The pandemic has taken a drastic toll on the nation’s economy, and on the American worker, with millions losing their jobs. A recent U.S. Census Bureau survey measuring the impact of the pandemic on U.S. households found that 47% of adults said that they or another adult in their home lost employment income since the national emergency was declared because of COVID-19. In addition, in the past year, U.S. gross domestic product (GDP) fell by more than $668 billion or 3.5 percent, a level not seen since 1946. These numbers are stark, and with more than a year having passed since the onset of the pandemic, it is clear that while the country appears to be on the rebound, the U.S. economy is still struggling.
When the country was faced with economic downturns of this magnitude in the past, infrastructure construction, including the promotion of investment in the electricity sector, has been an effective and impactful means of driving economic recovery while also achieving major national policy goals. It worked in response to the Great Depression, and then again in the aftermath of the Great Recession. In both instances, the infrastructure investment made in response to those crises not only spurred economic recovery, it also fulfilled pressing policy objectives such as promoting local public works and rural electrification projects in the 1930s and advancing development of clean energy and smart grid technologies in the early 2010s.
Similar grand policy goals have been set by the Biden Administration. President Biden has set an ambitious goal of decarbonizing the nation’s electricity supply by 2035. That is on top of other growing demands on the nation’s electric grid driven by reliability and resilience needs, aging infrastructure, and increasing electrification. Moreover, independent of federal and state clean energy mandates and goals, the country is undergoing a transformational clean energy transition away from fossil-fueled generation toward renewable power. The order of magnitude of transmission investment required to build the grid of the future and meet the nation’s clean energy, electrification, reliability, and resilience needs in the coming decades, and the speed with which it must be done, is unprecedented. Faced with the extraordinary economic and infrastructure challenges of today, in the words of Treasury Secretary Janet Yellen, “If there was ever a time to go big, this is the moment.”
A recent study by the research group London Economics International (LEI) analyzed the economic impact of $83 billion of currently approved and/or recommended transmission investments across the U.S. The LEI report found that transmission investment of this magnitude would increase domestic local spending by nearly $39 billion, boost U.S. GDP by $42 billion, and create an additional approximate 442,000 quality, family-supporting jobs. Beyond these initial economic benefits, the ongoing operational and maintenance needs associated with the newly constructed and operating transmission will generate an additional $1.6 billion in GDP each year and almost 9,000 jobs per year. In addition, transmission investment can benefit customers by reducing the cost of electricity, integrate remotely-located clean energy resources into the grid, lead to other electricity infrastructure investment, and help realize decarbonization benefits.
The other good news is that all of the benefits described above from transmission investment can be obtained without the need for a massive expenditure of taxpayer dollars. The electric industry is primarily a private sector enterprise in the U.S., and current plans for private transmission investment amount to tens of billions of dollars. Although significant private capital is available to fund most of this new infrastructure, electric transmission investment still faces a number of challenges and uncertainty. Some of the obstacles to transmission include: conflicting and unclear transmission planning frameworks, regulatory uncertainty on the allowed return on investment and how costs will be allocated, and siting and permitting challenges.
All of this begs the question, how do we get there?
1. Implement improvements to transmission planning processes.
The Federal Energy Regulatory Commission, or FERC, should consider transmission planning reforms that incorporate dynamic generation queue data and trends, local, state, and corporate renewable energy targets and electrification assumptions into scenario planning. Additionally, it should consider all the net benefits provided by a transmission project such as the economic value of decarbonization, resiliency, and achieving other public policies such as economic and environmental justice.
2. Provide greater regulatory certainty on transmission pricing and cost allocation.
Long-term investment in assets designed to last for decades requires stable economic regulatory policies. FERC should clarify and establish ROE policies that provide investor certainty and promote investment in transmission. Former FERC Chairman Joseph Kelliher recently urged the Commission to consider setting a standard initial ROE that is high enough above the level produced by its current base ROE methodology as a way of attracting needed transmission investment. Enhanced ROEs proved effective in boosting transmission investment for several years in the late 2000s. FERC should give serious consideration to Kelliher’s tried and true recommended approach toward spurring transmission investment.
3. Reduce delays caused by siting and permitting processes.
Congress and regulators can consider approaches to streamlining the siting and permitting process for transmission. For instance, adopting uniform standards for information disclosure and looking for ways to coordinate reviews by federal and state authorities could facilitate and expedite siting and permitting.
Transmission development is critical not only to meeting the ambitious clean energy goals set by the Biden Administration and a growing number of state governments, but also to providing a badly needed boost to job creation and the economic recovery. Time is of the essence, but so far, federal electric transmission policy has yet to produce a robust transmission system to meet these pressing needs.
It is time for the country’s leaders to match the rhetoric about the critical importance of transmission investment with actions designed to incentivize the massive buildout of the transmission system that will be required to meet the nation’s clean energy goals, resilience and electrification needs. The time to act is now.
Larry Gasteiger is executive director of WIRES.
