The Inflation Reduction Act (IRA) invests $369 billion in climate and energy security, including tax credits for clean energy generation. Despite the hefty price tag, it does little to fix how we build the energy infrastructure needed to bring generated power to consumers. The IRA and 2021’s bipartisan infrastructure law combined constitute just a fraction of the policy changes we need for a clean energy economy. Lack of necessary transmission is already a bottleneck in bringing more clean energy online and has catastrophic consequences in extreme weather. Without more interstate transmission, decarbonization will be slower and more expensive. We must update outdated transmission policies to ensure these historic climate investments lead to optimal outcomes.
Electricity transmission lines move power from where it is generated to where it is needed. In the United States, this essential infrastructure has been approved on a state-by-state basis for over 100 years. State-based permitting was a sensible regulatory structure for a long time because, with the exception of hydroelectric power, electricity did not usually move very far. The fuel moved across state lines (coal by rail and gas by pipeline), so the electricity did not have to.
This is no longer the case. Many of the best solar and wind resources in the U.S. are located in less populated areas and need longer transmission lines. The existing electricity grid has limited connections between regions, trapping this low-cost power where it is generated and leaving everyone else with unnecessarily higher-cost electricity. As the electricity grid changes with electrification and the generation mix changes with increased carbon-free resources, our permitting paradigm must also shift.
Congress has been trying to change how we permit electricity transmission lines for 17 years. Before 2005, the only transmission lines permitted by the federal government were those that crossed international borders or were built to carry hydroelectric power from federal dams. Recognizing that electricity transmission can have benefits beyond state boundaries, the Energy Policy Act (EPAct) of 2005 attempted to create the first federal permitting pathway. Unfortunately, this legislation did not have the impacts intended and has not been used to permit a single line.
The EPAct directed the Department of Energy (DOE) to study where transmission was needed to keep consumer costs low, provide resource diversity, and secure energy independence. DOE would define these areas as “National Interest Electric Transmission Corridors”. If a transmission developer was unable to secure state permits to build a line in these areas within 12 months, they could apply to the Federal Energy Regulatory Commission (FERC) to receive a federal permit. DOE’s initial corridor designations and FERC’s rulemaking were each met with lawsuits that narrowed the scope of the law until it was toothless. Transmission in the national interest was essentially still exclusively under state authority until the Infrastructure Investment and Jobs Act (IIJA) was signed into law in November 2021.
IIJA solved the transmission problems of the 2000s, but does little to address the issues we face today. The legislation was specifically designed around the judicial decisions that limited federal permitting authority. It expanded the criteria DOE could use to assess where transmission is needed and specified that FERC can approve projects that state regulators previously denied. IIJA worked within the existing law, maintaining the cumbersome two-agency approach and the required 12-month waiting period. This structure will not build the transmission we need for decarbonization at the necessary speed or scale.
Today, study after study finds that the least-cost pathway to decarbonizing the energy sector includes high capacity interstate lines. Despite this, the approval process for new generation has stretched from 2 to 4 years, with more than one terawatt of new capacity languishing from lack of transmission capacity. That is nearly the total utility-scale generation capacity on the U.S. grid. Even if most of these projects do not come to fruition, the backlog will only be exacerbated with the investments from IRA unless transmission policies change. Transmission lines that address this capacity issue struggle to get state approval because they cannot provide the majority of benefits to each state they traverse. Interregional lines are further complicated by debates over how to pay for them.
Congress should establish a clear federal permitting authority for the small number of high-capacity lines that cross state boundaries. These lines provide broad benefits that cannot be fairly evaluated on a state-by-state basis, and shouldn’t be delayed by state-level review and waiting periods. A bright-line test would put very few lines under federal purview – one example of proposed legislation to this end would leave more than 90% of transmission lines still under state authority. Adding a minimum required transmission capacity between regions would further ensure the building of resilient infrastructure.
All this building, of course, comes with a price tag; and that’s another area that lacks appropriate regulation. Congress should establish authority at FERC for the fair allocation of costs for interregional transmission lines, just as there currently is for sharing costs within a region. This approach would provide a path for addressing today’s grid challenges while still maintaining a balance of state and federal power.
In 2005, the EPAct’s experiment in federalizing transmission policy failed because it introduced too many steps and too much discretion. In the nearly two decades since, we have learned a lot about the benefits of transmission for a diverse, domestic, low-cost, low-carbon electricity supply that supports energy independence and security. Transmission is the linchpin for providing clean, reliable, low-cost energy, and it can only be secured by abandoning an outdated paradigm and starting fresh with federalism. It is time to take the lessons we have learned and apply them towards creating a federal authority over interstate electricity transmission.