The ten biggest questions in energy & climate tech, Question 1
Will we clear the path for a lot more electric transmission?
Because I work in what’s come to be called “climate tech”, friends & family often ask me some variant on the question: “How screwed are we?” For most average people, this is undoubtedly the biggest question in energy & climate tech.
My sense is most people are prepared for an answer along the lines of “pretty darn screwed”. So, they’re pleasantly surprised when I respond that I’m optimistic. I’m surprised myself at how confident I’ve become that we’ll be able to zero-out GHG emissions by roughly mid-century. Because of my work at Energy Impact Partners, I’m fortunate to work with some of the cleverest entrepreneurs and infrastructure operators on the planet who are charting various pathways to this destination.
There’s still lots of work to do, of course – lots of technology we need to invent, validate, refine, and deploy at global scale. We still need an enormous amount of human creativity and, frankly, a daunting amount of political willpower. We also need to admit that there will inevitably be economic winners & losers from such an enormous societal transition.
Yet, I have no doubt that decarbonization is doable, and in the scheme of things, affordable. Some activities, like plane travel, will probably end up being a lot more expensive than they are today. Other activities, like driving around town, could easily become less expensive. On balance, in aggregate, energy will end up consuming a bit more of our national budgets than it does now. My own personal bet is in the balllpark of 20-50% more energy spend. For context, at a macro level, if we could make the healthcare sector 10% more efficient we might just pay for the entire energy transition.1 Does anyone doubt that there’s 10% fat to trim in healthcare?
To be clear: I’m not betting on human civilization reaching any sort of enlightened end of history. We can’t bank on solving the climate crisis by conquering human greed, shortsightedness, or any of our other shortcomings. Nobody knows whether the arc of history will ever fully bend towards justice. However, history has generally seemed to yield to human ingenuity. Never bet against it. Combine our extraordinary cleverness with well-regulated capitalism, and surprising things tend to happen. Many, many decades from now, I think there’s a pretty good chance that most people will not view decarbonization as especially controversial.
Back to the premise of this article. Optimism aside, there are still plenty of questions about how we’re going to get this decarbonization thing done. Because energy touches every nook & cranny of the economy, there’s no end of nook & cranny level questions. So, I’ve decided to take a shot at elevating the biggest questions whose answers will have the greatest impact on the path we take to achieving our goal. Each essay in this series will focus on one of those questions, and explain my current working hypothesis about the answer. (Views are my own, but are of course heavily influenced by my experience at EIP.)
Here are those big questions:
Will we clear the path for a lot more electric transmission?
When will we get serious about nuclear? (or find something ‘nuclear-esque’?)
Can wind turbines self-replicate? (And how will we make beer?)
Is natural gas a “bridge fuel”? A dead end? Or something else?
Bonus question! Actually, the most important one...but it’s in “stealth” mode for now. Please sit tight for the big reveal!
Now, on to question Question 1:
Will we clear the path for a lot more electric transmission?
Current hypothesis: Sadly, no. But don’t stop believing!
Big Wind & Solar (trademark?) are winning the race to decarbonize. Large fields of wind turbines & solar panels are now the cheapest sources of zero-carbon primary energy nearly anywhere they can be deployed at scale. (In a few regions, they’ve become the cheapest sources of energy available, period.) Sure, these resources are intermittent - subject to the natural variability of wind and sunlight - and this intermittency undoubtedly poses a challenge for electricity grid operators. But I’ve grown extremely confident that energy storage technology is on track to make wind & solar intermittency manageable, even at very high levels of grid penetration, with manageable cost. (I’ll write more about this later…For now, I’ll just highlight two of our promising longer-duration storage portfolio companies at EIP, Form Energy and Rondo Energy.)
Yet, wind & solar power have another Achilles’ heel. They take up a lot of space, and that space needs to have robust wind & solar resources for the energy they yield to be reasonably affordable. Hence, the vast majority of wind & solar power to date has been built far from population centers in the windy plains or sunny deserts.
It’s true that Small Solar - whether mounted on rooftops or on relatively small tracts of open land - is an option for more populous areas. However, the cost of energy from Small Solar tends to be more than twice the cost of Big Solar, and there’s simply not enough viable rooftop space to satisfy more than 20% of our energy needs in most major metros, even if we blanketed all of the rooftops in PV. (Note, in the chart below, that rooftop solar can satisfy a much higher portion of current electricity demand than all final energy needs - even in a scenario with high levels of electrification.)
[Don’t get me wrong: I think blanketing rooftops in PV is a good idea. That’s a great use of rooftop space. That said, we need to figure out how to do so more affordably. And, we also need to stop paying for rooftop solar with absurd net metering schemes which, like a twisted version of Robin Hood, end up taking from the poor to subsidize the rich. But ultimately, yes, rooftop PV ought to play a ‘best supporting actor’ role in the energy transition.]
Back to Big Renewables. Their best friend is Big Transmission. When energy system modelers develop scenarios with high levels of renewable power generation, those scenarios also inevitably include a massive expansion of transmission capacity. For example, the landmark Princeton University “Net-Zero America” study found that we’d need to more than triple current US transmission capacity in order to achieve the most cost-effective decarbonized energy mix.2
Many of the notional new transmission lines in these sorts of models would need to span hundreds of miles in order to interconnect regions with diverse climate & weather patterns. Such lines would not only transport the richest renewable resources from remote expanses to concentrated demand hubs; they’d also help balance out the intermittency of wind & solar across diverse climate zones. (When it’s cloudy in Ohio, it might be windy in Kansas…etc.)
