Electrification is a key theme to Energize’s investment thesis. We invest in software and business model innovation, many of which directly contribute solutions towards decarbonization by means ofelectrification. In this blog series, we’ll explore this critical transition and the technologies driving and enabling it.
In the narrative surrounding decarbonizing via mass electrification, we often talk about barriers keeping us from getting to that 80 - 90 percent. Perhaps the single greatest barrier to achieving a primarily electric, zero-carbon economy in the U.S. is not in making the power –but in moving it.
Today, high-voltage electricity transmission lines move most of the power generated by power plants from more rural locations to metropolitan areas. Roughly 600,000 miles of transmission lines supported by more than two million towers are the backbone of the electricity grid today.
Rapid development of renewable energy in the U.S. is currently limited by transmission capacity. Why is moving renewable energy such a challenge? For starters, solar and wind resources are often located in remote areas that lack transmission lines or where existing transmission interconnection capacity is already saturated. Solar and wind farms often require “connector” lines that move power to the existing high-voltage transmission backbone. And this is expensive - ambitious efforts have launched to build massive transmission super-projects that would move abundant renewable energy to electricity-hungry regions, such as the $11B, 1.3 GW Clean Path New York project or $3B TransWest Express stretching from Wyoming to California.
Princeton’s Net Zero America study suggests we will need to double U.S. transmission grid capacity by 2035 and triple it by 2050 to achieve deep decarbonization via electrification. But transmission availability is fundamentally limiting the amount of solar, wind and storage we can deploy. Currently, 500 GW of solar, 200 GW of wind and 200 GW of storage across 5,600 unique projects are stuck in transmission interconnection queues, an exponential rise since 2015.
According to leading experts and startups aimed at solving this problem, there are three primary challenges that stand in the way of building new transmission or connecting renewables to the existing network.
Regional transmission operators are responsible for grid investment planning and electricity market decisions to cost effectively ensure reliability. Every new renewable energy plant paired with a new transmission connection line enters a “queue” process wherein the relevant regulatory bodies (FERC, transmission operators, state utility commissions) review and analyze the new project to ensure it will not adversely impact overall system reliability. Projects that enter the queue are evaluated based on when they were submitted. With the recent explosion in solar, wind and battery projects seeking transmission interconnection, transmission operators are drowned in a deluge of complex proposals. As a result, the average interconnection wait time has ballooned from almost two to three and a half years. Only one out of every four projects entering the interconnection queue ever enters commercial operation.
Once past the arduous and lengthy interconnection process, developers face an additional challenge: a host of local engagement and permitting requirements that rack up the soft costs associated with transmission development. To build or upgrade a transmission line, operators must seek:
And the list goes on…and the costs of these activities add up. The average “soft costs” of transmission development account for as much as 30 percent of total upfront capital costs for some wind projects. That number has increased tenfold from historical averages for some projects.
Finally, developer appetite to build or upgrade new transmission lines is generally low due to poor regulatory mechanisms and economic incentives. Outdated planning methods and ineffective investment cost-sharing approaches leave little financial incentives for developers to build new lines or adopt novel technologies.
To better understand this uphill battle developers face, imagine you are a car. You want to merge onto a highway, but no on-ramp exists. You request that a new on-ramp is built, and you are willing to fund an outsized portion relative to how often you will use the ramp. Many other cars will use the on-ramp as well, and significant public benefit will accrue. Now imagine that your request takes four years to evaluate and that once you receive a response, you are told you can build the on-ramp, but only if you fund 100 percent of the cost. And finally, once the ramp is up and going, the additional traffic it brings adds to the congestion of that highway. Now a lane expansion is needed to manage the traffic, and you’re again asked to be responsible for some or all of the cost.
Now replace the car with a solar farm, the highway with a current major transmission line, the on-ramp with a transmission connection line, and the lane expansion with an upgrade or replacement or the existing line. Many other solar and wind farms will join in using the connector line, but today, the initial solar developer is being asked to fund 100 percent of the connector cost. Add in the time it takes to receive a response on the request to build a new transmission line, and many solar farms drop out of the process before even getting the chance at approval.
Rob Gramlich, Founder and President of GridStrategies LLC and a leading expert on U.S. transmission policy, cites the issues in transmission planning. “We need to plan for anticipated future generation, and we are not,” he said. “Regional planners and FERC have an opportunity to put actual forward-looking plans together to support the future resource mix.” Fortunately, the recent infrastructure bill is beginning to address these issues by dramatically revamping the federal treatment of transmission regulation.
