KEEPING THE LIGHTS ON is not as simple as flicking a switch. New England has a massive, complex, multi-billion dollar grid system to support the region’s electricity needs and ensure electricity is available and delivered when called upon.  Ensuring that the grid is reliable is critical to the region’s economic, energy, and environmental future, but the planning process and financing rules governing grid investments remain stuck in the past. 

Today’s outmoded planning practices strongly favor large-scale, expensive transmission line expansions, just as they have for the past 50 years. They ignore cleaner and lower-cost options and fail to provide economic signals or adequate procedural opportunities to accommodate new advances in energy technologies. Not all new transmission investment is unnecessary.  Some new transmission investments may be needed to access indigenous power supplies, such as wind and solar. Other transmission investments may be needed for reliability.  

But it is hard to sort out the transmission investments that are truly necessary for reliability from the transmission investments that could have been avoided because the current selection, planning, and financing processes are failing to evaluate all viable options for meeting reliability, some of which are both cleaner and lower in cost than simply building more transmission lines. Without significant changes, transmission lines will remain the inevitable outcome of all transmission planning practices, and the planning process will remain out of sync with the economic and environmental needs and goals of the region.

The decision-making process remains stacked in favor of transmission lines that earn utilities upward of 13 percent guaranteed annual returns and against cheaper, cleaner options that offer no such high returns.  Under the current system, it’s almost impossible for New England consumers to have confidence that the $11 billion we are paying for new transmission lines are the best choices to clean our air and contribute to a healthier environment.

Experience has shown that New England can mitigate the high cost of transmission construction to meet reliability needs while promoting the states’ goals of increasing energy efficiency and developing renewable technologies. The key to balancing these competing concerns is embracing new ways of considering and paying for alternatives to transmission lines. 

      Transmission lines are the grid’s superhighways, moving large amounts of electricity over long distances. In New England, these superhighways are operated by ISO New England. With the goal of ensuring grid reliability – that there is enough electricity ready and available to meet demand at all hours – the ISO forecasts the needs of the region’s electric grid 10 years in advance in conjunction with the utilities that own the transmission lines. Herein lies the first problem: the ISO uses overly conservative assumptions to forecast future grid needs, which can result in decisions to build more lines than necessary.  This overarching problem is compounded by the ISO-led planning process, which fails to identify or fully consider the full range of non-transmission options that could not only help keep the lights on, but support other  regional energy and climate policy goals as well.  

Non-wires options, or non-transmission alternatives (NTAs), such as targeted energy efficiency programs or clean generation like solar, wind, battery storage, combined heat and power, other initiatives that reduce energy demand, can be cheaper than new transmission lines. All of these non-transmission alternatives can reduce grid stress and have proven themselves capable of deferring transmission construction.  Clean generation and storage are smaller and quicker to deploy than building a new line and can be customized to the particular reliability need being addressed.  NTAs represent smart and economic solutions to grid reliability needs. Energy efficiency investments in Vermont and New Hampshire recently were credited with deferring the need to construct $259 million in transmission upgrades. 

But even with the proven success of NTAs, the region keeps building more transmission lines.  Since 2002, New England’s regional grid planner has launched more than $5 billion in new transmission construction in the region. By 2017, another $6 billion is planned. 

To understand why, you need only look to the economics and politics of transmission construction. Congress and federal regulators have given electric utilities high returns on transmission investment.  Ratepayers are paying utilities and their shareholders a guaranteed return that approaches 13 percent for new transmission investments in New England, even on some cost overruns. 

States also have an incentive to support large, regional projects over NTAs.  A few years ago Maine faced a choice: Approve the siting of a $1.4 billion regional transmission project to be located within Maine or an alternative set of non-transmission alternatives (that included storage and solar generation) designed to serve the same need at about $800 million, or roughly half the cost.  The choice seems obvious, except for the existing rules of the game: Maine ratepayers pay just $112 million of the total $1.4 billion cost of the regional transmission line solution, while the NTA solution – which planners view as a non-regional solution —  would cost Maine ratepayers the full $800 million. It’s not hard to see why Maine regulators approved the more expensive solution for the region because it was the less expensive option for Maine ratepayers under existing rules. Yet if the NTAs had been eligible for regional cost allocation, all of New England’s ratepayers would have saved, including Maine’s.

            The existing rules and financial incentives are driving utilities and regulators to pick higher cost transmission lines when lower cost alternatives may be available.  Given their useful life, transmission investments represent a 30-plus-year wager on the region’s energy needs.  And these investments are being made before the region has made the important determination of what transmission enhancements may be needed to integrate the renewable generators that will help meet clean energy policy goals, or what gains can be realized through greater reliance on small localized generation such as rooftop solar.  Instead, the ISO continues down the path of building expensive transmission lines to meet the region’s current resource mix and reliability needs, with little regard for how those needs might change.  Any missed opportunity to meet projected reliability needs while promoting renewable resources is a costly mistake.  Overestimates are wasteful and cost the region; they divert capital that could be used to make the grid more resilient and help promote a diverse and cleaner set of energy resources. 

So, how do we reform the system to keep the region from being faced with the continuing – and needless – increases in transmission cost?  First, we must change the planning process itself so NTAs are fully and fairly considered and their costs are allocated in the same way as transmission lines.   Second, we should stop providing utilities such a rich reward for constructing more and more transmission lines.   One possible avenue for reform would be through federal regulations. Unfortunately, a recent set of planning reforms by federal regulators failed to include meaningful changes. 

            The other avenue for reform is the states themselves. The New England states could agree to share the costs of reliable NTAs that defer, and may avoid altogether, regional transmission line construction. By doing so they could save all New England ratepayers money, while furthering regional policy goals such as promoting cleaner energy and avoiding the destruction to land and wildlife caused by new high voltage transmission lines.

            Again, powering the region’s future is not as simple as flipping a switch, but we can call on regulators and lawmakers to make some fundamental changes that will significantly improve the way energy decisions are made. With the right kind of planning and vision, we can help the region build and secure a cleaner energy future. 

What is stopping us?

Michael Henry is senior counsel and director of the ENE Sustainable Transmission Project. ENE is a nonprofit organization that researches and advocates innovative policies that tackle our environmental challenges while promoting sustainable economies.