Upgrading The US Energy Grid: A Trillion Dollar Problem?

The incoming Obama administration faces any number of sizable challenges. One thing the President-elect proposes is to spend $150 billion "over the next ten years to catalyze private efforts to build a clean energy future." That money is supposed to help create 5 million new jobs.

The new administration also proposes to increase the amount of electricity that comes from renewable sources from 10% in 2012 to 25% by 2025. Another laudable goal.

Looking at the second goal first, the US currently generates about 9% of its electricity from renewable sources. That’s if you count hydroelectric as a renewable source. If you don’t, renewable sources account for only about 2% of US power generation. Going from 2% to 10% in just four years does not seem likely.

The other goal also demands a closer look. Investing $150 billion in clean energy is a great idea, but how much does that really improve the US energy picture? And where should the money go: wind, biofuel, solar?

An argument could be made that more critical than any new source of generation is the development and upgrading of the country’s electrical transmission and distribution grid. There are about 200,000 miles of power lines in the US. Much of the grid is nearing 50 years of use and is not geographically close to where solar and wind power can be most efficiently generated.

For example, the windiest places in the lower 48 states are the Dakotas. To build transmission lines from North and South Dakota to New York City would cost about $13 billion. The investment would eventually be recovered in cost savings, but the up-front money needs to come from somewhere.

And that’s just one project. Bringing solar- or wind-generated power to high population centers in the US will cost far more than $150 billion. Projections for new generation from alternative sources in the US exceed additions to the grid by more than four times.

How much is all this going to cost? Just to patch the flaws in the grid that caused the 2003 blackouts would have cost $100 billion. In the same year, the International Energy Agency estimated that it would cost the European Union about $650 billion to upgrade Europe’s grid. At current estimates of about $8 million/mile for overhead transmission lines in the US, something north of the EU’s $650 billion is not out of the question. That is almost the amount of money that Congress is considering for the entire two-year economic stimulus package.

The Obama administration’s plan to catalyze investment in alternative energy with $150 billion depends on additional investment in infrastructure. Without a significant upgrade to the power grid, clean generation will have only a small impace. The private sector cannot afford to come up with the several hundred billion dollars necessary. And, given other priorities, the federal government may be unwilling to.

Paul Ausick