A Silent Threat To The Energy Transition: America's Broken Infrastructure Policy

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by Tyler Durden
Sunday, Jul 30, 2023 - 06:30 PM

Authroed by Joshua Trott via RealClear Wire,

On paper, the Inflation Reduction Act was a big win for America’s infrastructure and energy future: $550 billion in federal spending, with nearly $400 billion earmarked for energy projects aimed at reducing our carbon emissions by the end of the decade. But money alone, even half a trillion dollars in federal funding, can’t solve the biggest problems facing the energy industry as it works to meet global demand today while building toward a more sustainable tomorrow. 

So much of the conversation focuses on the tired and misleading narrative about Oil & Gas villains vs. Renewable heroes. The true enemy of our sustainable energy future is the nation’s broken infrastructure policy. We could greenlight every renewable project in development today and innovate every piece of technology needed to meet our climate goals, and it wouldn’t matter because we lack the ability to utilize and store the energy we create.

Take the West Virginia pipeline finally approved after years of stalled progress. It’s getting done not because of new funding or policy innovation, but thanks to pork barrel politics in Capitol Hill’s debt ceiling negotiations. The Mountain Valley Pipeline highlights the shortcomings of our fragmented infrastructure policy, which threatens to derail even the costliest, best-executed, and most well-intentioned energy transition plans. The stakes have never been higher, and the situation is growing more precarious by the day. 

A Broken System

There’s a massive gap between our efforts to transition to sustainable energy and our ability to make it happen. Countless examples and data points bear this out. Here are just a few:

  • At the end of 2022, there were over 10,000 projects in the U.S., most of them wind, solar, and batteries, waiting for permission to connect to the grid, up from 8,100 the year before, according to researchers at Lawrence Berkeley National Laboratory. In 2021, backlogged projects sitting in the queue represented 1,300 gigawatts of solar, wind, and battery projects – technically enough to supply about 80% of the country’s electricity demand. 

  • Most energy storage projects never get built. A Clean Energy Group report found that “lengthening wait times and rising interconnection costs dramatically restrict the rate at which renewable generation and energy storage resources are installed.” This creates obstacles to hitting so many goals, including emissions reduction targets, renewable generation and energy storage procurement targets, and grid modernization plans.

  • California’s big three utilities may need to invest up to $50 billion by 2035 to upgrade their grids in order to meet the state’s ambitious electric vehicle goals. That’s a staggering sum, what is arguably the greenest and most forward-looking state regarding renewables, and it highlights the needs every state will face when tackling energy infrastructure investment.

  • The IR Act included hundreds of billions of dollars for solar panels, wind turbines, electric vehicles, and other technologies to tackle climate change. Yet if we can’t build new transmission at a faster pace, around 80% of the emissions reductions expected from that bill might not happen, according to researchers at Princeton University’s REPEAT Project.

Infrastructure isn’t top of mind for most people, but it has gotten more attention in recent years, particularly after Congress passed the massive $1 trillion infrastructure bill in 2021. The legislation included funding for everything from airport repairs to clean drinking water. It also contained the largest investment in clean energy transmission and the electric grid in U.S. history – $65 billion – to be used for new transmission lines for renewable energy, advanced transmission and distribution technologies, and research hubs for next-generation technologies, including carbon capture and clean hydrogen.

But what good are new transmission lines and next-gen technologies if they never make it past the black hole of red tape, interminable delays, supply-chain problems, and exploding costs that derail so many energy projects? 

The Interconnection Crisis

The demand for investment far outpaces the industry’s speed and capacity to build. In the past decade, only about 23% of all projects in interconnection queues have ultimately been able to plug into the grid and start operations. The total capacity of energy projects in the nation’s queues is growing fast and increased by 40% year-over-year in 2022, according to a recent report from the Berkeley Lab.  

This surge of development, largely a response to government climate resilience incentives, is good news for the energy transition – in theory. But to be able to build the infrastructure needed to meet our targets, development and construction timelines must be radically shortened.

