Creating a US National HVDC Transmission Network

This article was originally published by the Federation of American Scientists, 2024. The article has been republished here with minor modifications, with the permission of the original authors. Text by John Tracey.

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The United States should continue to pursue its commitment to reduce greenhouse gas emissions by 50–52% from 2005 levels by 2030 and achieve net-zero emissions by 2050. To reach these goals, the United States must rapidly increase renewable-energy production while simultaneously building the transmission capacity needed to carry power generated from new renewable sources. Such an investment requires transforming the American electricity grid at a never-before-seen speed and scale.

For example, the 2024 DOE National Transmission Planning study estimates that the American transmission system will need to grow between 2.4 – 3.5 times its 2020 size by 2050 to achieve a 90% greenhouse gas emissions reduction from a 2005 baseline by 2035 and net-zero emissions in 2050.

‍A promising way to achieve this ambitious transmission target is to create a national High Voltage Direct Current (HVDC) transmission network overlaid atop the existing alternating current (AC) grid. In addition to advancing America’s climate goals, such an effort would spur economic development in rural areas, improve the grid’s energy efficiency, and bolster grid stability and security. This memo proposes several policy options the Department of Energy (DOE) and Congress can pursue to incentivize private-sector efforts to construct a national HVDC transmission network while avoiding permitting issues that have doomed some previous HVDC projects.

Challenge and Opportunity

The current American electricity grid resembles the roadway system before the Eisenhower interstate system. Just as roads extended to most communities by the early 1950s, few areas are unelectrified today. However, the AC power lines that cross the United States today are tangled, congested, and ill-suited to quickly move large amounts of renewable power from energy-producing regions with lower demand (such as the Midwest and Southwest) directly to large population centers with high demand. Since HVDC transmission lines lose less power than AC lines at distances > 300 miles, HVDC technology is the best option to directly connect the renewable generation needed to achieve net-zero emissions by 2050 with consumers.

There are few HVDC lines in the United States today. Those that do exist are scattered across the country and were not designed to facilitate renewable development. As a result, the United States is a long way from the integrated nationwide HVDC network needed to achieve net-zero emissions. Many recent attempts by the private sector to begin building long-distance HVDC transmission lines between renewable producing regions and consumers—such as Clean Line Energy’s proposal for an above ground line that would have linked much of the Great Plains to the Southeast—have been unsuccessful due to a host of challenges. These challenges included negotiating leases with thousands of landowners with understandable concerns about how the project could alter their properties, negotiating with many local and state jurisdictions to secure project approval, and maintaining investor confidence throughout the complex and time-consuming permitting and leasing process.

However, a new generation of private developers has proposed an innovative solution that bypasses these challenges: the construction of an underground nationwide HVDC network alongside existing rail corridors. Unlike above ground transmission built through a mosaic of property owners’ holdings, this solution requires negotiation with only the seven major American rail companies. This approach also takes advantage of the proximity of these already-disturbed corridors to many areas with high renewable-energy potential (Figure 1), does not add visual pollution to the above-ground landscape, and would weatherproof grid infrastructure against natural disasters.

Importantly, these benefits apply to co-location next to highways or existing transmission lines as well. While this memo focuses on rail co-location, co-location next to other infrastructure should be simultaneously pursued by first removing regulatory barriers as was recently enacted in Minnesota and promoting the efficiencies gained from all forms of infrastructure co-location to relevant stakeholders.

In addition to the political considerations discussed above, several recent advances in HVDC technology have driven costs low enough to make HVDC installation cost-competitive with installing high voltage alternating current (HVAC) lines (see FAQ for more details). As a result, incentivizing HVDC makes sense from perspectives beyond addressing climate change. The U.S. electric grid must be modernized to address pressing challenges beyond climate, such as the need for improved grid reliability and stability. Because HVDC transmission, unlike AC transmission, can maintain consistent power, voltage, and frequency, constructing a HVDC transmission network is a promising way to support the large-scale incorporation of renewable sources into our nation’s energy mix while simultaneously bolstering grid stability and efficiency, and spurring economic growth in rural areas.

A nationwide HVDC network would also increase grid stability by connecting the four large interconnections that make up the shared American and Canadian power grid (Figure 2). Currently, the two largest of these interconnections—the Eastern and Western interconnections—manage 700 and 250 GW of electricity respectively. Yet, these interconnections are connected by transfer stations with a capacity of only about 1 GW. A recent study led by NREL modeled the economics of building a nationwide HVDC macrogrid that would tie the Eastern and Western interconnections together. The study concluded that such an investment would have a net benefit-to-cost ratio of 1.36 due to the possible ability for a nationwide HVDC grid to (i) shuttle renewable energy across the country as different power sources begin and end generation capabilities each day, and (ii) respond more nimbly to power outages in regions affected by natural disasters.

