Knowledge Problem

Lynne Kiesling

When I was reading around for my post on smart grid and renewables interconnection, I found several different parties willing to elide the two, to gloss over the important, subtle distinction between building new wires and incorporating digital intelligence and communication capabilities into a wires network. They are potentiall related, but different, and should be treated as such.

As described in this Green Inc. blog post, the thoughtful folks at the Center for American Progress appear to disagree with me, arguing that there is really no difference:

A truly national clean-energy smart grid must consist of two distinct components: an interstate “sustainable transmission grid” that will transport clean utility-scale renewable energy long distances to market, and a digital “smart distribution grid” to deliver this electricity efficiently to local consumers. The absence of a national grid that seamlessly integrates these two components is one of the biggest impediments to large-scale deployment of low-carbon electricity.

Or at least in her Green Inc. post Libby Tucker characterizes them as disagreeing with me … but this quote she pulled of theirs is at least consistent with the fact that the application of digital communication technology in the wires network falls disproportionately in the distribution network, not in the high-voltage transmission network. At that level the question predominantly is still on the economic value of the contruction of additional transmission infrastructure.

I am not universally predisposed against building new transmission infrastructure; however, I am arguing that until we have meaningful, relevant retail price signals and retail choice for retail consumers, it is impossible for us to know the economic value of additional transmission infrastructure. That, combined with the high level of political lobbying from Boone Pickens and others, leads me to be extremely cautious in recommending larage-scale transmission infrastructure construction. What if we spend lots of money (including taxpayer money) building this network, and it turns out we were wrong about its economic value? Then we’ve just created another set of stranded assets, the bete noire of the regulated electricity industry.

I’m also convinced that we cannot know the economic value to retail consumers/taxpayers of additional transmission infrastructure connecting large-scale renewables until we have an economically meaningful carbon price, which implies that carbon policy uncertainty should be resolved before we start long-distance transmission planning.

As we make decisions about building new long-distance transmission, I think FERC’s Acting Chairman Jon Wellinghoff and I agree on the ideas reflected in this Wall Street Journal article — use existing rights of way, such as rail lines, as transmission paths.

One way to avoid controversy over the location of new power lines could be to run them along railroad rights of way, Mr. Wellinghoff said in an interview.

“There is some discussion of investigating whether or not it’s feasible to site these lines down existing railroad corridors in the United States,” Mr. Wellinghoff said. Lines radiating out from the Midwest would be direct current lines, which “have a lot less interference in them” and could possibly run in a railroad corridor,” he said.

I’ve long believed that one of our most binding physical constraints is land, and that entities with rights of way may be able to profit and to create value by selling or leasing their rights of way to create bundles of infrastructure. I’ve mostly thought of it at the urban distribution level — in the limit, water, natural gas, electricity, and fiber wires in the same right of way — but the idea of siting transmission infrastructure by leasing rights of way from rail companies is a variation on the same idea.