AnushreeArticle Summary
The paper focuses on the inadequacy of current transmission infrastructure to accommodate growing renewable energy production. The authors argue that without either an expansion in transmission, storage, or dynamic pricing, the recent cost reductions in renewables will be wasted and much of the predicted benefits of recent legislation (the IRA, Infrastructure, and CHIPS Acts) won’t be realized.
One of the key issues in building out transmission is a classic "free rider" problem, where the benefits of new transmission lines are enjoyed by a larger set of consumers and stakeholders than those who bear the initial costs. State governments are reluctant to approve new transmission that doesn’t benefit their constituents. Utilities have an uncertain return because benefits are diffused outside their service area. Consumer advocacy groups can be concerned about the potential increase in electricity prices. And there are countless landowners and local groups who are opposed for legitimate energy justice reasons beyond NIMBYism.
The authors (weakly) support two alternatives: energy storage solutions and dynamic pricing. Energy storage could help balance supply and demand, but the scale of expansion needed would be unprecedented. We’re projected to reach 12,000 MW of storage capacity by the end of 2023, but peak demand is 700,000 MW, so this is less than 2%. The second alternative—dynamic pricing—is also challenging. While theoretically promising, the paper reminds us of the well-documented distributional effects on low-income households without the flexibility to shift energy use patterns.
My Takeaways
This is a forthcoming paper in the Journal of Economic Perspectives that my advisor in Course 14 (Nancy Rose)—who is the third author—sent me because of its relevance to my research. I’ve been meaning to do a deep dive for a few days, so this is a perfect opportunity to do that!
Overall, the paper was a good review of what I already knew about existing challenges in building out transmission, but there were three new points that particularly stood out to me in the context of my research:
- Utilities are disincentivized to build transmission lines: Most of the residents and experts I’ve interviewed in California are adamant that utilities are supporting new large-scale energy projects because this gives them a bigger “mandate” to build nearly risk-free transmission projects, in turn lowering their electricity costs without any need to lower rates. This argument had generally made sense to me and hadn’t been contradicted by the economics literature, so utilities being included in the groups disincentivized to build transmission was surprising and I’m hoping to discuss this with Nancy.
- Building out transmission along other right-of-ways: This is a relatively new idea to me that the paper briefly mentions, and I found another article on transmission co-location with broadband that could resolve many local siting/permitting issues. The rural communities I’ve spoken with care a lot about broadband for accessing education, healthcare, etc. It’s surprising that this hasn’t been included in recent permitting reform proposals in Congress!
- Capacity expansion and HVDC + hybrid AC/DC: I interviewed a few grid experts this summer (SDCP, CEC, consultant at Deloitte) and all of them dismissed loss in transmission as “not a major bottleneck”; but this paper claims that such conversions “can increase total transmission capacity by up to four times!”
Citation (this is forthcoming, but I have a PDF saved in Zotero)
Davis, Lucas W., Catherine Hausman, and Nancy L. Rose. 2023. “Transmission Impossible? Prospects for Decarbonizing the US Grid.” Journal of Economic Perspectives 36 (3): 1–26.