Many private companies are already starting to realize an upgraded U.S. grid via new co-located HVDC transmission lines. For example, Minneapolis-based Direct Connect, with financial backing from American and international investors, has begun the permitting process for SOO Green, a buried HVDC line along a low-use railway that will link the Iowa countryside to the Chicago area. Direct Connect estimates that the SOO Green HVDC link will spur $1.5 billion of new renewable-energy development, create $2.2 billion of economic output in Iowa and Illinois, and create thousands of construction, operation, and maintenance jobs. Although geographically short, the line is also significant because it will join the Midwest (MISO) and PJM Independent System Operators (ISOs), two of the seven regional bodies that manage much of the United States’ grid. The combined territory of the MISO and PJM ISOs stretches from the wind-rich Great Plains to demand centers like Chicago and the Northeast corridor. Facilitating HVDC transmission in this project will allow renewable power to be efficiently funneled from regions that produce lots of energy to the regions that need it.

The Champlain Hudson Power Express joining NY-ISO and the Quebec interconnection is another example demonstrating the promise of buried, co-located HVDC transmission. The project is projected to save New York homes and businesses $17.3 billion over 30 years through wholesale electricity costs by supplying Quebec hydropower to New York City. The line is currently permitted and under construction and when finished will stretch 339 miles underneath Lake Champlain & the Hudson River and underground through New York State to a converter in Astoria, New York City. The terrestrial portions will be built alongside existing railroad and highway right of ways.

While these two projects and the handful of other buried and  co-located HVDC lines currently in permitting, permitted, or under construction are important projects, far more transmission needs to be built to meet the U.S.’ climate goals.  As a result, scaling underground co-located HVDC rapidly enough to achieve the transmission required for net-zero emissions in 2050 requires federal action to make these types of lines a more attractive proposition. The policy options outlined below would encourage other privately backed HVDC projects with the potential to boost rural economies while advancing climate action.

Plan of Action

The following policy recommendations would accelerate the development of a national HVDC network by stimulating privately funded construction of underground HVDC transmission lines located alongside existing rail corridors. Recommendations one and two are easily actionable rule changes that can be enacted by the Federal Energy Regulatory Commission (FERC) under existing authority. Recommendation three proposes that the DOE Grid Deployment Office should consider rail co-location in its NIETC designation process. Recommendation four is a more ambitious proposal for federal tax credits which would require Congressional action.

Recommendation 1. FERC should issue a new order that requires ISOs to review new renewable generation and new transmission projects on separate tracks to decrease permitting time delays.

New merchant transmission projects (transmission lines developed by private companies and not by rate-regulated utilities) such as SOO Green and the Champlain Hudson Power Express are often reviewed by ISOs in the same interconnection queue as new generation projects. Due to the high volume backlog of new, often speculative, renewable generation project proposals, transmission projects can wait for years before they are reviewed. This then creates a vicious cycle holding back the clean-energy sector: a delayed review of the transmission capabilities required by new renewable-generation projects ultimately chills the market for generation projects as well.

FERC recently reformed its regulations for interconnection requests (FERC Order 2023). FERC’s  expectation is that switching to a first-ready, first-served system, clustering projects together in groups to be approved en masse, and increasing both submission deposits and withdrawal penalties should prevent speculative submissions and reduce approval times. Order 2023’s removal of the reasonable effects standard (i.e. hardening deadlines for transmission providers to complete impact and interconnection studies) as well as allowing multiple generation projects to share interconnections should also reduce wait times.

FERC Order 2023 is a laudable first step to address interconnection backlogs; however there is a chance that reality may not match FERC’s expectations. Therefore, FERC should continue to improve the regulatory regime in this area by issuing a new order that requires ISOs to review new renewable generation and new transmission projects on separate tracks. Such a rule would greatly decrease the permitting time for co-located HVDC transmission projects.

Recommendation 2. FERC should encourage ISOs to re-examine older transmission interconnection rules that are appropriate for AC transmission regulation but do not take into account the benefits of HVDC. External capacity rules, which govern the ability to trade power across ISO boundaries, are a specific area in need of action because they can create barriers to building HVDC transmission across ISO boundaries.

One granular example is described in SOO Green’s complaint to FERC about the PJM ISO (FERC Docket EL21-103).  Under current rules set by the PJM ISO, energy generated outside of the PJM service area can participate in PJM’s energy marketplace only if grid operators can directly dispatch that energy. This rule was established because grid operators cannot otherwise control the free flow of power through cross-ISO AC transmission, but it results in the exclusion of external, non-dispatchable renewable energy resources from PJM’s market.  However, HVDC lines offer the capacity to schedule current flow at pre-agreed upon times, allowing PJM to directly control transmission and negating the need to control energy dispatch. PJM should look for solutions to this issue from ISO New England and NYISO’s external capacity rules, which have enabled them to import external capacity through HVDC lines into their territories.

