Project Development, Wind Power

Forget the PTC, Wind Energy’s Real Problem Is Transmission

Forget the challenges associated with government tax credits.  Do you want to know the real barrier for future North American wind market growth?

Here’s a clue: It’s not a lack of public support.  It’s not the ongoing debate about the production tax credit (PTC) either.

It’s actually something far less controversial, but all the more important, and it can be summed up in four simple words: transmission and the grid.

Make no mistake, it represents one of the single biggest hurdles for the development of global clean energy.  And in the United States, it’s now the biggest challenge that’s holding the development within the market back.

Why?  To put it bluntly, while the U.S. continues to benefit from favourable wind resources and vast tracts of open land on which to develop project portfolios, the painful truth is that the obvious development sites aren’t anywhere close to major conurbations and the power hungry consumers.

That’s because the best projects are located right in the middle, while most of the power is needed right out on the perimeters on the East and West coasts.

And for the developers, that presents a growing problem.  While it’s perfectly possible to sell some of the power locally, the ability to transmit power over multiple state borders and over hundreds of miles has proved to be an expensive distraction, both in terms of time and money.

That’s exactly why outfits like Clean Energy Line Partners have opened up shop. It’s also explains why whenever they engage in an open solicitation process to gauge interest, they’re inevitably over-subscribed. As it stands, the firm currently has five major transmission projects under development and in planning. Its latest initiative, known as The Grain Belt Express Clean Line, offers a 780-mile high voltage direct current (HVDC) link from Kansas, Missouri, Illinois and Indiana to key eastern states.

In this particular instance, The Grain Belt Express received requests for more than 20 GW of transmission service — that represents more than four and a half times the total capacity of the line. 

Those requests were received in just three months.

The business model behind each of the lines is simple: Developers bid for access to transmission on the service and in return can guarantee along-term market to sell their power.  In return, owner operators like Clean Energy Line Partners benefit from long-term stable revenues from developers reliant on the service.

It’s surprisingly simple model that, by tackling the complex issues of transmitting power interstate, suddenly opens up huge opportunity in the market.

The most interesting element, however, is still to come.  For as the phase introduction of these transmission superhighways becomes reality, the revenues that they generate won’t be so easily overlooked. 

Expect therefore, for many of these projects to quickly change hands, superseding existing grid and utility infrastructure as they do so. 

In the longer term, it’s that bypassing of existing infrastructure that will also have a profound and meaningful impact on the traditional power business.  And that, by proxy, will shift the US energy markets in a way that right now, may be difficult to imagine.

As we have previously argued in our 2014 report, Tackling Transmission, the roll out of major renewable energy generating initiatives has had a profound impact on transmission and the grid — the true impacts of which may not yet fully be understood.

Lead image: Wind turbine. Credit: Shutterstock.