Unfortunately, reality is simply not cooperating with this vision. Instead of setting out to triple the grid in thirty years, the US is on track to add about 50% more transmission capacity…if we’re lucky. And I can count on one hand the number of major new high-voltage inter-regional lines that have been built in the US in the past decade. Hint: it doesn’t even take any fingers!
Building a large-scale electrical grid the first time around certainly wasn’t easy, but at least it was fairly obvious to the early 20th century public that the benefits of electrification would outweigh the costs. The second time around, the typical public response to expanding the grid seems to be: “I already have my washing machine and flat screen TV, thank you very much. Not in MY backyard!”
Hence, hurdles to siting & permitting big infrastructure projects have come to impose a heavy burden on new transmission development – particularly in the case of long lines that need to cross multiple jurisdictions. In every county you cross, there’s a commissioner who demands to know how his or her town will benefit from the “eyesore” you’re planning to erect.
The consequences of transmission constraints are already becoming abundantly clear. In the Southwest Power Pool - the electricity market spanning the windiest parts of the country across the Great Plains - wind power is now increasingly bottled up without an escape route to urban demand centers. Nearly every year for the past seven years we’ve seen a rise in periods of negative power prices. This market oddity emerges when wind farm operators are incentivized to pay coal & gas plant operators to reduce their output, so that those wind turbines can still generate tax credits (which are only produced if the turbines are actually making power). Meanwhile, the cost & lead times required to interconnect new renewables to the grid have also surged across regions.
Underinvestment in transmission is undoubtedly a loss for society as a whole. It will make nearly all other elements of the energy transition more expensive. One study from MIT found that a slate of Big Transmission initiatives could nearly halve the cost of delivering zero carbon electricity to consumers. Studies typically find that the economic benefits of major new inter-regional transmission lines are more than double the costs.
At my company, EIP, we see several categories of technology which have the potential to alleviate these transmission woes. Solutions generally fall into one of two buckets: 1) new sensing, analytics, and control tools for grid operators to maximize the capacity of the lines we already have; and 2) higher capacity conductors which are able to carry more energy via a less imposing physical footprint (e.g. smaller towers & narrower corridors).
While new technology can surely make a difference, I won’t sugarcoat the difficulty of implementing new solutions in the electric transmission business. Working with dozens of electric utilities over the years, I’ve found it to be among the most risk-averse segments of an (appropriately) risk-averse industry. (I say “appropriately” because nobody has an interest in compromising the safety or reliability of our high-voltage power network.) But even if new tools can be validated and adopted at scale, transmission expansion is still, ultimately, more of a collective action problem for governments & citizens than it is a puzzle for engineers.
I’m very sorry to say that the US, at least, does not currently inspire confidence in collective action.
So, what are the consequences of transmission falling short?
The most obvious consequence is that renewables, too, will fall short. But…not uniformly. In the near-term I still expect to see more & more renewables crammed into areas with super strong resources & lots of open land. In the US, for example, wind & solar projects subsidized by federal tax credits are now so cheap in certain places that they can be financed fully anticipating that there will be frequent periods when they’re forced to curtail their output due to a surplus of generation. After all, a wind farm with a levelized cost of energy of $10 per MWh uncurtailed is a wind farm with a cost of $20 per MWh curtailed half the time! That’s still in the money compared with the marginal cost of gas-fired generation in the US.
In the long-term, though, transmission constraints will also ultimately constrain the growth of renewables.
These dynamics suggest a complicated second-order impact on the emerging opportunity for energy storage. Transmission & storage are in some ways partial substitutes, and in some ways complements. For areas with especially high renewables penetration, new transmission reduces the need for storage by enabling wind & solar intermittency to be balanced across a bigger system. Yet transmission is also ultimately required to support higher levels of renewable power penetration everywhere. Hence, in the long-term, a loss for transmission is also probably a loss for the storage market.
In the near-to-medium term, though, transmission’s loss is going to be storage’s gain. In the US, inadequate transmission expansion means more wind power bottled up in the plains, and more solar energy stuck in the southwest. There will be increasingly frequent periods when excess renewable energy causes power prices to plummet, sometimes followed shortly after by periods when renewable generation declines precipitously, causing power prices to surge. The opportunities for grid storage to profit from this volatility will be plentiful. The biggest winners will be today’s leading storage system integrators like Powin Energy, who are ready to deploy lithium-ion-based systems rapidly, at massive scale, in the next few years. (Note: Powin is an EIP portfolio company.)
Another second-order effect of transmission shortfalls might be additional economic divergence among regions between cheap renewable ‘haves’ and ‘have nots’. If large energy consumers can’t access cheap, clean power via transmission, perhaps they’ll go directly to the source. For example, by working with our portfolio company Rondo Energy, large industrial heat consumers could set up shop in locations with the very best wind or solar resources, and perhaps skip the need for a grid connection altogether. In the longer-term, renewable hot spots could become host to a whole new “electrofuels” industry – combining electrolysis, direct air capture, and other electrically driven processes to synthesize hydrogen & ‘recycled’ carbon from the atmosphere into a range of gaseous & liquid fuels. (I’m getting ahead of myself. More on this wild idea later!)
Lastly, failure to build sufficient transmission will accelerate the need to turn to alternative zero-carbon primary energy resources - preferably, geography-independent, low-land-utilization resources. Nuclear is of course the most proven, and still the most likely candidate. But a dearth of renewables also leaves a bigger gap for novel geothermal or CCS technology to fill. That’s coming up next.
Healthcare is currently about 18% of GDP, which energy has averaged around 7% of GDP since the 1970s oil crisis. So 10% savings on healthcare = 1.8% of GDP, or roughly a quarter of energy expenditures.
In it’s “RE+” Scenario.