The Power System Benefits of Interregional Transmission

Politico reported Thursday that negotiations around increasing the debt ceiling, which were already considering permitting reform, might include a bill written by Senator John Hickenlooper (D-CO) and Representative Scott Peters (D-CA) to foster the building of interregional electricity transmission. Interregional transmission capacity can increase grid reliability, support new generation resources, and lower costs for end users (businesses and residential consumers) of electricity.

The proposal would require grid operators, or regions, to “be able to transfer at least 30% of their peak demand between each other.” This means grid operators would have to expand existing or build new transmission lines with their immediate neighbors to help balance the power grid.

There are several reasons why improved interregional transmission capacity would benefit the reliability and resilience of the grid.

  1. Transmission capacity directly improves grid reliability by enlarging the pool of generation resources available to meet demand. Grid reliability first and foremost rests on the continuous balancing of supply and demand at all locations on a grid system. Transmission connects more generation resources to more demand locations. This essentially expands the options available to grid operators as they seek to dispatch the required volume of generation. A major source of risk is unplanned contingencies, which can occur within every segment of the grid system. Examples include unscheduled plant outages, weather driving demand far above forecast, transmission equipment outages which disconnect generation facilities from the grid, and gas supply system failures driving gas-fired generation offline. An expanded diversity of generation options is the most robust defense against the unplanned contingencies that occur during extreme system conditions.
  1. Interregional transmission improves regional grid reliability because grid conditions often differ dramatically across zones. On the demand side, regions are exposed to different weather systems, and thus have different demand requirements, and they are time differentiated, so demand peaks do not occur simultaneously across regions. On the supply side, generation outages and underperformance can be offset by spare capacity in neighboring regions. For example, cloudy weather decreasing local solar generation can be offset by strong wind-generation several states away, or cold weather driving strong residential gas demand and forcing gas-fired plants offline can be offset by robust hydropower from a neighboring system. The ability for regions to share generation capacity is determined by the carrying capacity of the transmission system which connects regions.
  1. The advantages of expanded transmission to system reliability are well documented. A recent example is the 2022 California heat wave. CAISO, the California grid operator, was able to import 6,500 megawatts of power from the broader western region, which played a crucial role in averting blackouts. CAISO specifically notes the “geographic diversity of extreme heat across the West,” and that the heat “was not as intense or prolonged throughout the Desert Southwest or Pacific Northwest compared to California.” This illustrates how an expanded pool of resources experiencing diverse conditions helped avert blackouts.

    An unfortunate counterexample is the case of Winter Storm Elliott. The Tennessee Valley Authority and Duke Energy were forced to initiate blackouts due to insufficient generating capacity during the storm. A primary cause of these blackouts was contingencies created by extreme weather which drove local coal and gas-fired power plants offline. However, analysis by RMI shows how multiple gigawatts of wind energy was available in the Midwest, and would have been available to supply the southeastern region if sufficient transmission capacity existed. As it was, these wind farms were simply curtailed, as the local system was oversupplied with energy.
  2. Transmission reduces grid congestion, allowing the lowest cost units to serve load, which leads to lower energy costs for ratepayers. Congestion occurs when low-cost resources in one region are dispatched to meet system wide load, but insufficient transmission capacity exists to deliver the energy to a specific load zone. The transmission constraint forces the grid operator to dispatch higher cost generation, which is local to the demand. This higher-cost generation is paid for by the end-users in that specific load zone. This phenomenon explains why certain transmission constrained regions suffer from structurally higher electricity prices relative to transmission rich regions. Transmission expansion would erase this type of bottleneck and therefore lower costs for the industrial, commercial, and residential end users.

Establishing a meaningful interregional transmission capacity minimum, as this proposal would do, contributes immensely delivering the benefits described above. This kind of policy creates regulatory demand for transmission and would help get projects off the ground. This is an important signal for project developers and complements reforms to the federal permitting process, which will improve project approval timelines. 

Importantly, this approach empowers existing planning authorities, primarily regional transmission organizations and independent system operators, which host existing planning processes and technical staff required to deliver large portfolios of transmission projects. These defined procedures and expertise take years to develop; it is smart policy to leverage existing systems which have delivered significant packages of transmission expansion in the past and maintain regional and state influence over how transmission is sited and built.

Joseph Majkut is the director of the Energy Security and Climate Change Program at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Cy McGeady is an associate fellow with the Energy Security and Climate Change Program at CSIS.

Joseph Majkut
Director, Energy Security and Climate Change Program
Associate Fellow, Energy Security and Climate Change Program