A vital factor affecting the economics of any energy source is transportation: where is the fuel extracted, where is it used, and how does it get from point A to point B?
An example is the case of Texas versus North Dakota, both of which have experienced a boom in oil and gas production from shale since the introduction of hydraulic fracturing.
Texas, with its long history of oil and gas development, is riddled with underground oil and gas pipelines connecting remote areas of the state with regional trading hubs.
North Dakota, on the other hand, was not traditionally a major oil and gas producer, so it has far less pipeline infrastructure in place than Texas. The result: between May 2012 and May 2013, $1 billion worth of natural gas was flared at well sites in North Dakota—burned off essentially as a waste product. For the most part, drillers in North Dakota operate a well to extract higher priced oil, which can be shipped via rail, albeit sometimes with disastrous results.
Fossil fuels are not the only energy source that can fall victim to transportation constraints. In fact, in many ways these constraints are far more onerous for renewable energy.
Like oil and gas resources, renewable energy regions are often located far away from major population centers. A prominent example is the U.S. wind belt, which stretches through the Great Plains from North Dakota to Texas. While this region is one of the greatest wind energy resources on the planet, it also happens to lie in the very center of the continental U.S., far from the coasts, where most Americans live.
What makes renewable energy different from oil and gas is that renewable “fuel” (in the form of wind, water, or sunlight) is converted into electricity on-site, and, to date, there is only one feasible way to move lots of electric energy across the country: high-voltage transmission lines. If the requisite transmission infrastructure is not in place, a wind farm’s electricity output might have to be voluntarily turned down to avoid overloading what transmission lines do exist. And unlike the case of oil, no train or truck can come to the rescue.
Simply put, without the adequate transmission infrastructure in place, there is no way to bring wind energy from the plains to the cities, and wind will not produce at its full potential.
It seems like a no brainer then—build transmission lines. Unfortunately, a new transmission line can cost over $1 million per mile, and that’s for the equipment alone, before any of the NIMBY (not in my backyard) related costs that tend to plague major transmission projects. Moreover, unlike oil and gas pipelines, it’s impossible to control whose electricity is flowing on whose power line. Electricity flows through the entire grid at close to the speed of light, going where it pleases based on the voltage and resistance between various nodes of the grid. For this reason, the cost of transmission lines is typically socialized, even where electricity market competition has been introduced. This is good for raising the capital required to build the transmission infrastructure we all need, but it can also introduce partisanship and bureaucracy, slowing the whole process down.
Nevertheless, experience shows us that if government and private industry get their act together and carve out a path for renewable energy transmission lines, the wind energy developers will follow. In 2008, Texas allocated $4.93 billion dollars for the CREZ (Competitive Renewable Energy Zones) transmission project, which connects West Texas and the Panhandle to the population centers of Dallas-Fort Worth, San Antonio, and Austin. While the final price tag of the project climbed to $6.8 billion, it has helped Texas maintain its decisive lead in total installed wind energy among the 50 states. And there’s plenty of room to spare. The 3,600 miles of new lines can deliver up to 18,500 megawatts of power from West Texas to the state’s cities, about 50 percent more than the amount of wind power installed in Texas today. In fact, Texas grid operators are currently reviewing 21,000 megawatts of new wind projects, including a planned 1,100-megawatt wind farm near Lubbock that will be the nation’s largest.
While new transmission lines may be costly, in many regions of the U.S. they are a required precursor to unlocking wind energy’s true potential. The example of Texas shows that if we build new lines, the wind developers will follow. States that wish to encourage renewable energy development should work to invest in the requisite transmission infrastructure, so that wind energy growth is not held back by external constraints.