FERC should encourage PJM ISO to revise its external capacity rules to enable less burdensome pathways to market participation for external resources connecting through HVDC transmission. PJM can look to ISO New England and NYISO as examples.

Recommendation 3. As the DOE proposes possible National Interest Electric Transmission Corridors (NIETCs), it should pursue co-location with rail, highways, and existing transmission whenever possible.

Previous attempts by Congress to establish greater federal power over transmission siting and permitting have revolved around the DOE’s authority to designate areas as NIETCs. NIETCs are regions that the DOE identifies as particularly prone to grid congestion or transmission-capacity constraints. Creation of NIETCs was authorized by the Federal Power Act (Sec. 216), which also grants FERC the authority to supersede states’ permitting and siting decisions if the rejected transmission project is in a NIETC and meets certain conditions (including benefits to consumers (even those in other states), enhancement of energy independence, or if the project is “consistent with the public interest”). This “backstop” authority was created by the Energy Policy Act of 2005, was recently reformed in 2021’s Infrastructure Investment and Jobs Act, and was further clarified by FERC Order 1977 through the creation of a landowner bill of rights.

While a laudable attempt to spur transmission investment and respect landowners, the revised authority in its current form is unlikely to lead to the sudden acceleration of transmission siting and permitting necessary to achieve the United States’ climate goals. This is because NIETC designation, as well as any FERC action under Section 216, (i) trigger the development of environmental impact statements under the National Environmental Policy Act (NEPA), and (ii) may still engender strong political opposition by states and landowners whose properties would be part of proposed routes but would not receive any benefits from transmission investments.

The DOE recently released a list of proposed NIETCs, which if designated would be the first corridors in the country.  Some of the NIETCs were designed with co-location in mind, for example the NY – NE ISO link is located alongside roadways and mid-Atlantic routes are co-located with already existing transmission. However, rail co-location was not mentioned, yet the DOE’s proposed NIETCs overlap with the nation’s class 1 railways in many locations, especially in the Southwest and Midwest. In order to speed up the NEPA review process and reduce NIETC opposition, the DOE should i) consider discussing rail co-location in addition to highway and transmission infrastructure during the upcoming public engagement process, and ii) promote the possibility of co-location to transmission developers in all relevant NIETCs after they are officially designated.

Recommendation 4. Create federal tax credits to stimulate domestic manufacturing and construction of HVDC transmission, including HVDC lines along rail corridors.

Congress should create two federal investment tax credits (ITCs) to stimulate a market for American HVDC lines. One tax credit should be directed to American manufacturers of cross-linked polyethylene (XLPE) which serves as the material for the liner in HVDC cables. Since most producers are based in Asia, such an incentive would help ensure a reliable domestic supply of this essential material. The second tax credit should be directed to HVDC line developers who propose new regionally significant transmission projects that join ISOs or the three interconnections together. Since the United States’ grid grew in an ad-hoc, decentralized way, a Congressional tax credit of this type would further build on FERC’s recent order 1920, which requires transmission providers to think more big picture, long-term and strategically by developing a long-term regional transmission plan that covers at least the next 20 years.

Such a tax credit was recently introduced into Congress. In 2023, Sen. Martin Heinrich (D-NM) proposed a 30% ITC for “regionally significant” transmission projects which was also introduced in a companion bill by Rep. Steven Horsford, (D-Nev). Their Grid Resiliency Tax Credit Act would provide a 10-year credit for projects that begin building before 2033. The bill is currently under discussion by the Senate Finance committee and should be amended to also include a tax credit for XLPE manufacturers. The expiration of parts of the Tax Cuts and Jobs Act in 2025 will focus attention on tax legislation in the next Congress and offer a legislative window for transmission construction and component manufacturing tax credits. In the potentially acrimonious debate about the future of tax policy, transmission tax credits could be a rare point of agreement and an opportunity for both parties to invest in American manufacturing and infrastructure growth.

Conclusion

A significant increase in transmission capacity is needed to meet the United States’ efforts to achieve net-zero emissions by 2050. Creating a nationwide HVDC transmission network would not only greatly aid the United States’ efforts to address climate change, it would also improve grid stability and provide sustained economic development in rural areas. Direct Connect’s SOO Green project and the Champlain Hudson Power Express are examples of innovative solutions to legitimate stakeholder concerns over environmental impacts and individual property rights – concerns that have plagued previous failed efforts to construct long-distance HVDC transmission. The federal government can stimulate private development of HVDC  infrastructure via rule changes to the transmission interconnection process by FERC, promoting rail co-location in the NIETC design and designation process, and by passing new HVDC transmission-specific tax credits.

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