alphabet, Microsoft, and Amazon are sitting on mountains of cash that should be jonesing for private finance initiative projects to build transmission for the federal government, give operational control to a regional transmission organization, and receive the approved return from ratepayers. Do more than consume the power — bank the returns!

One of the most urgently needed policy changes, several clean energy experts and transmission developers argue, is an investment tax credit specifically for transmission projects, which would allow developers to deduct a certain percentage of their costs from their federal taxes. A bill establishing a tax credit for transmission lines has already been introduced by Senator Martin Heinrich, a Democrat from New Mexico, and the concept also appears in Biden’s major infrastructure proposal, the American Jobs Plan. 

Whereas utilities know they can recover the cost of new transmission lines from the ratepayers they already serve, private developers need to confirm that at least a portion of the energy they transport will be purchased, whether it’s by utilities themselves or large corporate energy users like data companies. Many developers, Gramlich said, are ready to begin building, but don’t have quite enough customers to comfortably pull the trigger on construction. A tax credit would help the “project economics pencil out,” he explained, boosting transmission projects over the hump toward completion. 

Joe Kalin in News-Press Now

Joe Kalin has fond memories of growing up in the Buchanan County countryside.
His father came from Switzerland and turned 87 acres near Faucett, Missouri, into a successful dairy farm, where Kalin lived and worked with four brothers and a sister. Before passing it to the next generation, Kalin’s father instilled a deep appreciation for the land and its productive capacity.
“My parents both come from the old country,” said Kalin, now 84. “My father, he loved to farm. It was given to us boys as an inheritance. We were always told to take care of it, that it would care of us.”

It’s a 780-mile, high-voltage transmission line that threatens to cut through the land that brought John Kalin to America in the 1920s. The project, known as the Grain Belt Express, seeks to transfer wind power from western Kansas to population centers east of the Mississippi River.

For his part, Kalin said he isn’t against green energy but opposes being forced to pay the price while others reap the benefits. He doesn’t want to look out the window and see 150-foot power poles where his father once saw a landscape reminiscent of an alpine meadow.
“I don’t like the government telling people what they can do and can’t do with their land,” he said.

“DOE is making financing available for projects that improve resilience and expand transmission capacity across the electrical grid, so we can reliably move clean energy from places where it’s produced to places where it’s needed most,” said Secretary of Energy Jennifer M. Granholm.

Observing the report’s map, Skelly said, “If you squint a little bit, you can see the beginnings of what would be a nationally connected system. Obviously, there are plenty of gaps here, but … if these lines get done, then we have the beginnings of a something” that could “grow organically into a national grid.”

Among the projects are a few originally proposed by Michael Skelly’s defunct Clean Line Energy Partners, including the Grain Belt Express and the Plains & Eastern Clean Line.

“The reason we put these projects on the list is because they’re sited, and they’ve got interconnect agreements, and they’ve got studies; they’re ready to go,” said Skelly, now a senior adviser at Lazard, who joined ACEG Executive Director Rob Gramlich and several representatives of the listed projects’ developers in presenting the report.

Given the scale of transmission need discussed above, other policies to enable large-scale expansion of transmission over the longer-term are also needed.

Anchor Tenant

Legislation could be enacted to direct the federal government to directly invest in new transmission lines as an “anchor tenant” customer, and then re-sell that contracted transmission capacity to renewable developers and others seeking to use the transmission line. This would help provide the certainty needed to move transmission projects to construction and overcome what is called the “chicken-and-the-egg problem,” in which renewable developers and transmission developers are each waiting for the other to go first due to the mismatch in the length of time it takes each to complete construction.

FERC Transmission Planning and Cost Allocation Reform
The Federal Energy Regulatory Commission (FERC) has authority over how transmission is planned and paid for. FERC can use that authority to break the transmission planning and cost allocation logjams that are preventing large regional and inter-regional lines from being built. Legislation to direct FERC to use that authority could also be helpful.

Streamlined Permitting
While most authority for permitting transmission lines is held by states, federal agencies have authority over lines that cross federal lands. Steps can be taken to streamline and expedite that process, which can currently take a decade or more.

Community opponents of the highway expansion said TxDOT’s only solution to ease traffic problems and congestion is to build more highways, which, besides allowing more cars on the road, also covers more city area with asphalt and concrete. This has considerably increased flooding in areas surrounding highways, many of which have suffered disproportionately since Hurricane Harvey in August 2017, they said.
Michael Skelly, a local activist with the Make I-45 Better Coalition, said TxDOT has consistently ignored residents’ input on project design despite several public hearings. “In 2015, a few of us residents got together and submitted our comments to TxDOT on a 2017 draft project,” he said. “It soon became clear they were not going to commit to anything.”

The White House cites Texas’ deadly power outages as a key selling point for a $2.3 trillion infrastructure package, leaving a clear – but potentially misleading – implication that Texas would get the billions needed to avert such catastrophes in the future.

As Energy Secretary Jennifer Granholm put it while pitching the plan at a White House briefing last week: “After what happened in Texas, can anybody really doubt that electricity and the electric grid is part of the foundation of who we are as a nation? And we need to invest in it if we want to make sure power keeps coming to our homes.”

