As the march continues toward decarbonization, utilities are casting a critical eye to what it will take to wean the American economy off its steady diet of carbon emissions. Renewable generation is key to enabling this zero-carbon future, but it will require deep investment — not only in the generation sites but also in the transmission lines required to transport this cleaner, greener energy to its end-user.
Truly decarbonizing the economy will require a multibillion-dollar buildout of renewable generation. But grid-scale renewable generation sites — for example, large wind farms and solar fields — tend to be situated in remote locations where conditions are right and land is cheap and plentiful, while the demand is typically located miles away in dense urban and suburban hubs. As a result, renewable energy is closely tied to the success of transmission investment — and demand is only increasing.
Black & Veatch 2020 Strategic Directions: Electric Report survey reflects this finding. The survey polled more than 600 stakeholders across the U.S. electric industry to discover that 39% of respondents see renewables as the No. 1 reason driving utilities to invest in beefing up their transmission capabilities over the next five years, coming in ahead of resiliency and reliability (28%), congestion (12%), interregional coordination/integration (11%), and fossil retirements (10%) (Fig. 1).
This comes as no surprise, given that across the United States — from the PJM Interconnection in the east to CAISO in the west — transmission-owning utilities continue to see an uptick in transmission interconnection requests, particularly when it comes to remote utility-scale renewable generation. This appetite for transmission projects is not expected to slow any time soon, particularly in the West and the Midwest, and could expand even further if several proposed offshore wind projects along the east coast move forward.
As a result, utilities are actively responding to the expansion of renewable energy by changing how they allocate their investment dollars. The survey found that of the 38% of respondents who said they are increasing investment in existing assets over last year, almost half plan to upgrade their transmission and substations (Fig. 2).
Challenges Remain
As more renewable generation comes online, and utilities and developers add thousands of megawatts of new renewable generation onto the existing grid, it may appear that the industry is "all in" on renewables — but barriers still exist when it comes to integrating renewable generation into the transmission system.
Reconfiguring the transmission infrastructure to serve a renewable generation mix isn't the only challenge — utilities still need to manage current transmission assets to ensure reliability and resiliency. This will require investment in — and knowledge of — advanced asset condition monitoring, targeted failure analyses, and predictive maintenance investment.
Climate change
Digitization is top of mind as utilities work to harden their transmission systems in the face of climate change. When it comes to extreme weather events, 2020 was a record-breaking year across the United States. According to the Center for Disaster Philanthropy, the West had its worst drought and wildfire season yet and estimates peg the total economic damage at between US$130 billion and US$150 billion.
The South and East didn't fare much better, as the busiest Atlantic hurricane season on record resulted in more than 300 fatalities and over US$32 billion in damage. All this destruction is spurring transmission line upgrades across the country to rebuild damaged or destroyed lines and to harden systems against the next disaster.
So it comes as no surprise that a significant number of survey respondents are directing their dollars into upgrading their transmission systems, investing in technology upgrades such as automating operations (35%), increased remote monitoring and diagnostics (23%), and converting analog systems to digital systems (20%).
Regulatory impacts
Site permitting remains one of the largest barriers to new transmission construction, along with evolving incentives policies and return-on-equity determinations. The Trump administration's decision to weaken the National Environmental Policy Act by limiting public review may help speed up the construction of energy infrastructure, though the decision is widely expected to be litigated.
Respondents see the Federal Energy Regulatory Commission's (FERC) Order 841, which opens the wholesale energy markets to energy storage, to positively impact transmission investment over the next five years. But although energy storage could be a partial alternative to building new transmission, it will not resolve every issue.
Another FERC ruling — its decision to permit the Midcontinent Independent System Operator, Inc., (MISO) to treat energy storage as a transmission-only asset (SATOA) for cost-recovery purposes — will also help drive interest around energy storage in the transmission marketplace. This decision will help incentivize the expansion of storage by allowing transmission owners in MISO to earn a return outside of traditional revenue streams — and by allowing an organization to consider its energy storage resources solely as transmission resources, will likely set a precedent within the industry.
Another ruling that may impact the industry is the executive order, passed in May 2020, that seeks to bolster the security of the bulk power system by restricting the use of "electric equipment designed, developed, manufactured, or supplied by persons owned by, controlled by, or subject to the jurisdiction or direction of foreign adversaries" within the supply chain. When asked how they are responding to the order, 36% of respondents said they are waiting to see the proposed regulation from the Department of Energy (DOE), 32% are actively auditing equipment purchased directly from vendors, and 22% are actively auditing their contractors' supply chains (Fig. 3).
High-voltage conversions
Lastly, when asked if they plan to convert any of their ac transmission lines to high-voltage direct current (HVDC) ones, most respondents have no plans to make the conversion. Nearly half have considered it and probably won't, 12% considered the conversion but will not implement, and a combined 30% are either currently considering or may consider it soon (Fig. 4).
New HVDC is expected to be built to meet renewable energy targets and to support the deployment of long submarine and underground transmission links, which may avoid many of the rights-of-way acquisition hurdles faced with overhead transmission. Also, growth in offshore wind — with several states establishing offshore wind procurement targets of up to 23.7 GW by 2030 — is also expected to spur HVDC transmission investment.
Conclusion
Utilities and developers recognize that weaning the economy off the carbon diet will require investing billions of dollars in renewable generation and transmission. The success of renewable energy hinges heavily on the success of transmission investment — although the challenges are many, few are insurmountable.
This article is the first of a three-part series on trends in renewable energy and transmission lines by global transmission expert Kevin Ludwig. Additional experts will discuss 'Utility Challenges: Plan and Pay Now for Tomorrow's Decarbonization' and 'Old Utility Problems Raise Interest in New Technologies' in parts 2 and 3, respectively.
