Last month, the Department of Energy (DOE) released a draft of the highly anticipated National Transmission Needs Study. The report–which synthesizes and summarizes a growing list of white papers and analyses calling to strengthen and expand our electrical grid–comes at a critical moment. Our electrical grid is under heightened scrutiny due to concerns about resiliency, physical security, implementation of the Inflation Reduction Act, and the rapid transition to a clean energy economy. The DOE is now seeking public comment and feedback before finalizing what will essentially be the definitive triennial analysis of the state of the national grid.
The current regulatory system needs a mechanism to address the interregional needs DOE has highlighted. As such, the takeaway from this study (and from Niskanen’s analysis) is that Congress should act swiftly to establish a minimum transfer requirement between regional transmission organizations (RTOs).
The National Transmission Needs Study contains valuable insight into current regional and national transmission needs, and those it anticipates in the next decades. DOE found that interregional transfer capacity would need to increase nationally by 120 gigawatts (GW) by 2035 and 655 GW by 2040 in a scenario with a high rate of clean electricity generation. The study then projects the needs of each region based on several key factors: system reliability and resilience, load and generation growth, and high price/demand areas.
It then breaks down region-to-region transfer capacity recommendations. On average, the recommended increase in capacity was 987 percent by 2040. One notable proposal calls for the transfer capacity between the Plains and Texas (ERCOT) to increase by a whopping 4,260 percent.
DOE’s report is hardly an outlier in establishing a clear need for an increase in inter-state and interregional transmission capacity. Incorporated within DOE’s report are findings from Princeton University’s landmark 2021 Net-Zero America study, which analyzed the steps needed to reach “net-zero greenhouse gas emissions by 2050”. One of the study’s pillars was the development of clean energy and transmission. Based on projected solar and wind generation growth by mid-century, anticipated electrical transmission needs will be two to five times 2020 levels. While the study does not explicitly discuss the transfer of electricity between regions, the geographic distribution of renewable energy sources will require an increase in transfer capacity.
Figure 1: Based on the EPA Integrated Planning Model, the analysis of existing electricity transmission transfer capacity between adjacent FERC Order 1000 planning regions. Percent [%] reflects the interconnection capacity of connected regions as a percentage of the peak load of the larger region. Arrow colors indicate levels, red ≤ 5%, yellow 6-14%, green ≥ 15%. Note: FERC Order 1000 planning regions do not align exactly with the DOE geographical regions from the National Transmission Needs Study.
Our current regulatory framework has failed to establish the interregional transfer necessary to address the nation’s critical transmission needs. Based on a growing body of evidence–including Niskanen’s analysis (see above)–we encourage Congress to pass legislation to establish a minimum transfer requirement. This could resolve some of the issues DOE has identified and provide several key benefits: 1) it will increase reliability by allowing power markets to exchange capacity, thus dispersing the risk of blackouts from severe weather conditions, 2) it will lower energy costs by allowing high priced areas to “import” cheaper, cleaner energy, 3) it will allow areas with plentiful renewable energy resources to export clean energy across the country.
The DOE study provides indisputable evidence that the United States’ energy grid must rapidly expand interregional transmission to meet our nation’s climate targets. By instituting a minimum transfer requirement, Congress can address these goals and provide a decarbonized, less expensive, and more reliable grid.