What’s the issue?
The International Energy Agency (IEA) projects global spending on clean energy technologies will need to jump from $1 trillion per year to $5 trillion per year by the end of this decade for the world to reach net zero by 2050 (NZ50). The U.S. represents 15% of global emissions; if spending needed to zero out emissions were simply correlated to their origin, the annual U.S. share of global spending would be $750 billion. With investments yet to be programmed, the Biden administration is committed to achieving this goal and negotiating Congressional appropriations. But for these measures to be effective, they need large accompanying changes that yield: 1) sustained enabling political, legal and regulatory regimes; 2) immense industrial innovation; and 3) efficient evolution of energy commerce.
Why does it matter?
Today’s energy evolution imperative is focusing on decarbonization by large-scale electrification of transportation that requires orders of magnitude more renewables-based capacity and expansion and modernization of transmission grid infrastructure. The recent history of the “Shale Revolution” provides insight into big changes and issues that may ultimately determine the speed and extent of the coming decarbonization and renewables revolution.
What’s our view?
The Shale Revolution involved the deployment of innovation, investment and infrastructure primarily based on an existing legal and regulatory framework that was generally functioning. The renewables revolution will need even more innovation, investment and infrastructure, but it currently lacks efficient legal and regulatory framework(s) to build the interstate high voltage electrical transmission lines needed to support expansive renewables-based electrification. The siting and permitting of this critical infrastructure is done via a patchwork of state regulatory agencies and a project can take decades to complete. The comparable interstate pipeline infrastructure built over the past decade was completed within one federal permitting framework, and a large project took an average of 3.5 years. Reform recommendations lean towards rulemaking and regional approaches, but those may not be enough to drive the timelines needed to reach NZ50 goals.
In the United States, independence is an identity and a prized possession — cherished as individuals and as a citizenry. Every Independence Day, we reflect with gratitude for our independence and contemplate how to protect it. This year we are thinking about how to protect the energy independence we reclaimed this century. Doing so will depend on interconnected geopolitical and economic dynamics that pit global cooperation to combat climate change against global competition for economic might.
For the U.S. to stay independent and be a leader in decarbonization, we’ll need five big “I”s - imperative, improvement, innovation, investment and infrastructure. All five of these enabled the last energy transition referred to as the “shale revolution.” Reviewing that recent history can help frame what is needed for the coming evolution referred to below as “net zero (NZ) electrification.” For this ArView, we’ll focus on the first two — imperative and improvement — the regulatory kind.
Imperative & Improvement
Global energy production and consumption is complex and can be divisive, but the imperative to reduce emissions and slow global warming is clear. The fragile bipartisan consensus emerging on infrastructure is some evidence of an imperative for action in the U.S.
Enough Congressional consensus for action is much more important now than it was for the shale infrastructure scale-up because the inherent challenges to permitting, siting and constructing electrical transmission infrastructure will, in our view, require substantive legislative action. Discussion of these challenges and the need for regulatory improvement has been ongoing for well over a decade, but the imperative for action has been lacking due to states’ resistance to federal control and the lack of political constituencies in Congress.
A 2009 Congressional Research Service report predicted the coming priority for faster permitting to enable electrification: “One criticism of current regulation is that it takes many years to permit a project. Expanding federal authority over permitting is viewed as a means of accelerating the process. The underlying assumption is that it is indeed important to build transmission lines faster. For example, if national priorities include quickly putting low carbon generating plants on line to reduce greenhouse gas emissions and to speed the introduction of electric vehicles, then a rapid permitting process may be critical.”
Transmission permitting is still a state-by-state patchwork that must navigate inevitable and intractable interstate disagreements on environmental impacts, consumer cost allocations, land use and eminent domain acquisition. This is again explored in a 2020 report requested by Congress from FERC which detailed the “barriers and opportunities” for high voltage transmission. It concluded that navigating state processes and stakeholders can cause transmission development to take “in excess of a decade.”
Interstate Gas Pipeline Paradigm
This is in stark contrast to the regulatory and legal paradigm that supported the building of pipeline infrastructure to support the Shale Revolution. That paradigm — based on the 1938 Natural Gas Act and its 1947 amendments — supported the construction of $100 billion worth of interstate natural gas pipelines between 2008 and 2020 that, combined, span 18,195 miles and provide 223 BCF/d of capacity.
Ninety-seven percent of projects approved under the NGA during that time were approved within two years. The average time for constructing a large (>100 miles) interstate pipeline project from approval to in-service was 3.48 years — well less than a decade for what could be considered linear infrastructure development comparable to electric transmission.
However, as our customers know, federal regulation is no panacea and the averages deceive, since project timelines have increased over time. After approval, many projects ran into strong opposition and litigation which dramatically impacted their cost and schedules -- and for some led to cancellation.
Issues that led litigation regarding the Atlantic Coast Pipeline and PennEast Pipeline projects to the U.S. Supreme Court are the type of land use and regulatory jurisdictional issues that will most certainly impact future infrastructure projects, irrespective of their emissions and renewables profiles.
Tangled Transmission
In sharp contrast to the timelines depicted for interstate gas pipelines in the above graph, we highlight a large interstate high voltage electric transmission project that FERC used in the above-referenced report to Congress - TransWest Express. This project was initiated in 2005 and just completed all of its environmental and permitting reviews.
In The Electric Grids at a Crossroads, Professor Alexandra Klass of the University of Minnesota Law School conducted an extensive analysis of the historical evolution of energy infrastructure permitting and future needs to develop three recommendations for regulatory frameworks feasible when considering legal and state versus federal political dynamics. While recognizing the success of centralized federal regulation of interstate projects, as exists for pipelines, Klass did not view that as possible for transmission and recommended any of the following regional approaches:
- First, states could enter into interstate compacts under the Energy Policy Act of 2005 to create regional siting agencies with permitting authority over interstate transmission lines within those states.
- Second, Congress could transfer siting authority to Regional Transmission Organizations (RTOs) in areas where RTOs exist.
- Third, Congress could leave siting authority with the states but require state Public Utility Commissions and state courts to expressly consider regional transmission needs and regional energy needs in making siting and eminent domain decisions.
The imperative to evolve rapidly to net zero highlights the need to improve and reform the requisite regulatory regimes. This need is increasingly visible to policy makers, and success will be determined by their ability to make the changes to laws and rules at all levels needed to build new interstate electric transmission infrastructure.
At the federal level, efforts to mitigate foreseeable state-to-state constraints to approvals of transmission projects are underway in draft legislation and agency policy. They center on creating regional frameworks (not to the extent Klass recommends) for collaboration and utilizing existing federal lands and rights-of-way as corridors for development. For example, a recent Federal Highway Administration policy memorandum encourages states to leverage highways’ rights-of-way for “pressing public needs relating to climate change, equitable communications access, and energy reliability.”
These types of guidelines are likely not enough to significantly impact en masse project feasibilities and schedules. Lasting legal and regulatory changes require lawmaking by a political consensus that is now very rare in Congress and increasingly rare in requisite regulatory agencies. The sooner that changes, the better our chances of meeting aggressive long-term infrastructure goals.