By Jeff St. John
Draft legislation from U.S. Senate Majority Leader Harry Reid would radically expand the federal government's power to speed the siting of transmission lines from remote renewable energy zones to the nation's population centers.
The draft legislation unveiled by Reid's office earlier this week also would also set aside enough federal land to build four to 25 gigawatts of solar power at royalty payments far below current rates.
All in all, the proposal "is effectively the Eisenhower (interstate highway system) plan again for the transmission of electricity," said Erik Olbeter, senior analyst for Pacific Crest Securities, which released an analysis of the legislation.
While the effects of the bill, if passed into law, would take years to be felt, they could represent a "foundation for a long-term renewable energy industry," Olbeter said – a view that was echoed by renewable energy industry groups Friday.
"Senator Reid's legislation provides a solid framework to start working on policies that will allow vast quantities of solar power to be delivered to consumers across the country," Rhone Resch, CEO of the Solar Energy Industries Association, said in a prepared statement.
Reid first floated the idea of expanding federal powers to lay claim to land needed for transmission lines late last month (see Green Light post), and his draft legislation follows through by offering the Federal Energy Regulatory Commission (FERC) new eminent domain powers to site transmission lines.
The legislation also would give FERC power to institute "national cost sharing," in which states that would need to pay for transmission lines in their territory could spread the costs across the entire country via utility rate increases, Olbeter said.
While expanded eminent domain power was likely to be unpopular among some lawmakers, he expected the cost-sharing provision to ease opposition from states that otherwise would have had to shoulder the majority of the costs for new transmission lines.
Reid's proposal is expected to be added to broader energy legislation to be taken up by the Senate in the next month or two. The expanded eminent domain authority could be seen as an attempt to overcome a recent court ruling that held up state and local objections that FERC overstepped its authority in siting transmission lines in Virginia.
Solar and wind energy groups have lobbied hard for expanded powers like these (see Solar and Wind Groups Lobby FERC to Lead Grid Expansion). President Obama has called for the country to double its renewable energy production in three years, but bringing renewable power from where it's most efficiently generated to where it's needed most could cost as much as $900 billion by 2030 in new transmission infrastructure, according to the Brattle Group (see National Grid: Dream or Reality?).
In Texas, for example, wind farms don't have enough transmission lines to get their power to where it's needed, which has led to power producers paying grid operators to take their power at times (see Texas Wind Farms Paying People to Take Power and Texas Approves $5B Worth of Transmission Line Projects).
And a February report by Midwest grid operators estimated it would cost as much as to $80 billion to build transmission lines to carry wind power generated in the Midwest – which could help boost the country's wind power share from less than 1 percent today to 20 percent by 2030 – to where it's needed (see Wind Growth Could Cost Eastern U.S. $80B in Transmission Lines).
But the costs of building those transmission lines have remained obstacles for individual utilities. A California transmission line meant to carry solar power from the state's southeastern corner to San Diego was narrowly passed in December despite cost and environmental complaints (see California OKs Controversial Transmission Project).
Solar power plant developers are likely to welcome a piece of the proposed legislation that would drastically decrease the prices they pay to lease federal land, Olbeter said.
That proposal would give the president the ability to declare "National Renewable Energy Zones" with strong potential wind, solar or geothermal energy generation resources.
According to Olbeter, that would include enough land to build 4 megawatts to 25 megawatts of solar power plants – and developers would be asked to pay only one tenth-of-a-penny per kilowatt hour of electricity produced by the projects, he said.
"That's a giveaway," he said, noting that such low rates could cut going costs for utility-scale solar projects by a third. The legislation directs the Department of Energy and the Bureau of Land Management to set up a process to identify where those zones would be, he said.
Given that the BLM is already backlogged with applications to build solar projects on its land, Olbeter didn't see a short-term boost to solar power developers if the proposal was passed into law (see The Rush for Gigawatts in the Desert Explodes).
Among the solar developers farthest along in the BLM application process are solar-thermal power developers BrightSource Energy in Oakland, Calif. and Stirling Energy Systems in Phoenix, Ariz (see BrightSource Inks 1.3GW SoCal Edison Deal).
"By implementing many of Senator Reid's proposals, companies like BrightSource Energy will be able to move forward with projects in Nevada and other areas in the Southwest," Joshua Bar-Lev, vice president of regulatory affairs for BrightSource, said in a prepared statement.
The National Association of Regulatory Utility Commissioners, representing state bodies that oversee utilities, remained neutral on the proposed legislation.
In the longer-term picture, the fate of Reid's proposals could boil down to other pieces of the larger energy bill they're expected to be combined with, Olbeter said.
Some lawmakers are calling for a national renewable portfolio standard that would require the country produce 25 percent of its energy from renewable sources by 2025 (see the New York Times' Green Inc. blog).
And President Barack Obama has called for a national cap-and-trade system that would set greenhouse-gas emission limits for many businesses and require those that exceeded them to buy allowances from others that haven't (see Chu's Wish List: Cap-and-Trade and Cheaper Solar).
But Obama's proposal has been met with concern and some opposition from U.S. business leaders, particularly in light of the poor economy, making unclear its likelihood of being passed into last this year, Reuters reported.
"The $75 billion question is, if you bundle this with a national renewable standard, a renewable fuel standard, and carbon cap and trade," Olbeter said. "Does carbon cap-and-trade sink the whole boat?"