Looking for a turnaround in transmission

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I'm Shelle Khan, and this is Catalyst. It was quite dramatic that the Secretary of Energy, Secretary Wright, wrote this letter to FERC saying here's a rule making I'm putting before you i on access to the grid. It strongly proves the point. The whole AI industry needs the grid and that this current administration is willing to do anything and everything to support. AI. So now we need to see the next step of okay, well let's expand the grid. Coming up, transmission. Transmission.

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Energy Hub builds and operates virtual power plants that utilities actually stake their grid planning on, coordinating EVs, batteries, thermostats, and more through a single platform built for utility scale, predictive, verifiable, and designed to perform when it counts. Learn more at energyhub.com. I'm Shale Khan. I lead the early stage venture capital strategy at Energy Impact Partners. Welcome. Apologies for my singing voice. Uh we're talking transmission this week because.

I had Rob Gremlich on a year ago, a little over a year ago, to talk about the woeful state of US transmission build out, which has like truly been embarrassing for the past decade or so and even worse in recent years. And uh w we talked about all the reasons why that was true and what might change and so on. But you know, I'd say the outlook was like we're in a a tough spot and a bunch of things need to change in order to

for us to start building significant transmission lines again. And just as a reminder, we need to build new transmission lines for lots of reasons. We need to integrate lots more renewables on the grid and other generation And also now we need to serve all of this new load that's showing up in the form of data centers. So it the need is doubled. And that speaks to why I wanted to have the conversation again today, which is

A lot has changed in the past year in the electricity sector. Things in other parts of the market have changed substantially. And transmission may or may not be the hardest thing to change. So I wanted to see whether all of the rapid change, all of the money that is flowing into the sector has moved the needle on building out new high voltage power lines in the US. So I brought back Rob Gramlik from Grid Strategies to do an update. Here's Rob. Rob, welcome back.

Спасибо за субтитры Алексею Дубровскому

All right, so you and I talked on this podcast uh a little over a year ago about transmission and new transmission, I would say in particular, in the US, and it was a a tale of Wells. And uh a a big long exclamation of how amazing it is that we've been able to build so little transmission, new high voltage transmission in particular in the United States in the past decade or so. Um, and I wanted to have you back on because, you know, the past year has changed many things.

about the electricity sector. And I wonder whether it has changed this thing. So my f high level question for you is, do you think we're in a fundamentally different position with regard to I don't know, your outlook on new transmission build in the US relative to a year ago, or is it more the same place?

Well, we're still struggling to uh put the pieces together. I think we do have a good platform that actually has a pretty decent shot of, you know, surviving the political change we've all experienced. because transmission is so critical for data centers and AI driven uh data center demand. But w we don't really know that for sure yet. Things are just sorta getting settled with uh the relevant agencies here in Washington, Department of Energy and FERC.

Uh, so we don't really know how that's gonna turn out. We did actually have an uptick in new lines in um Uh uh twenty twenty four. So that was new because I think when we spoke we were talking about how there were only fifty five miles of new high voltage transmission lines in twenty twenty three, which is down, you know, a trickle from the four thousand uh, you know, that had been built ten years prior. Um, which hopefully I wasn't all woe is me, woe is us when we Well is us, certainly.

I mean You know, I I do like to point at that um experience ten years ago and say, Hey, look, we were able in this country with all the permitting challenges we have to build four thousand miles of new high voltage transmission that connected all this clean energy. Um so there is hope and we like to point to that example of saying, look, when we get the pieces together right, we can do this.

Uh, but then, you know, some things happened and we went down to a trickle of only fifty five miles. Well, there was an uptick to like eight hundred eighty ish uh miles in twenty twenty four. So that's, you know, some good news. Uh when I first saw that I thought, oh great, like we're starting to turn things around. But if you look a little bit closer, it's you kind of see, oh wait a minute, these were lines

that were like begun ten or fifteen years ago that just finally got finished. Now You you know, you could say, all right, that's a good story'cause uh uh a number of these did need like federal permits from federal agencies and I think during the Biden administration they were approving transmission projects.

Um, and so, you know, that's good news and you know, that could uh could continue, might not continue in the current administration. We don't know yet. But uh there, you know, there was an uptick. So in some ways we've gotten some permitting. But some of the key policies like at FERC in order nineteen twenty.

Uh, you know, it could, you know, be sort of branded as a democratic thing. I think it was bipartisan and, you know, it actually had no preferences for renewable energy or anything like that. So I think it should be safe.

um and robust to a, you know, partisan change with new commissioners coming in. But we don't know yet. We don't know what the new commissioners are gonna do about nineteen twenty. Are they gonna implement it or just, you know, kinda render it Um you know sort of a dead letter and and a and a weak order that doesn't Uh briefly redescribed nineteen twenty.