Some more sobering statistics: The combined solar and wind capacity currently actively seeking grid interconnection roughly equals the installed capacity of the entire U.S. power plant fleet. And just 21% of projects (and 14% of capacity) seeking connection from 2000 to 2017 had been built as of the end of 2022.

Not surprisingly, bad wait times are only getting worse. The typical duration from connection request to commercial operation increased from less than two years for projects built from 2000 to 2007 to nearly four years for those built from 2018 to 2022. When companies do finally get projects reviewed, they often face another hurdle: Local grids are at capacity, so they are required to spend much more than they planned for new transmission lines and other upgrades.

The mission-critical priority is not the ability to build energy resources. It’s the infrastructure and ability to absorb and leverage those energy resources. Forget about politics, policy, and money – if you don’t have the infrastructure to support the new technology, nothing else matters.

Aging Grid, Growing Problems 

This New York Times headline from February sums up the issue well: “The U.S. Has Billions for Wind and Solar Projects. Good Luck Plugging Them In.”

Much of the U.S. grid was built in the 1960s and 1970s, and over 70% of it is currently more than a quarter-century old. But age isn’t the grid’s only problem. The U.S. power infrastructure was built to bring energy from where fossil fuels are burned to where the energy will be used. The nation’s electricity industry, meanwhile, grew via a patchwork of local utility companies whose targets were to meet local demand and maintain grid reliability.

Emissions-free energy sources like sun and wind are, by nature, intermittent. They’re abundant only in places where the sun is shining or the wind is blowing, and therefore need to be stored and transmitted to other locations where there is demand for power. 

Along with the need for new ways to transmit and store sustainable energy, the existing grid will need a major upgrade as demand for electricity rises to meet the needs of electric vehicles, heat pumps, and other replacements for conventional energy sources. A modernized and expanded grid “will be the backbone of the energy transition – and a requirement of any realistic decarbonization pathway,” according to a 2022 report by McKinsey & Company.

A recent Department of Energy draft analysis cited “a pressing need for additional electric transmission,” especially between different regions. The McKinsey study framed it more dramatically: The U.S. grid will need to expand by 60% by 2030, and doing so would require “a mind-boggling acceleration of the typical ten-year capital project timeline. It is, arguably, a century of work to do in less than a decade.” 

So far, that expedited timeline looks like a pipe dream. PJM Interconnection, the largest electrical grid operator in the U.S., has been so inundated by connection requests that last year, it announced a freeze on new applications so it can work through a backlog of thousands of interconnection requests, mostly for renewable energy.

Upgrading the grid is the single most important thing we must do to enable a successful energy transition. Without policy change, this problem won't get solved. 

Washington: We Need Action Now 

There is no silver bullet to fix this complex set of issues. But it’s clear we need a strategic approach to infrastructure investment, and fast. Part of that investment needs to come from Washington in the form of comprehensive policy and regulatory reform, which is the single biggest blocker to private investment and healthy competition in the energy sector. 

Simply put, building energy projects is complicated. Who pays for what is even more complicated, as processes, permitting, payment, and incentivization are all misaligned. Current policy doesn’t support the buildout we need; in fact, it slows it down and exacerbates the problem. Without policy and regulatory reform, we’ll continue to pay more and more to maintain our quality of life. Even worse, we’ll never reach the finish line in the race to a sustainable energy future.

If we want such a future, we must completely retool our approach to building infrastructure. We must support the resourcing we need in ways that maintain reliability while also furthering our climate goals. We need improved processes for addressing state and federal permitting, with a focus on timely conflict resolution. And we need incentive structures that promote large-scale infrastructure investment and improve cross-sector collaboration.

Pitting Oil & Gas vs. Renewables is a false choice that ignores the perilous state of our country’s infrastructure policy and sidesteps the sizable obstacles to overhauling it. Solving these issues should galvanize everyone who cares about the transition to a sustainable energy future. It also should unite the energy industry behind a clear and urgent mission: to understand the challenges posed by our grids and infrastructure, to intelligently invest in solutions that are both profitable and deliver results for society, and to ring the bell loudly about the regulatory reform that is needed to deliver on our goals.