However, overcoming the challenges of moving renewable energy will require major regulation reform coupled with a culture shift among transmission operators.
As we’ve established, building new transmission infrastructure is difficult. But it’s not all gloom and doom: we believe digital technologies are uniquely poised to unlock the potential of transmission. How?
Oftentimes, the most cost-effective investment in our energy system is finding a way to get more out of existing equipment. The average capacity utilization of the electric transmission network often clocks in at less than 30 or 40 percent. There are some good reasons to maintain a meaningful buffer, including to ensure reliable power delivery even during extreme cases. However, there’s no reason we couldn’t increase capacity utilization by 50 to 100 percent with the right technology investments. Transmission grid sensor, automation, and software technologies can materially increase utilization and in turn enable large amounts of renewable energy to interconnect to the existing transmission network.
Brattle estimates that “grid enhancing technologies” like dynamic line ratings, advanced power flow control and advanced topology control could roughly double renewable energy capacity for existing U.S. transmission power lines. Looking at the economics on a national scale, digital transmission technologies could deliver $5 billion in yearly energy cost savings, 330,000 local construction jobs, and 20,000 high-paying operations jobs.
One grid enhancing technology I find incredibly compelling is developed by LineVision. LineVision’s proprietary sensor/software product is installed on existing transmission towers. It uses LiDAR and other remote sensing techniques to measure key operating parameters such as real-time dynamic line rating (DLR), power flow data, conductor temperature, sag and clearance, and other indicators of asset performance and health.
These analytics can help improve transmission capacity utilization by 15 to 40 percent and cost less than five percent of a new transmission line. Moreover, LineVision’s solution can be deployed in months rather than the five to 10+ years required for new transmission construction.
According to Hudson Gilmer, CEO of LineVision, “We will need to build new inter-regional transmission lines, but to have any shot of reaching our energy transition goals, we also need to get the most out of the power grid we’ve already built by leveraging grid enhancing digital technologies like DLR.”
Existing transmission planning and operational practices are outdated and do not often leverage the latest advances in technology. For example, generator interconnection analysis can take several months to complete a single study, contributing heavily to current delays in the renewable generation interconnection queue. Current transmission planning approaches often times do not incorporate alternative, least-cost mitigations such as advanced grid sensors and control systems as an alternative to simply building a new transmission line or increasing the capacity of an existing line by installing new conductors.
Pearl Street Technologies offers one such solution. Pearl Street's software has been utilized by transmission operators, utilities, project development companies, and consulting firms for applications including renewable project siting and grid capacity analysis, auto-identification of low-cost grid upgrades to meet reliability standards, extreme event analysis, creation of long-term planning models, and more. In the context of interconnection studies, Pearl Street’s software helps reduce engineering time from months to minutes by automating model builds and diagnosis of the scenarios that trigger complex proposals for transmission system upgrades. Its software also enables transmission planners to simulate many different upgrade options quickly to identify the most cost-effective solutions, dramatically shortening the timeline for interconnection while potentially saving developers tens to hundreds of millions of dollars in upgrade costs.
David Bromberg, CEO & Co-Founder of Pearl Street, shared how software can play a role in streamlining transmission interconnection analysis: "Clearing queue backlogs across the nation is a complicated equation, but one we need to solve to ensure there is enough renewable energy to power our electrified future. Pearl Street is excited to contribute to the solution by advancing the reliability modeling component of the equation -- both how it's done today and how it will be done tomorrow."
The power industry is by design risk-averse and slow to incorporate new technologies. However, advancements in solar, wind, batteries, and other new electricity generation methods are steering power industry executives towards the realization that moving slow is no longer an option. The risk of inaction is too extreme.
If solar and wind are the bedrocks of a highly decarbonized U.S. power grid, we’ll need to invest billions, if not trillions, into renewables transmission. Most of that capital will be allocated towards new transmission infrastructure - steel towers, high-voltage conductors and the like. However, the role of software, sensors and automation should not be underestimated in addressing many of the key barriers to transmission development. Moreover, digital transmission solutions can be deployed quickly and start optimizing existing infrastructure right away, which will in turn help to alleviate the current backlog of solar and wind projects awaiting interconnection.
In Energize’s Electrify Everything series so far, we’ve addressed solar, wind, batteries, low-carbon flexible generation like geothermal and hydro, and transmission. For the remainder of the series, we’ll shift to the demand side of the electrification equation.
Up next, I’ll cover the electrification of mobility. At Energize, we see software acting as an essential enabler of the massive investment underway into the adoption of new electric vehicle (EV)models and the supporting EV charging infrastructure.