Energy: Transmission

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

I. Overview 

America's electricity grid, once 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, threatening 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 new lines and upgrades. 

II. Problem 

Electricity demand is picking up, expected to grow by up to 8% annually through 2029,¹ 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.²  

The US electricity transmission system’s nine regions aren’t working well together, producing limited transmission between regions. 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 — in other words, a bigger, better, more efficient market for electricity.³ New investment needed to achieve this market is in the hundreds of billions of dollars, estimated at $300B if net-zero carbon targets are incorporated.^4,5 

We're already late. High-voltage transmission projects currently take 7 to 10 years on average to go from conception to operation.⁶ Stagnant building of high-voltage transmission in recent years — just 55 miles in 2023, down from 4,000 in 2013⁷ — means too few projects are in the pipeline.

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 with oversight from state regulators

What could go wrong?

• 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, and regulators are conservative in granting it. Moreover, traditional financing models disincentivize technological upgrades

Underinvestment is the costliest choice of all. Without adequate grid capacity, new power can’t connect to it, leaving billions in private investment stranded. It's visible across every transmission region, with hundreds of completed energy projects sitting idle in long “interconnection queues.”

The queue is like an aging canal in need of upgrades, and new electricity sources are cargo ships, waiting their turn to pass through too few locks. New energy projects must be carefully integrated into the grid; if even one energy project pulls out of the calculation, the entire queue backs up, leading to cascading bottlenecks. These constraints on energy, much like overwhelmed canals in global shipping lanes, create unnecessary scarcity and increase costs.  

III. Recommendations 

The Federal Energy Regulatory Commission (FERC) should 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. It could also set a target (an interregional transfer capacity minimum) and allow regions to do the rest.

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

FERC should create new rate formulas that reward utilities for implementing cost-saving technologies and upgrades.^{8, 9} (States can lead on this too—Montana and Minnesota already have.¹⁰) New transmission planning should also be required to evaluate the net-benefit of using technological upgrades ("ATTs") to combat inertia.  

FERC should continue to pressure transmission regions on their interconnection queues.¹¹ 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 lengthy study process (though at some cost to reliability) and helped Texas’ ERCOT bring on more generation than any other region in recent years.¹² Regions could also create transparent estimates of available capacity (or “headroom”) along the existing grid, helping generators plug in in the right places.¹³ 

Transmission projects must be protected from endless legal delays with policy allowing construction to proceed after a maximum of 4 years of litigation.¹⁴ 

IV. 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 transmission 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.^15,16 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.¹⁷  

The federal government could bear some of the cost to protect ratepayers from shocks. Without these investments, competition for finite electricity means costs are likely to rise and remain high — a process of "energy gentrification" ¹⁸ — rather than rise only temporarily.