There are 160,000 miles of high-voltage power lines in the U.S. That’s six and a half trips around the world — if anyone these days was traveling — or most of the way to the Moon.
Across this sprawling network, roughly half of the wires are used at less than 25% of their capacity. In other words, all these wires draped outside our homes, crisscrossing streets, and undulating along the side of the highway are not doing what we’ve paid big money for them to do.
This is a problem. And for the first time in more than 10 years, the Federal Energy Regulatory Commission, or FERC, has a chance to fix it — as long as it doesn’t get its wires crossed.
'Smart grid' incentives
FERC is putting the finishing touches on a suite of incentives aimed at promoting so-called "smart grid" or "grid enhancing" technologies — common-sense solutions that you may think America’s grid has already implemented, but which are in fact long overdue: everything from smart wires that can intelligently route power flows on the high voltage network, to so-called "dynamic line ratings" that finally enable grid operators to see the conditions of their power lines in real time, to Waze-like routing software for electricity known as "topology optimization."
Together these technologies would unlock 500 GW in clean energy projects that are currently stuck in transmission queues, forcing developers to wait as long as 900 days to get interconnected to the grid.
What the commission hasn’t yet confirmed, though, is how it plans to incentivize investment in these technologies. Electric utilities are typically rewarded for the money they spend. The bigger the project, the bigger the reward — a perverse incentive known as "ratebasing."
Of course, grid-enhancing technologies are the anti-big-investment: For a fraction of the cost of a new transmission line, they identify network capacity based on real-time conditions and intelligently reroute power on more efficient pathways than it otherwise naturally flows. They smartly, and inexpensively, make the most of what we already have.
That means FERC needs to look to another incentive: one that’s rational, value-based, and outcome focused. Rather than encouraging electric utilities to spend more, the incentive for grid-enhancing technologies must instead reward utilities for more efficiently using what we have already paid for.
This can add up to big bucks: Technologies like smart wires and dynamic line rating regularly generate a benefit-to-cost ratio of 4:1 — four dollars back for every one dollar invested. By offering utilities a share of the savings they generate, FERC can create a highly lucrative incentive that will rapidly spur investment in the technologies to make our grids more resilient, efficient and secure.
More than a dozen U.S. senators are now calling on FERC to act. In an Aug. 7 letter to Chairman Neil Chatterjee, lawmakers wrote that "though grid-enhancing technologies are readily available and can improve operation of the existing grid, the commission’s current transmission incentives policies do not encourage their deployment."
This is an understatement. We’ve been running the grid the same way for the past 100 years — forget pre-iPhone, the grid hasn’t changed much since Nikola Tesla died just before World War II.
Other countries race ahead
Meanwhile, our friends overseas are racing to transform their grids. From Canada to Europe, Latin America and Australia, grid operators have rapidly implemented grid-enhancing technologies that allow utilities to respond in real-time and even predict shifts in demand, capacity, weather and more. Their grids have gotten safer, more nimble and more reliable — and it took a matter of weeks and months, and at a fraction of the cost. The U.S. grid, by comparison, is the most unreliable of all of the OECD countries.
This shouldn’t be a surprise: As recently as last year, the U.S. Department of Energy recognized that "the U.S. currently lags behind other countries in the deployment of some advanced transmission technologies." A key reason, it continued: "The difference in regulatory environments; the U.S. provides transmission owners little incentive to deliver more power over existing lines or to reduce transmission congestion."
This isn’t a Democratic or Republican issue — as the finding above from the Trump administration amply demonstrates. Harnessing the technologies and ingenuity developed right here at home promises to put thousands of Americans in the smart-grid sector to work.
FERC has a rare opportunity to fix this broken system. The current incentives all point the wrong way: rewarding utilities for building expensive, inefficient boondoggles, rather than making the most of what they already have. This saddles American families with higher bills, exposes the grid to greater vulnerabilities, and undercuts efforts to make our grids as clean and efficient as possible.
FERC’s new approach should include value-based incentives that reward utilities for truly increasing access to their grids, including by introducing competition to reduce project costs and timeframes and better protect consumers. This approach promises to recalibrate our electricity markets to make sure they operate in the most efficient way possible. And it ensures our grid becomes and remains the fastest, most secure, most reliable and most efficient on the planet.