Time for a National Electrical Grid

by Greg Pollowitz

Gilbert Metclaf, author the Manhattan Institute report, “Financing a National Electricity Grid: What Are the Issues?,” writes in IBD:

On the campaign trail, President Obama is promoting his green jobs agenda as an antidote to high unemployment. And though it’s an approach that doesn’t always attract bipartisan support, one aspect of it should — and has: the construction of a true national electricity grid.

One especially unusual and attractive aspect: it’s a green construction project that can be financed privately. What’s more, such investments, as Google makes clear, will not need to be government-financed — just one reason that “grid” improvements have attracted rare, bipartisan support.

Few policies attract support from both Obama and Newt Gingrich. The development of a national inter-connected electricity grid is one of them. The president has promoted what he describes as a “newer, smarter electric grid” that “will make our energy bills lower, make outages less likely and make it easier to use clean energy.”

Former Speaker Gingrich has chosen a different emphasis — but reached the same conclusion. “You’ve got to rebuild the electric grid,” he said, “because, as I keep telling all of my left-wing environmental friends, if you want people to drive electric cars, there has to be electricity.”

Indeed, there’s a bipartisan understanding that adding new interstate high-voltage lines to connect and expand what are now three barely linked regional electricity distribution systems can both help bring new, less-expensive power to parts of the country where prices are high and serve as a transmission highway to cities for wind and solar power, generated in remote locations.

Over 50 years ago, President Eisenhower championed an interstate highway system for its national security and economic development benefits. Today, Susan Eisenhower, chair of the Eisenhower Institute and the president’s granddaughter, has advocated a built-out grid as a latter-day version of the interstate highway system — infrastructure that sets the stage for prosperity.

The electric power industry is on board, as well; wary of power peaks and the risks of blackouts, it seeks the reliability that an extended and improved national transmission network would ensure.

Yet, over the past decade, during which we have added 15,000 miles of new interstate natural gas pipelines, we have added just 685 miles of new high-voltage interstate electric power transmission lines. Improving on that record will require two key, related realizations: first, that an improved and expanded grid can actually be financed privately and second, that doing so will require crucial public (i.e., regulatory) cooperation.

Traditionally, investments in our transmission and distribution grid — a system built incrementally over the past century by private utilities — have been financed through retail payments for electricity. This remains a robust and available revenue stream, expected to total, over the coming decade, some $2.6 trillion.

By comparison, I estimate — based on projections of the North American Electric Reliability Corporation — that investment costs for transmission lines of 230kV or higher over that same period will be $90.8 billion.

Even if these estimates are too conservative by half, improving our transmission grid will cost only 5% to 10% of our total expenditure on electricity between now and 2018. For the average residential customer in the United States, this translates to as little as $5 a month and at most $10 a month on their electric bill.

The rest here.

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