BUILDING A NATIONAL ELECTRICITY GRID
CAN BE DONE WITH PRIVATE, NOT PUBLIC, MONEY
Washington, DC: The benefits of a truly national electricity grid have been known for years. Advantages include increased reliability and efficiency, as well as the potential to transmit power generated from renewable sources across long distances. Despite the promise of cheap, abundant, and reliable electricity, significant financial and regulatory barriers to the development of a national grid remain.
Today, Monday, September 20, 2010, the Manhattan Institute will release two reports outlining these policy obstacles and detailing how private money can be used to finance the needed high-voltage transmission capacity.
Demand for electricity is rising in most parts of the country. As a result, an abundance of investment capital for expanding generating capacity has materialized. But increasing generating capacity will accomplish little if transmitting capacity of new and lower-cost power, renewable and otherwise, across an extended electric grid is not expanded. In his report, Financing a National Transmission Grid: What are the Issues?, Dr. Gilbert E. Metcalf, professor of economics at Tufts University and a research associate at the National Bureau of Economic Research, explains why private investors, not the government, should finance the construction of the grid.
Key findings include:
- Historical pacing of transmission investments will not be adequate to enhance grid reliability or to unleash the potential for generating electricity from the wind, the sun, or the earth;
- Adding to the challenge of transmission planning and investment is the replacement of a vertically integrated electric utility industry in many parts of the country by a more disaggregated one composed of merchant generators;
- Focusing on federal funding for grid improvements is misplaced;
- Moving to a largely carbon-free economy by the middle of the century requires a transformation of the power system in this country, one that cannot be successful without a strong interstate high-voltage transmission backbone; and
"The bottleneck in investment in grid expansion and improvement is not lack of federal funding but rather a failure to recognize that grid investments offer benefits that transcend state boundaries." Gilbert Metcalf
The biggest barriers to building a national electricity grid are not technological, but political: state and regional interests often conflict with the national interest. Gas and oil pipelines are generally regulated by the federal government, but high-capacity electricity lines are not. In his report, Regulatory Barriers to a National Electricity Grid, Drew Thornley, author of Energy & the Environment: Myths & Facts, explores the regulatory barriers standing in the way of an interstate grid, including the authority of state public utility commissions to set transmission rates and approve facility siting.
Specific recommendations include:
- Give the Federal Energy Regulatory Commission’s (FERC) “backstop” authority to approve the siting of high-voltage transmission facilities within so-called National Interest Electric Transmission Corridors, after state and local authorities are given a chance to make their concerns known;
- Increase the number and reach of such corridors, which now number only two;
- Establish a system whereby types of energy are developed and transmitted strictly on the basis of their cost, not their favored status;
- Allow states to retain jurisdiction over lower-voltage interstate lines, intrastate transmission, and local distribution; and
- Allow states and localities the right to participate in proceedings examining siting, cost-allocation, and other issues in which they may indicate ways the project under consideration can be made minimally burdensome to the surrounding community and the environment.
“We possess the technology, and we know how to build the infrastructure. But significant legal and regulatory (not to mention political) barriers stand in the way of creating a technologically up-to-date grid.” Drew Thornley
Both studies are available at http://www.manhattan-institute.org/html/eper_05.htm and http://www.manhattan-institute.org/html/eper_06.htm. If you would like to schedule an interview with Gilbert Metcalf or Drew Thornley, please contact Clarice Z. Smith at 646-839-3318 or by email at firstname.lastname@example.org.
The Manhattan Institute, a 501(c)(3), is a think
tank whose mission is to develop and disseminate new ideas that
foster greater economic choice and individual responsibility.