Sure. So it was the order passed uh i issued a few years ago um w for proactive uh long term transmission planning, twenty year plans for each region. So it applies to the The grid operators. Yeah. PJM and MISO and SPP and California ISO, but also to the uh non-RTO utilities they need to get with their neighbors and put regional plans together. And so, you know, significant order, very well crafted in my opinion. Um

Chairman Glick and his team, you know, shepherded it through and Commissioner Clements and others. Uh, Chairman and then um uh Commissioner um Christie uh was there for the latter part of it he he made some changes, um but it uh so it, you know, it kinda wound up very sort of bipartisan and you know, technology neutral, uh, which is fine. Uh but it you know, it's there.

should be done. The courts will have their say. Hopefully people will revoke their challenges from the courts and just let it uh stay as it is. And then hopefully FERC will actually, you know, implement it with teeth and not just accept any old thing that comes in on on compliance. But that is the next step is the regions file their compliance approaches with FERC and FERC, you know, kind of on the on the margin can either m make it be a weak rule or remain a strong rule.

I mean, is this the fundamental reason why things so like in in other parts of electricity world. Things have changed a lot in the past year, right? And Uh, and and it's driven by just the it's like necessities, the mother of invention. It's a combination of necessities the mother of invention, and there is essentially an endless pool of money willing to throw itself at any solution that gets more power to data centers faster. Um

Is the reason why this hasn't like transmission hasn't benefited from that, that like the only way to solve it is kind of it's like what you're describing. It's like a FERC order that has to go through the ISOs that takes years to go through the process. And so it's just inherently a slower thing because you you could imagine a scenario where.

Sort of similar to what we're seeing in other categories, right? Like uh hyperscaler wants to build data center and strikes a deal with utility where they can get interconnected faster if they pay for A hundred miles of new seven sixty five KV line or something like that. Like you'd think that kind of thing would be happening. Yeah. I think it's just you know it's not right in the the bullseye of um you know the data centers

immediate need or the utilities immediate need. It's sort of the, you know, the background infrastructure that everybody relies on. And absolutely you need to build up that network, that backbone network to support all this new load. Um but it you know, it's not the obvious thing. It's not what, you know, incoming officials at the Department of Energy immediately go to as oh, here's immediately what we need to go focus on.

Uh, and it's not, you know, it doesn't catch a lot of the press attention. A lot of the press attention is about, oh, look at this, you know, on site generation option or a new um, you know, now we're doing rice, you know, generators or this or that or the other.

on site option. Those those get for some reason more attention, but I mean my understanding from the hyperscalers and the data center developers is that they all really, really want the full network transmission service with all of the good, you know, backup and cushion that that network provides to their operations. And the five nine's reliability that you only get that way. Um Uh and so

I think the message is starting to filter through the process. I mean, it was quite dramatic that the Secretary of Energy, Secretary Wright, wrote this letter. uh to FERC saying, you know, here's a rulemaking I'm putting before you uh on access to the grid. Right. But it's not really it doesn't really have anything about transmission in it, right?

Well, it's it's access to to transmission. And then so the next it begs the next next question of well, if you care that much to do this dramatic order that's, you know, almost never used authority. um and take all the you know, the beating from state regulators who would be losing some just uh jurisdiction. If you're willing to do that, well then you must care about the size of the grid, the actual capacity of the grid.

You know, what's access to a grid if it has no capacity for you? So uh it to me it it strongly proves the point that. the whole, you know, AI industry, if you want to call it that, uh needs the grid and that this current administration, which is willing to do anything and everything to support uh AI being done in this country.

um it proves that th the transmission network is critical to that because they're taking this major action to get access to the transmission grid. So now now we need to see the next step of, okay, well let's expand the grid and

all the things that come with that, which is order nineteen twenty and then inter regional transmission and then using the DOE programs, like the transmission facilitation program, we could go on. But there are a lot of things that uh FERC and DOE can do uh to uh you know actually enable the expansion of the grid. Is it a is this a little bit of a tragedy of the commons kind of a problem where it's like the any given

data center company needs transmission expansion, but you can't attribute that transmission build out to that specific data center necessarily. And so they can't say, I will put down money for you to build out new transmission lines specifically for me. And as a result, it gets pushed down the order of priority list because they're like, okay, immediate concern is getting this data center connected to the grid. And so instead I'm just going to go buy a bunch of gas generators or whatever it is.

Exactly right. Uh look, these cyperscalers and you know, you and I know them all and I'm sure we both have many friends at at each of them. They are in intense competition with each other. Uh, you know, to the point where the people I know at the hyperscale, they don't actually know which data centers are being developed for their company because it's so commercially sensitive that only a few people even in the company know which ones they're really planning to go forward with.

