TRANSPORT PROBLEM
U.S. wind energy’s biggest foe is simply moving it to population centers.
The cost of wind energy has dropped drastically over the past several decades as the technology has advanced, especially in the size of turbines. Since 2009, the unsubsidized average cost of onshore wind-energy production has fallen to 4.2 cents per kilowatt hour, from 13.5 cents in 2018, according to an analysis by Lazard, the company I work for.
After including U.S. tax subsidies, the cost of building wind capacity is often lower than the marginal cost of generating electricity with existing coal-powered plants. Thus wind energy now offers great opportunities for lowering carbon-dioxide emissions.
But a surprisingly difficult challenge remains: how to move the wind energy from the places where it is produced — often remote areas — to the population centers where it is needed. One reason wind accounts for a greater share of energy produced in Europe — it represents 12 percent of electricity in Germany and 19 percent in Spain, compared with just 7 percent in the U.S. — is not that more wind blows there. It’s partly that European infrastructure facilitates transmission of the power to the places where people live.
One big reason the U.S. lags in such transmission is dramatically illustrated by the experience of Michael Skelly, who was a founder of one of America’s largest wind-power companies, and is now an adviser at Lazard. Beginning almost a decade ago, Skelly tried to construct a 700-mile high-voltage direct-current line to carry wind energy from the Oklahoma panhandle to Tennessee. In the end, he was stymied by opposition from property owners and government officials who refused to allow the line to cross their land. As Wall Street Journal reporter Russell Gold tells the story in his new book, “Superpower: One Man’s Quest to Transform American Energy,” Skelly worked tirelessly to navigate the difficult local politics.
The underlying policy issue here involves eminent domain, the power that governments use to force local property owners to sell easements across their land for some broader public purpose. Unlike interstate natural gas pipelines, which have been able to exercise eminent domain under federal law since Congress passed the Natural Gas Act in 1938, interstate electricity-distribution lines lack any such authority. In virtually every jurisdiction along the path of Skelly’s proposed wind-energy line, he faced substantial local opposition.
This problem theoretically could have been prevented. Back in 2008, President-elect Barack Obama’s transition team, of which I was part, discussed the idea of adding federal eminent domain for electricity lines to the economic stimulus bill. Obama rejected the idea because it was controversial enough to endanger the urgent stimulus package.
In so doing, the former president lost a crucial opportunity to transform the electricity industry, argues Reed Hundt, a former chairman of the Federal Communications Commission, in another recent book, “A Crisis Wasted.” It’s true that if Obama had tried and succeeded, Skelly’s story would have turned out differently. Yet Skelly’s experience also confirms that the politics of this issue are heated enough to have posed a threat to the stimulus bill itself.
So what now? Other efforts are being made to build lines in the same way Skelly tried, proceeding on the theory that, as Gold puts it, the “second mouse gets the cheese.” Two other approaches might get around the local difficulties detailed in “Superpower”: developing offshore wind farms near population centers (with underwater transmission lines), and laying highvoltage lines along existing highways or railroad lines.
Another way to substantially alter the trajectory of wind energy in the U.S. is to attach a price to carbon-dioxide emissions, so that wind energy becomes more cost-effective even in less windy areas, thereby making the transmission problem less severe. Many approaches to such pricing are possible. And although political obstacles make Congress unlikely to adopt any of them in the foreseeable future, some state governments aren’t waiting. Today 11 states, accounting for about a quarter of the U.S. population, have carbon pricing policies in place.
“Superpower” concludes on a somewhat discouraging note. But if turbine technology continues to advance, new ways are found to move wind energy to population centers, and states are able to set a price on carbon, Skelly’s story may one day be seen as merely a hiccup in the greater rise of wind power in the U.S.
Peter R. Orszag is a Bloomberg Opinion columnist. He is the chief executive officer of financial advisory at Lazard. He was director of the Office of Management and Budget from 2009 to 2010, and director of the Congressional Budget Office from 2007 to 2008.