Steel For Fuel N° 001 of 56 31 Mar 2023
The ten biggest questions in energy & climate tech, Question 1
by Andy Lubershane, Partner and Head of Research, Energy Impact Partners
In this note
The question
Will the United States clear the path for a lot more electric transmission?
The answer
His working hypothesis is no. Building long inter-regional lines is a collective action problem rather than an engineering one, and the United States, he says, does not currently inspire confidence in collective action. The interesting part of the post is what he expects to happen instead.
03The argument
The post opens the series with his answer to the question friends actually ask him: deep cuts in emissions are achievable and affordable. The first of his ten big questions then gets a flat negative, and the two coexist because he thinks a transmission shortfall raises the cost of the transition rather than stopping it. Large wind and solar farms are now the cheapest zero-carbon primary energy nearly anywhere they can be built at scale, and he says he has grown extremely confident that storage can make their intermittency manageable even at high grid penetration. Their real weakness is land. They need a lot of it, in places with strong wind or sun, which puts them far from the people who use the power. Rooftop and small-scale solar cannot substitute: it costs far more per unit and cannot cover most of a major metropolitan area’s energy needs. So big renewables imply big transmission, and the modelling agrees: the scenarios that reach a least-cost decarbonized system call for more than tripling United States transmission capacity.
Reality is not cooperating. Against that tripling, the country is on track to add about half as much capacity again, at best, and by his count not a single major new high-voltage inter-regional line has been completed in the past decade. His explanation is not technical. The first grid was built when the benefits of electrification were obvious to the public; the second time around the public already has its appliances, and every county a line crosses has a commissioner asking what his town gets out of the eyesore. The consequences are already visible in the wind belt, where power is bottled up behind the constraint and periods of negative prices have risen in nearly every year for seven years, and where the cost and lead time of connecting a new project have surged. He treats underinvestment as a loss to society as a whole that makes nearly every other part of the transition more expensive, and cites studies finding the benefits of inter-regional lines to run well above their costs. His firm sees two categories of technology that could relieve some of the pressure, tools that squeeze more capacity out of existing lines and conductors that carry more power on a smaller footprint, but he does not oversell them: transmission is among the most risk-averse corners of a risk-averse industry, appropriately so, and a validated tool does not dissolve a collective action problem.
The last third is the useful part, because it works out who gains from failure. Renewables fall short, but not evenly. In the best resource areas, subsidized projects are now cheap enough to be financed in the expectation of being curtailed a large fraction of the time and still beat the running cost of gas generation, so the near-term result is more generation crammed into fewer places. For storage, transmission is a partial substitute and a partial complement, which cuts both ways over time: bottled-up renewables produce exactly the price volatility storage profits from, so the near-term shortfall is storage’s gain, but since transmission is ultimately what allows high renewable penetration everywhere, a long-term loss for transmission is a long-term loss for storage too. The other adaptations are geographic and technological. If large consumers cannot get cheap clean power delivered, some will move to the resource, with industrial heat users siting at the best wind and solar sites and, further out, a possible electrofuels industry built where the power is. And a transmission shortfall raises the value of energy that does not depend on geography or land at all, which he says means nuclear first, with a wider opening for novel geothermal or carbon capture.
04What you need to know first
- Inter-regional transmission
- High-voltage lines running hundreds of miles between regions. They do two jobs at once: carry power from remote resources to demand centers, and balance one region’s weather against another’s.
- Curtailment
- Being cut back when there is more generation than the system can absorb. A project that generates over fewer hours earns over fewer hours, so curtailment raises its effective cost per unit without raising its capital cost.
- Negative power prices
- Moments when a generator pays to keep running. In the market he describes, wind operators do this because their subsidy is earned only on power actually produced, so it can be worth paying others to make room.
05Details worth keeping
- The post lists all ten questions in the series and promises a working hypothesis for each, plus a bonus question he says is in stealth mode; a bracketed note added to the text says it has since been revealed as whether geopolitics will derail the energy transition.
- He supports covering rooftops with panels and attacks how they are paid for, calling the arrangements that credit rooftop owners for power sent back to the grid a twisted Robin Hood that takes from the poor to subsidize the rich. Rooftop solar, in his phrase, should play a best supporting actor role.
- Part of the rooftop evidence sits in a chart: the prose directs the reader to notice there that rooftop solar covers a much higher share of current electricity demand than of all final energy demand in an electrified scenario, and that comparison appears only in the image. Two further charts, under the buildout claim and the bottled-up wind claim, carry no caption at all.
- He names the beneficiaries: storage system integrators ready to deploy lithium-ion at scale, and one of the longer-duration storage companies he mentions earlier, named again as the partner industrial heat users could set up alongside at the best wind and solar sites.
06Claims worth citing
All figures as stated on 2023-03-31. The buildout, price and cost figures are the fastest-moving of these.
- Small-scale solar costs more than twice what large-scale solar costs, and rooftops could not satisfy more than about 20% of energy needs in most major metropolitan areas even if every roof were covered. Lubershane, alongside a 2016 National Renewable Energy Laboratory assessment
- The most cost-effective decarbonized energy mix would require more than tripling current United States transmission capacity. (Princeton “Net-Zero America” study, cited by Lubershane; a footnote specifies its “RE+” scenario)
- The United States is on track to add about 50% more transmission capacity, and he qualifies that with “if we’re lucky”. Lubershane
- No major new high-voltage inter-regional lines have been built in the United States in the past decade. Lubershane, by his own count
- In the wind-rich Great Plains market, periods of negative power prices have increased in nearly every one of the past seven years. Lubershane
- A set of major transmission initiatives could nearly halve the cost of delivering zero-carbon electricity to consumers, and studies typically find the economic benefits of new inter-regional lines to be more than double their costs. an MIT study and unnamed others, cited by Lubershane
- A wind farm costing $10 per megawatt-hour uncurtailed costs $20 per megawatt-hour if curtailed half the time, which is still cheaper than the marginal cost of gas-fired generation in the United States. Lubershane
- He says he is very confident that global greenhouse gas emissions can be cut, probably on the order of 80% or more, within the next three to five decades, and puts his own bet for energy spending at roughly 30 to 50% more of national budgets than now. Lubershane, stated as his own confidence and his own bet
- Health care runs about 18% of GDP against an energy average of about 7% since the 1970s oil crisis, so a 10% health care saving is about 1.8% of GDP, roughly a quarter of energy spending. Lubershane, in a footnote
07Where it’s contested
Nobody pushes back, and the post is explicit that it is offering a hypothesis rather than a finding: the answer is labelled a current hypothesis and immediately softened with an instruction not to stop believing.
- The assumption the argument rests on and does not defend. That storage will make wind and solar intermittency manageable at high penetration, which he states as extreme confidence, supports with nothing, and defers to a later piece. Almost everything downstream depends on it, including the claim that a transmission shortfall is survivable rather than fatal.
- Optimism and pessimism sit side by side unreconciled. He opens certain that deep decarbonization is doable and affordable, then answers his first big question in the negative, and does not work through what a 50% expansion rather than a tripling does to the 80% figure.
- The diagnosis is political and stated as judgment. That the United States does not currently inspire confidence in collective action is asserted, and the county commissioner asking what his town gets is a characterization rather than evidence.
- One strong claim is made in a bracket. The attack on how rooftop solar is paid for, as a transfer from poor to rich, is delivered as an aside and supported by nothing in the post.
- What he has at stake. He says his views are his own but heavily influenced by his work, and the three companies he names, as evidence for the storage claim and as beneficiaries of transmission’s failure, are all his firm’s portfolio companies. He says so each time.