Uh and so if they're in that intense competition, like company to company, then it's of much less interest, just much less incentive. Um for, you know, them to go work on the the network that all of their competitors get to use just as much as they do. So that's classic public good, tragedy of the commons. And, you know, it's the reason why You know, in this scenario, this is a classic reason why you have government leadership. And, you know, as a nation, if we are in an AI race with China.

then we should be using federal leadership to build out the network for all of those uh data centers here that want to be in this country and operating here, not the Middle East or you know, Asia or wherever else. Um and so, you know, for this to happen right, you really need federal leadership. States and regions can do a lot, uh, as well and localities, but you know, we really need to build out the transmission network, which is an interstate uh federally regulated network.

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Let me throw a couple of recent announcements at you and just get your take on like what how big a deal is this and what does it mean? Okay, so one was I think just recently, SPP, Southwest PowerPool. uh got I think approval to build this 765 KV transmission backbone, as they called it. That sounds quite positive. How big a deal is that?

Yeah, that plan, the ITP plan is huge. Um I mean they went back and forth and I I don't know the Like the final number in terms of um it might be closer to the ten billion version rather than the twenty billion dollar version. Yeah, it's like eight point six or something was

Yeah, I read. Okay. So, you know, it got unfortunately cut back. I hope there's a way. Here's another way. Like the federal government could could come in and say, Hey, for you know, AI race with China, we want to get you back up to the twenty billion and we're gonna help you. Uh but hopefully It ain't over till it's over on that. But at any rate, directionally

It's fantastic. A seven sixty five KV collector loop with, you know, I mean anybody's favorite generation source is available in that, you know, Great Plains footprint and, you know, the market will decide which ones go forward. Uh but there certainly uh could be a a a tremendous amount of clean energy that connects to that system and powers a tremendous amount of data center and new manufacturing and other other load in that area.

Okay, so now an announcement that that points in the opposite direction, which is that the DOE, the loan program's office, uh, canceled the loan guarantee that was going to be offered to the Greenbelt Express project. So to your point, there it it seems from all the other indications that this administration would be Super in favor of new transmission build-out. That cancellation seems like an odd decision in in light of that. What do you make of it?

Yeah. So m many people interpreted that as though maybe they don't care about transmission. I don't interpret it that way. I think that was a very unique circumstance where uh a senator decided to use his minutes in the Oval Office to talk about a specific loan to a specific transmission line.

Okay, that's not gonna happen very often in our you know in the in the future. Uh and if it does, any time a senator uses his time with the president to talk about a specific loan to a specific line, that project should be a good thing. Uh that loan anyway will be in trouble. The project, um, I I expect will go forward. It's a great project.

Um uh but that loan is no longer. So I I just think, you know, I mean, presidents do things at the request of senators sometimes and you know, that's that's what happened.

How many Okay, I guess the way to ask this question is you said before, like, okay, to the extent that we built anything out recently, it's been stuff that was in the works for the past ten years, et cetera. So presumably we should have pretty good visibility then into how much we will build for the next two, three, four, five years. How much is it? Yeah, I think it's looking pretty good. I mean you've got um

Seven sixty five KV A C plans. We mentioned SPP, but MISO in the more of the like the Great Lakes part of the Midwest. uh and is looking at seven sixty five PJM as well. And they just came out with a new, uh very much more ambitious plan than we've seen from them. in the Mid Atlantic and ERCOT in Texas also has seven sixty five KV plans. So that's four regions who are for the first time in many decades doing the highest AC voltage transmission lines that we have.

So, you know, those take time, but those are uh now being planned. And there were also plans that, you know, started more like five, seven years ago, the MISO um long range transmission plan. Um some of these are still facing some challenges like that one has there's a challenge at at FERC with some states.

Um but uh hopefully that will go forward. California ISO has continued. They've been um cranking along quietly for many years. Pretty much they're the only ones who have kind of gone nonstop on transmission. Uh so every year they're uh they're doing more and it's bringing in, you know, resources from around the West. Um so I yeah, I do think uh there's a lot of indications. New York has some. Uh there's a a new line that the N E C E C in the from uh Quebec into

New England is finally going forward after, you know, some back and forth and tough court decisions and opposition. But um I do think there are a bunch that are on their on their way and looking promising. So the curve may bend back up a little bit, at least. Like that stuff comes together. We could be building hundreds, thousands of miles per year. Yeah. Yeah, we could be getting into the a few thousand or more miles per year.

