Green Corridors: Linking Interregional Transmission Expansion and Renewable Energy Policies

Abstract

A variety of recent policy measures have been advanced to promote interregional power transmission investment in the United States; among these are the designation of corridors on federal lands in western states and the identification of national interest electric transmission corridors across the country. Although these corridors have been put forward as critical policy interventions to modernize an aging transmission system, their effectiveness could be undermined by parallel policies, such as renewable portfolio standards (RPSs), designed to alter the landscape for new investment in generation capacity. This paper presents the results of a scenario analysis of the relationship between the interregional power grid and renewables policies to evaluate 1) the effects of state and national RPS policies on interregional power flows and 2) the impacts of transmission expansion on the locations and types of new, renewable sources for electricity capacity additions. Using the RFF Haiku Electricity Market Model, we find that the locations of transmission corridors could have a significant impact on the location, type, and marginal cost of generation in the future. Conversely, a national RPS would induce interregional power flows across the country significantly different from those that would prevail in the absence of such a policy. In particular, a national RPS would promote western renewables and shift power flows to the East. Under either a set of state-level RPS policies or a national RPS, the majority of power flowing into California will come from the Pacific Northwest, not from the Southwest, which is where corridors are most abundant. Additionally, a national RPS could motivate more than 10 GW of new biomass capacity in the Southeast, but grid expansion could shift 6 GW of this capacity to the Plains states and western wind.

Keywords: energy corridors, transmission grid, renewable electricity, RPS

JEL Classification: Q42, Q48