For a president aiming to sell a gargantuan stimulus plan, the timing has been fortuitous.

“As you saw in Texas and elsewhere, our electric and power grids are vulnerable to storms, catastrophic failures, and security lapses, with tragic results. My American Jobs Plan will put hundreds of thousands of people to work… laying thousands of miles of transmission line; building a modern, resilient, and fully clean grid,” Biden said when he unveiled the plan March 31 at a carpenters training center in Pittsburgh.

Texas can’t import that many electrons even in a crisis, thanks to decades of isolation from the two huge grids that span the rest of the country.

Ending that grid independence is a touchy subject in Texas. Biden’s plan doesn’t broach the topic.

In terms of keeping the lights on the next time Texas is walloped by an arctic blast, the most relevant idea is building 20 gigawatts of high-voltage power lines to provide “a more resilient electric transmission system,” using tax credits to leverage tens of billions in private investment.

That’s an expansion of capacity somewhere, not a promise to insulate Texas generating plants.

And 20 GW is less than half of what Texas lost during the February storm.

Next, a bailout for Texas’ grid would hit resistance from states where utilities and their customers – not federal taxpayers – already made the investments needed to keep the juice on when the mercury plummets.

“Most Americans would not want to pay a higher tax if the ratepayers in Texas itself don’t want to pay,” said Geddes, the Cornell professor of policy analysis and management.

“The resilience of the grid should be borne by the user,” he argued. “If you pay for my bread, or my electricity, I might not be so careful about how much I consume.”

Historically, infrastructure of all types relies on user fees. Gasoline taxes of 18.3 cents per gallon go into the Highway Trust Fund, for instance.

There’s no equivalent “user fee” on electricity. Utility companies and ratepayers cover costs.

During a briefing for regional news outlets on Monday with Buttigieg, Bharat Ramamurti, deputy director of the White House National Economic Council, maintained that whatever is invested would quickly pay for itself.

“The problems with our power grid are costing us $70 billion a year, according to the Department of Energy, and are costing lives, as we saw in Texas. We can make an investment in improving our power grid, and make up those $70 billion in a year or two,” he said.

Asked by The Dallas Morning News how much of the winterizing funds would go to Texas, he demurred.

“As with a lot of this, the goal here is to set out a vision and then work with Congress to determine some of the details,” he said.

Sasha Mackler, director of the energy project at the Bipartisan Policy Center, sees the vagueness at this stage as an invitation to haggling, rather than a shortcoming.

“They’re putting forward the goals and opening the door to congressional engagement,” he said. “It’s vague at this point by design.”

‘‘(c) QUALIFYING ELECTRIC POWER TRANSMISSION LINE PROPERTY.—The term ‘qualifying electric power transmission line property’ means— ‘‘(1) any overhead, submarine, or underground transmission facility which—
‘‘(A) is capable of transmitting electricity at a voltage of not less than 275 kilovolts,
‘‘(B) has a transmission capacity of not less than 500 megawatts,
‘‘(C) is an alternating current or direct current transmission line, and
‘‘(D) delivers power produced in either a rural area or offshore, and

‘‘(2) any conductors or cables, towers, insulators, reactors, capacitors, circuit breakers, static VAR compensators, static synchronous compensators, power converters, transformers, synchronous condensers, braking resistors, and any ancillary facilities and equipment necessary for the proper operation of the facility described in paragraph (1).

“Sen. Martin Heinrich, Rep. Steven Horsford and Rep. Susie Lee’s introduction today of the Electric Power Infrastructure Improvement Act adds to the growing momentum for a federal transmission investment tax credit (ITC). As we saw this winter, America’s outdated grid infrastructure is hurting consumers and our economy. With a transmission ITC, we can enhance grid reliability, create jobs, save consumers money, and provide developers with the long-term certainty they need to invest in a 21st century Macro Grid that’s capable of delivering the clean energy future Americans want and deserve. We look forward to working with lawmakers on both sides of the aisle to pass this critically important legislation this year.”

The American Council on Renewable Energy (ACORE) is a 501(c)(3) national nonprofit organization that unites finance, policy and technology to accelerate the transition to a renewable energy economy.

Thanks to generous support from Breakthrough Energy, ACORE and Americans for a Clean Energy Grid (ACEG) launched the Macro Grid Initiative to promote investment in a 21st century transmission infrastructure that enhances reliability, improves efficiency and delivers more low-cost clean energy.

Breakthrough Energy Ventures is an investor-led fund that aims to build the new, cutting-edge companies that will lead the world to net-zero emissions.
Our strategy links government-funded research and patient, risk-tolerant capital to bring transformative clean energy innovations to market as quickly as possible.

In addition to providing a source of affordable, renewable energy to communities along the route, Invenergy says it expects to provide broadband capability to internet service providers — connecting as many as 1 million Missourians with high-speed internet.

Aside from Missouri’s proposed legislation, Zadlo said the project only needs final regulatory approval in Illinois before construction begins. It’s expected to be online by 2025, he said.