And then how much is all this stuff tied up in the question of permitting reform? How much does that matter? Cause it it it doesn't it's not clear to me whether that's actually on the horizon. It may be, but certainly hasn't happened yet. Do we need it? Yeah I th I do think we need it. I mean you can You you can build things here and there, um under the current regime, which again, you know, was proven by ten years ago we we did it. Um

But there are real limitations uh with that. Um and some of it is this Big interregional opportunity. Like we don't really have a system in place to build interregional transmission from region to region, MISO to SPP or SPP to the interior west or interior west to the coast. all of these neighboring regions, there's a massive untapped value of transmission there. And, you know, we don't have a regional transmission organization with a planning process to deal with that. And and this whole

more mac looking at the whole industry on a more macro scale. You know, we're evolving out of a industry that started with three thousand utilities doing their local thing in their local fiefdom. uh without much of a you know tie between them and so we're crafting onto the top this more regional and then inter regional appro approach and it's a process, a multi decadal process that we're still working through and we're nowhere near

the end game on that. So we're still working through on that. Permitting reform, at least as um uh set up in the Manchin Barrasso Energy Permitting Reform Act, EPRA from a couple of years ago, it has a transmission title. That has a big focus on interregional transmission planning, uh and you know, uh kind of determining what what are the list of benefits that are the basis for cost allocation uh and some um federal permitting.

uh role in there. So those things, in my opinion, are extremely helpful. It's a great bill. It was bipartisan, passed the Senate Energy Committee, um eleven to four, only one Republican opposed. Uh, same one. Senator Hawley who opposed the uh the grain belt loan. But uh otherwise very strong showing at the Senate Energy Committee. And now it's, you know, t I think it's teed up for the broader permitting package, which there are complexities on the other components of the package that

both House and Senate are working through. I expect to see the House moving pretty quickly on on one piece, the NEPA related piece. Uh and that'll be an important milestone. So I I do think there's a chance and I do think it would have a very big impact on on transmission and enabling transmission going forward.

How much innovation do you see in the transmission world in the sense of um Either planning, right? Like people have talked about citing transmission lines along railways, that kind of thing, undergrounding technology innovation. What do you think is interesting? Yeah, I do think there are some very interesting um I'll call them advanced transmission technologies. Uh you know, one category is high performance conductors with carbon core or superconductors.

Where you put up a new wire either on the same tower or rebuild the tower. reconductoring more than new builds, right? Yeah. That's right. It's b for both. But but yeah, but it does open up the opportunity for reconductoring, which is very fast because you don't need a new right of way for that.

Um so that's one category. Another category is grid enhancing technologies which are more the operational type technologies, topology optimization, advanced power flow control, dynamic line rating, that sort of thing. Uh in the storage as transmission you could put in there. increase headroom and capacity in a in a quick way. And again the you know, the mantra in Washington anyway is speed to power, uh, because that's kind of the mantra for the data center community right now.

Uh and th you know, those things are speedy. Uh they're relatively inexpensive and they're and they're speedy. Um, you know, they don't fully solve the problem. It's not like you don't need new transmission as well. Um But they do increase the headroom and we all need headroom'cause it's a very constrained congested grid right now.

So final question, I guess. Um you mentioned we don't really have a system for interregional transmission. There are those out there, folks at Grid United, run by Mike Skelly, uh famous longtime transmission developer. Inventergy and others who have planned projects that are interregional. So how are they doing? Yeah, that's right. I mean, I think there is a little market for some transmission that you can cobble together enough um uh you know, basically money from customers, like voluntary.

subscriptions uh from utilities along the route or at either end in order to pay for some lines. Uh you know, long term I don't think that's enough to build anywhere near the optimal amount. Uh, but there is some and they're you know, these developers to their credit are looking at like some super high value pathways and they have uh I think in many cases very cleverly figured out good routes that uh you know can be put together and worked things out with landowners.

So many of them are pretty far along on that and what they do. I mean they kinda pass the hat to utilities and say, Hey, would you pay this much? And if they get enough then they can go forward. And, you know, they do often need federal permits and one hopes that there are actual staff at the Department of Interior and places like that to actually issue permits. It does rely on that. um in many cases. Uh but, you know, some of these lines are, you know, looking very very promising. So

I do think we will get some of those under the current regime, even if we don't get permitting reform. But if we get permitting reform, uh, you know, and or significant FERC action in the inter regional space, I think we would get a lot more. All right, Rob, thanks for the update on the lines. Uh we'll be back in another year and see if things have changed substantially from now. All right. We'll be ready for it. Good to talk to you, Show.

Rob Gramlik is the founder and president of Grid Strategies. This show is a production of Latitude Media. You can head over to latitudemedia.com for links to today's topic. Latitude is supported by Prelude Ventures. This episode was produced by Daniel Waldorf. Mixing and theme song by Sean Marquand. Stephen Lacey is our executive editor. I'm Shale Khan.