According to a new report from Wood Mackenzie, the U.S. power system is facing a number of challenges, including how to strengthen resilience and reliability, while cutting greenhouse gas emissions. The fragmentation of the industry is of particular concern. “Inadequate transmission capacity is a key factor behind electricity oversupply and negative prices in some markets, and a constraint on investment in new low-carbon generation,” said the report.

The report noted that the Lawrence Berkeley National Laboratory has calculated that, at the end of 2022, there were projects with about 2,000 gigawatts of solar, storage, and wind capacity waiting in transmission grid interconnection queues, with most of that in solar (947 GW) and wind (300 GW). “The solar and wind requests combined are about the same as the total generation capacity in the U.S. today,” said the report.

The size of the queue is increasing quickly. Projects totaling about 758 GW of capacity entered interconnection queues last year, and the LBNL expects the increased incentives for renewables in the Inflation Reduction Act (IRA) will drive further growth in the years to come. Meanwhile, the time that is required to get a connection has been rising. For example, projects built between 2000 and 2007 typically had to wait less than two years from connection request to commercial operation. For projects built in 2022, the median wait time was five years.

“If the U.S. power industry is to fulfill the promise of the IRA and build out a huge amount of new renewable generation, an acceleration in investment in transmission capacity and connections will be needed,” said the report.

Inadequate transmission connections also make grids more vulnerable. For example, when millions of people in Texas lost power during Winter Storm Uri in February 2021, the crisis was exacerbated by the state’s shortage of connections to other grids.

As the share of solar and wind power in the electricity system rises, long-distance transmission that connects areas with different generation mixes and weather conditions becomes increasingly valuable. However, it is not always a panacea. For example, the worst impact from Winter Storm Uri hit during an extended “wind drought” that affected a vast area including the ERCOT, MISO, PJM and SPP regions. But, according to Wood Mackenzie, stronger connections between regions can play an important role.

Against the backdrop of the urgent need for more transmission, there has been some good news recently, mainly in the West, with several transmission projects underway. In addition, the state of California has for many years been looking at the potential benefits of a more integrated Western regional grid. Now some of the infrastructure needed to make that vision a reality is starting to come into place.

“Although it is encouraging to see these investments making progress, there is still a long way to go before the benefits of a bigger and stronger grid can be realized,” said the report. Samuel Berman, a Wood Mackenzie principal analyst for power and renewables, noted that physical integration of different regions is a necessary, but not sufficient, condition. Grid operators also need better communications and processes for working together.

Above all, said Berman, the length of time needed to secure approvals for even the successful projects does not bode well for the nation’s ability to build out the infrastructure needed to support a huge expansion of low-carbon generation over the coming decade.

“If new transmission projects are always going to take 15 to 20 years to build, there is no way we are going to get to a decarbonized electricity system based on wind and solar on the timetable envisaged by the Biden administration without raising serious concerns about reliability, especially if we are planning to add a significant amount of extra load from electric vehicles,” said Berman.

In the face of these challenges, according to Wood Mackenzie, it is no surprise that utilities’ spending on technologies at the grid edge, which do not require construction of new transmission, has been soaring. New analysis from Wood Mackenzie shows that leading investor-owned utilities in the U.S. plan to increase their spending on grid modernization technologies, such as advanced metering infrastructure, by 71percent this year, as they seek to improve resilience and make progress on emissions goals. “The harder it is to achieve their objectives by building out the grid, the more critical those technologies become,” said the report.