Energy: Transmission

Energy: 5-6% of GDP
Estimated Cost: No fiscal cost
Political Challenge: High

Background and Recommendation

America's electricity grid, a proud national accomplishment and engineering marvel, is being left behind by our economy. The grid is ill-equipped for a looming surge in energy demand, risking rising power outages and prices. To head off these challenges and create an abundant energy future, Congress must reform the systems that govern transmission construction and unleash a wave of construction and technological upgrades.¹

Analysis

Electricity demand is picking up, expected to grow by 5-6% annually from 2024 to 2033, driven by factors that include a resurgence in domestic manufacturing in the short term, the revolution in generative AI in the medium term, and the transition to electric vehicles over the long term.¹⁵

The US electricity transmission system’s nine regions aren’t working well together, producing limited transmission between regions. But meeting coming demand without rising power outages and costs will require a far more integrated national grid, one that can transmit power from where electricity generation is cheapest far away to where demand is greatest — a bigger, better, more efficient market for electricity. New investment needed this decade to achieve this market is likely in the hundreds of billions of dollars: at least $310B if net-zero carbon targets are incorporated.

Change will lag policy, so it’s time to get going. High-voltage transmission projects currently take 7 to 10 years on average to go from conception to operation. Stagnant building of high-voltage transmission in recent years — just 55 miles in 2023, down from 4,000 in 2013 — has left us poorly positioned for our energy-intense, rapidly approaching future. 

America’s grid has fallen behind its economy due to challenges with the three major components of the transmission system:

• Planning: Forecasting future energy demand and designing appropriate transmission infrastructure to connect new generation and new load
• Permitting: Securing approvals at federal, state, and local levels
• Paying: Financing new projects, typically done through consumer energy rates, which regulators oversee and often push utilities to minimize

So what makes it hard to build?

• The problem with planning: Lack of long-term, interregional, and proactive planning leads to short-term fixes that are more costly in the long term
• The problem with permitting: A complex web of overlapping approvals creates significant delays, often exacerbated by litigation
• The problem with paying: Utilities are reluctant to pursue projects without clear cost allocation mechanisms, and regulators are conservative in granting it. Moreover, traditional cost-sharing models disincentivize technological upgrades

Underinvestment is the costliest choice of all. Without sufficient grid capacity, new power plants can’t connect, leaving billions in private investment stranded. Across every transmission region, hundreds of completed energy projects sit idle for years in “interconnection queues.” It’s like the supply chain crisis Americans experienced during COVID—new power generation projects are today’s boats full of goods, stuck waiting to dock and unload. And just as managing port traffic requires careful planning, so does integrating new energy projects. Adding these projects requires important but time-consuming forecasts that must restart if even one anticipated project drops out of the queue (a not uncommon occurrence). These bottlenecks, much like the ones at Long Beach and Los Angeles ports, raise prices.

Recommendations

Congress should instruct the Federal Energy Regulatory Commission (FERC) to establish a mandatory interregional planning process for all transmission planning regions. FERC could then require transmission regions to align their plans with this broader strategy. 

Congress should grant FERC automatic backup permitting authority for major transmission lines (100kV+) that align with the approved interregional plans. This would majorly resolve state-level permitting issues. 

Congress should instruct FERC to create new rate formulas that reward utilities for implementing cost-saving technologies and upgrades. (States can lead on this too—Montana and Minnesota already have.) New transmission planning should also be required to evaluate the net-benefit of using ATTs. 

Congress should protect transmission projects from endless legal delays by allowing construction to proceed after a maximum of 4 years of litigation.  

FERC should continue to pressure transmission regions on their interconnection queues. Regions must be expected to work through their backlog and prevent new ones from forming. FERC could help promote generation-only interconnection, which skips much of the length study process (though at some cost to reliability) and helped Texas’ ERCOT bring on more generation than any other region in recent years. Regions could also create transparent estimates of available capacity (or “headroom”) along the existing grid, helping generators plug in in the right places.

Risks and Politics

Transmission reform involves many stakeholders, including utilities, environmental groups, landowners, independent generators, consumers groups, and the tech sector. These groups have competing interests, and navigating them is deeply challenging, slowing needed action from FERC. In the current landscape, the most realistic path to advancement of reform is likely a Senate-led, bipartisan compromise that balances these interests as much as feasible. Of course, the compromises intrinsic in this path will naturally limit the scope and ambition of reform. 

In the short-term, ratepayers are likely to bear the cost of ATT upgrades and more ambitious planning. Though costs vary greatly depending on context, we estimate that fee increases resulting from ATTs could reach as high as 2 to 3 cents per kilowatt/hour. That translates to roughly $20 a month for the average household.^, GETs usually stand to quickly recoup those costs (and then start saving money) for ratepayers, but the net benefit of reconductoring may take years and new transmission takes the longest of all. Survey data shows that most Americans are highly sensitive to their electric bills. 

Without these investments, costs are likely to rise and remain high rather than rise temporarily. And, while we found credible cost estimates elusive in the course of research, the federal government could bear some of the cost to protect ratepayers.

Appendix

1: Materials for further reading

• All Queued Up and Nowhere to Go (Clearpath)
• Expanding the Possibilities: When and Where Can Grid-Enhancing Technologies, Distributed Energy, Resources, and Microgrids Support the Grid of the Future? (RFF)
• National Transmission Needs Study (DOE)
• How the RTO stakeholder process affects market efficiency (RStreet)
• Pathways to Commercial Liftoff: Innovative Grid Deployment (DOE)

2: Recommended contacts for additional discussion:

• Casey Kelly, Manager — Research and Electricity, Clearpath (kelly@clearpath.org)
• Cy McGeady, Fellow in the Energy Security and Climate Change Program, Center for Strategic and International Studies, (cmcgeady@csis.org)
• Shane Londagin, Senior Advisor for Policy Innovation, Third Way (slondagin@thirdway.org)
• Julia Selker, Executive Director, WATT Coalition (jselker@gridstrategiesllc.com)
• Devin Hartman, Policy Director, Energy and Environmental Policy — RStreet, (dhartman@rstreet.org) 

3: Relation of major recommendations to existing FERC rulemaking and Energy Permitting Reform Act: