California has a new $7.3B plan to fix its transmission problems

California’s grid operator has just approved a $7.3 billion plan to build the thousands of miles of new high-voltage transmission lines the state needs to hit its climate goals.

Thursday’s unanimous vote by the board of governors for the California Independent System Operator (CAISO) is an important next step in a long battle to modernize a grid that’s lagging far behind the state’s needs. It’s also the result of years of wrangling over transmission policy and represents ​“close coordination with regulatory agencies, load-serving entities and other key stakeholders,” Elliot Mainzer, CAISO president and CEO, said in Thursday’s announcement.

CAISO’s plan seeks to address a clean energy challenge plaguing the entire nation, not just California: There’s not enough transmission to connect the massive amount of new clean energy being developed to the grid. In California, CAISO has already had to postpone processing newer interconnection requests to handle its existing backlog — and much greater amounts of clean power are on order from state regulators.

Earlier this year, the California Public Utilities Commission set clean energy targets that will lead to more than doubling the capacity of the state’s existing resource mix by 2035 — a boost needed to scale up carbon-free energy at a pace to meet California’s goal of a carbon-free energy sector by 2045. Last month, on top of its existing backlog, CAISO received 546 applications totaling 354 gigawatts of new clean energy resources, far more than the total electricity demand of the state.

At least one organization that’s been critical of California’s slow progress on transmission development is happy with CAISO’s new plan.

“We are enthusiastically supportive of the approach that CAISO staff have taken,” said Ed Smeloff, a consultant to the Center for Energy Efficiency and Renewable Technologies, a group that’s been calling for transmission reforms for years.

While three of the largest of the 45 transmission projects in the plan will be open to competitive bidding from independent developers, most will be built by the state’s three big investor-owned utilities, Southern California Edison, Pacific Gas & Electric and San Diego Gas & Electric, with the costs to be borne by customers already burdened by some of the highest electricity bills in the country.

But the costs of building these new power lines pale in comparison to the costs of not building them, energy experts say. That’s not just because failing to combat climate change will drive rising costs and harms from extreme weather, but also because expanded grid capacity allows ever-cheaper clean energy to flow to customers.

Getting clean energy developers and transmission planning on the same map

Transmission lines can take more than a decade to site, permit and build — CAISO estimates an eight- to 10-year lead time for the investments laid out in its $7.3 billion plan — so acting now is vital to meeting these goals.

So is figuring out how to coordinate the work of developers to site and permit big clean energy projects and the work of regulators to site and develop where transmission is going, and vice versa.

On that front, for the first time, CAISO’s new transmission plan brings clean energy developers and transmission-planning policies onto the same page, Smeloff said.

Under previous planning methods, clean energy developers ​“would kind of make an educated guess about where there would be capacity” on the grid, he said. Developers might also file multiple interconnection requests for the same project in hopes of finding at least one spot where the grid could support them.

But that’s led to a situation where CAISO engineers are forced to study the grid impacts of far more clean energy projects than can realistically be built, he said. Meanwhile, long-term transmission planning lacked data that could clarify where the real-world development would most likely take place.

The new process, by contrast, uses ​“a zonal focus for transmission planning and coordination of procurement and interconnection reform,” he said.

In other words, it ​“starts first with commercial interest” from clean energy developers, identifying the zones where the majority of new clean energy projects are being proposed, he said. That’s a sounder footing on which to carry out the complex calculations that can indicate what combination of transmission buildouts are most likely to enable the most cost-effective pathway to get enough projects online to meet the state’s goals, he said.

Here’s a map from a draft version of CAISO’s plan released in April that shows the results.

In December, CAISO signed a memorandum of understanding with the California Energy Commission, which is in charge of siting and permitting clean energy projects, and the California Public Utilities Commission, which has authority over investor-owned utilities, to merge what had been more disconnected processes for bringing this information to bear on their work.

The result is a new transmission plan that includes upfront information on where major clean energy development is being planned in zones across the state, he said. That information then feeds into where CAISO plans to build transmission to serve it, enabling much more accurate forecasting of how much new energy capacity it will allow to be brought online, he said.

CAISO forecasts that the 45 projects in the plan will allow the development of more than 17 gigawatts of solar resources within the state and in neighboring Arizona and Nevada, more than 1 gigawatt of geothermal power in California’s Imperial Valley and in southern Nevada, and wind power projects including more than 3.5 megawatts within the state and more than 4.5 megawatts coming from as far as New Mexico and Wyoming.

“This is sort of the first transmission plan that actually shows you that, with colored dots on these one-line diagrams for each region that shows how much geothermal, how much solar, how much wind,” Smeloff said. While Thursday’s plan is largely focused on solving Southern California problems, future phases will bring Central and Northern California into scope as well, he said.

Filling the holes in California’s grid planning

The new plan also targets some long-standing challenges for California’s grid, Smeloff said — including the big hole in Southern California grid capacity left by the 2013 closure of the San Onofre nuclear power plant. Losing that plant’s 2.2 gigawatts of always-on generation capacity has forced utilities Southern California Edison and San Diego Gas & Electric to build and run new fossil-gas-fired power plants, even as they’ve also sought out carbon-free substitutes.

The three projects that CAISO plans to put out for competitive bids are squarely aimed at closing that gap.

One will carry power from western Arizona to California’s Imperial Valley — the site of large-scale geothermal power development. The second and largest, with an estimated cost of about $2.2 billion, will run from Imperial Valley into SDG&E territory south of the closed nuclear plant, and the third will connect from north of the nuclear plant to a stressed-out substation in Orange County.

Beyond reducing grid constraints in the Los Angeles Basin, the three projects are ​“really strategic in terms of unleashing the potential for a lot more solar, geothermal and wind development,” Smeloff said.

One strategic project that didn’t make it into CAISO’s plan is aimed at expanding the capacity to bring gigawatts of wind power from outside the state’s borders. 

Last month, the TransWest Express — a 732-mile transmission line meant to carry about 3 gigawatts of wind power from Wyoming through Utah and Nevada to California’s border — won final approval from federal regulators. That clears the way for construction to begin and for power to start being delivered as soon as 2028.

But California lacks the grid capacity from the Nevada border across the Mojave Desert to effectively carry that power to where it’s needed. Previous versions of CAISO’s plan included a roughly $2 billion project to solve that problem, Smeloff said.

That project was cut from the final plan after an independent transmission developer proposed an alternative that would use an existing transmission corridor to string high-voltage direct-current (HVDC) cables that could solve the problem at lower cost and with fewer permitting complications, he said.

Meanwhile, California policymakers are grappling with how to coordinate transmission planning to maximize its potential to reduce reliance on fossil-fuel-fired power plants, he noted. Specifically, CAISO is studying the potential for an undersea HVDC cable that could run from the state’s central coast to the L.A. Basin area to carry power from onshore — and potentially from offshore wind farms called for in the state’s broader clean energy plans — that could reduce the need for fossil-gas-fired power plants that community and environmental groups have been fighting to close down for years.

More work to do: Permitting, interconnection reform and retiring fossil fuels

That’s not to say that CAISO’s new plan solves all the problems California faces, Smeloff said. Permitting, siting and interconnection remain long-standing challenges, and while California has been working on reforms to these policies for the past few years, the state still has a way to go, according to recent reports from the Clean Air Task Force and from the Center for Energy Efficiency and Renewable Technologies and think tank GridLab.

“The next challenge is permitting,” Smeloff said. The CPUC is in charge of managing the permitting process for transmission in the state, and ​“there’s been a lot of criticism that the CPUC has not been able to process these applications in a timely manner.”

The CPUC launched a proceeding this month aimed at updating its transmission siting regulations, prompted by last year’s passage of a state law demanding reforms to streamline its process.

Interconnection reforms are another pressing issue, he said. ​“We have a really clogged-up interconnection queue, and a lot of those projects will never be built,” Smeloff said. ​“We need an orderly way of getting the studies done that need to be done, without doing make-work on lots of studies” that don’t reflect realistic futures.

CAISO on Thursday also approved the first phase of a process designed to improve how interconnection applications are evaluated and processed.

Similar efforts are underway at grid operators across the country, some of which face yearslong interconnection-queue backlogs and rising pressure to clear them so that clean energy projects can be built quickly enough to meet state and federal decarbonization goals. The Federal Energy Regulatory Commission is also in the midst of setting new regulations geared to unclog those interconnection bottlenecks and encourage more long-range grid planning.

Ultimately, lack of transmission capacity has been a major underlying barrier to adding new clean energy to the grid across the country, according to multiple studies. The pace of transmission expansion must double or triple nationwide for the U.S. if the country is to meet the Biden administration’s goal of a carbon-free electricity sector by 2035.

CAISO’s 20-year transmission outlook released last year identifies $30.5 billion in new transmission needed to reach the state’s 2045 clean energy goals. Thursday’s plan is just the first step in that long-range effort.