We all love clean energy. We just don’t all understand it.
Rally cries are easy to come by for new wind and solar projects, but the ralliers aren’t always aware of all that must be done to bring those projects to fruition.
Fields of turbines and acres of panels are playing the lead role for the clean energy industry, stealing attention from an outstanding supporting cast.
Don’t get me wrong, looking at current and forecast capacity growth for solar and wind energy makes me all gooey inside like any other cleantech junkie.
But the attention being paid to the solar and wind sisters is making for a Cinderella story elsewhere in the industry. . .
Transmission: Unloved, Unwanted
For me, this story starts back in the fall of 2006, when Texas wind energy got a "$10 billion boost.
In October that year, Gov. Rick Perry announced an initiative, sponsored by eight companies, that would increase wind energy capacity in his state by 7,000 MW, enough to power over 4.5 million homes.
Huge companies were involved in the deal: Gamesa, Airtricity, FPL, Babcock & Brown — the giants of the industry were stepping up to the plate.
The only catch? The Texas Public Utility Commission (PUC) had to construct the necessary transmission lines.
The Cinderella status of clean energy transmission had been confirmed, at least for me. Highly capitalized public companies were chomping at the bit to throw money at wind while transmission sat quietly in the room, pawned off on some state-run agency.
But transmission would have its day.
The Comeback Brews
At the time, "the Governor’s office [was] optimistic that the PUC [would] be able to carry out the project." It was estimated that to increase wind energy capacity by 7,000 MW "the lines [would] cost an estimated several hundred million dollars."
Of course, nothing costs just several hundred million dollars anymore. Energy transmission would soon teach a multi-billion dollar lesson, and finally capture its fair share of attention.
Flash-forward to summer 2008.
The headline now reads, "Texas Approves a $4.93 Billion Wind-Power Project," and clean energy transmission is finally getting some much-deserved respect, progressive policy, and investment.
Granted, that $4.93 billion will pay for more than twice the original estimated capacity, at about 18,500 MW, but the pricetag–even if you liberally estimate "several hundred million” at $600 million–is more than eight times greater. (Thank Mr. Pickens for not only adding to the capacity total, but also for his lobbying weight in getting the decision, which passed 2 to 1, passed.)
Rising natural gas and oil prices to record levels during that time forced equal rises in retail electricity rates, prompting homes and business to welcome the stable price wind energy offers.
What’s more, companies that once abstained from transmission funding while pushing for rapid wind energy expansion were singing a different tune.
A representative from Horizon Wind Energy, which was involved in the 2006 Texas wind deal, was quoted as saying "The lack of transmission has been a fundamental issue in Texas, and it’s becoming more and more of an issue elsewhere. This is a great step in the right direction."
Oh transmission, please don’t go. We need you.
Transmission Proves Vital, Even Profitable
In the two years transmission went from sideline to center stage, it added several lines to its resume.
Increased wind energy transmission is now being lauded not only as clean energy lifeblood, but as a reducer of costs and energy grid waste, an increaser of efficiency, and a creator of jobs.
And according to a DoE report, it’s also one of the few obstacles holding back even faster growth of wind and solar expansion.
With clean energy expansion at the top of so many agendas, transmission is proving vital. Decisions like the one made by the Texas PUC are about to be emulated by the Federal Energy Regulatory Commission (FERC), which makes the rules for the rest of the nation’s grid. (Of course Texas gets its own PUC.)
In fact, the Interior Department and the FERC are busy changing the rules right now.
Couple that with the large smart grid portion of the stimulus and the President’s oft-cited goal of laying "3,000 miles of new transmission lines," and you’re looking at the final transition of transmission from duckling to swan.
The Obama administration’s focus on the topic–from the campaign trail to the Congressional floor–have driven up transmission-related stocks on the street ever since the election.
Here’s a chart of two of my favorite energy infrastructure stocks, AECOM Technology (NYSE: ACM) and American Superconductor (NASDAQ: AMSC), each up about 60% since November:
With the ascension of transmission priorities has come a resurgence in proposed projects.
Based on the Texas announcement alone, Oncor has said they’ll hire a couple thousand workers to erect transmission lines. The company is also paying Falcon Steel $100 million for 3,800 steel towers.
That will create even more jobs and boost big ticket sales.
Publicly-traded Nucor is also benefiting. That company’s workforce is getting a boost from a project that will use automotive and industrial scrap metal to build thousands of lattice transmission towers.
North of the Texas Panhandle, Michigan-based ITC Holdings has proposed a $10 billion "high-voltage superhighway" that would bring wind energy from the Minnesota, Iowa, and the Dakotas to Wisconsin.
But that’s just a fraction of the necessary total for transmission spending according to a recent study by a group of regional grid managers. They said in order to get just 5% of our electricity from renewables more than $50 billion would need to be spent on increased transmission.
Securing that funding and executing the necessary projects will be the climax of this Cinderella story.
Expect clean energy transmission and clean energy production to be looked upon equally from here on out.