Up to $9bn of annual investment needed in transmission for 38 years – America’s Power Plan

Between $6.4bn and $9bn of investment in U.S. transmission will be needed each year until 2050 in order to meet the 80% renewable energy future that the National Renewable Energy Laboratory has said is achievable by that time.

That level of investment includes 110- to 190 million megawatt-miles of new transmission line, compared to 150- to 200 million megawatt-miles of existing line, and 47,500- to 80,000 MW of new intertie capacity across the three interconnections, and do not include continuing investment for maintenance or replacement of existing transmission capacity, according to a paper, “Finance Policy: Removing Investment Barriers and Managing Risk.”

The paper is one of seven that comprises America’s Power Plan, a coordinated effort by “over 100 of the country’s top energy experts” that addresses and assesses the power system’s main challenges and outlines potential policy and market design solutions, according to a Sept. 16 statement announcing the plan.

America’s Power Plan outlines different initiatives that need to be undertaken to achieve the National Renewable Energy Laboratory’s (NREL) findings in its Renewable Electricity Futures Study, which investigates the extent to which renewable energy can meet the country’s electricity needs. The NREL study found that the renewable energy technologies commercially available today, in combination with a more flexible electric system, are “more than adequate to supply 80% of total U.S. electricity generation in 2050 while meeting electricity demand on an hourly basis in every region of the country.”

To meet the 80% future, between $50bn and $160bn will also need to be invested in renewable generation every year until 2050, according to the paper. That level of investment accounts for between 25 GW and 70 GW of renewable energy added to the grid each year. Between 100 GW to 152 GW of new storage will also need to be added to the electric system’s current 20 GW of pumped hydro storage capacity.

“In total, moving to an 80% renewables future will require investing roughly $50-70bn per year over the next decade, increasing to between $100-200bn per year as we approach 2050,” the authors said. “This is roughly two to five times larger than current levels of investment in new transmission and generation assets in the electricity sector, but still small (0.5-1.5% of [gross domestic product]) relative to the current size of the U.S. economy.”

The majority of the investment will be borne by the private sector, but significant barriers exist today to realizing a future that relies on renewable energy, the authors said. These include markets designed for conventional generation, which don’t value some of the renewable energy’s key benefits – the reduction in peak power prices, the hedge against volatile fuel pricing and reductions in carbon and other pollution; the chicken and egg problem of financing projects that may only be viable if the country does move toward a renewable energy future; low energy demand discouraging investment; and the risk that a move to a renewable future will result in stranded inflexible assets, the authors said.

Another barrier is the liquidity of the financial markets. Today, only 20 tax equity investors actively finance renewable projects in the United States, according to the paper. To remedy this, the authors propose replacing tax equity with taxable cash incentives and making renewable energy eligible for master limited partnerships or real estate investment trusts.

Stable policies will also help to reduce the perception of risk and increase liquidity, the authors said. Specifically, putting a price on carbon by way of a carbon tax.

“[N]ational renewable and clean energy standards, which have been proposed in Congress, would establish long-term targets and provide important long-term market signals to investors,” the authors said.

About Rosy Lum 525 Articles
Rosy Lum, Analyst for TransmissionHub, has been covering the U.S. energy industry since 2007. She began her career in energy journalism at SNL Financial, for which she established a New York news desk. She covered topics ranging from energy finance and renewable policies and incentives, to master limited partnerships and ETFs. Thereafter, she honed her energy and utility focus at the Financial Times' dealReporter, where she covered and broke oil and gas and utility mergers and acquisitions.