California’s ambitious goals to achieve 90% clean electricity by 2035 and 100% by 2045 hinge on whether the state can rapidly develop new transmission. In this blog post we analyze six key barriers and opportunities to developing this infrastructure, including siting and permitting, public financing, competitive solicitation, grid-enhancing technologies and advanced reconductoring, interregional transmission and issues related to offshore wind. 

Overall, a combination of reforms will be needed to ensure a transmission build-out consistent with the state’s climate goals. Public financing appears promising as a way to reduce ratepayer costs and enable more rapid deployment of key intrastate lines, such as for offshore wind. This could be complemented by efforts to expand interregional transmission and clean energy access from other western states including Idaho, Wyoming and New Mexico.

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A rapid and large-scale transmission build-out is arguably the most important factor to delivering California’s 2030 and 2045 climate goals. Without it, it will not be possible to access new and distributed renewable energy resources and in doing so phase-down the use of fossil fuels. 

Yet transmission deployment continues to lag – regularly taking over a decade to develop new projects at a significant cost to ratepayers. There is simply no future where California can achieve its climate goals without unprecedented reforms to transmission development. 

The goal of this blog is step back and provide a fresh look at transmission in California. We identify key issues and potential policy opportunities. Overall, and despite notable leadership from state agencies as well as the California Independent System Operator (CAISO) that are seeking to arrest the transmission crisis, there are still multiple areas for improvement. Solving the problem will require an all-in approach from state leaders, experts and advocates.

Key transmission issues  

We identify six key barriers and opportunities related to transmission in California (Figure 1). Although certain issues have a higher potential to get transmission deployment on track than others, reforms across all of the issues are needed. As other regions grapple with similar challenges, California’s efforts could provide crucial learnings and leadership for other states. 

Siting and permitting 

• Background: It regularly takes more than a decade to build new transmission lines in California, with environmental review and permitting a key reason for the delay. 

• Status: There was a major effort in last year’s legislative session to address permitting issues. AB 1373 (Garcia) established a rebuttable presumption that the CPUC should accept a CAISO determination of transmission need. Meanwhile SB 619 (Padilla) and SB 420 (Becker), which amongst others authorized the CEC to review and approve permits, were vetoed by the Governor, citing the potential for complications by decentralizing permitting away from the CPUC. 

• Next steps: Other policies contemplated in SB 619 and SB 420, including that there should be a time limit (270-days) for an agency to approve or deny a permit and that certain smaller projects (e.g., minor line expansions) should receive additional streamlining, could provide key benefits and would be consistent with other western states. The CPUC’s General Order 131-D is an open rulemaking where these policies are being considered. AB 3238 (Garcia) is a current bill that, similar to SB 619, would authorize the CEC as the lead environmental review agency and set time limits for permit approval. Given last year’s veto, it is unclear whether this bill will pass into law. 

Public financing 

• Background: An expansion in transmission necessary to achieve state climate goals could push California’s already high electricity customer rates considerably higher, potentially undermining the social and political will for a 100% clean economy. 

• Status: Public financing has been identified as a key option to significantly reduce the cost of new transmission. This is because public debt has lower costs than comparable utility financing and, to the extent it replaces utility equity in the capital structure, can result in major cost savings. Additional tax benefits could be realized if transmission assets are publicly owned, which could then be leased to the private sector to operate and maintain. 

• Next steps: Further work is needed to quantify the potential cost savings of public financing as well as consider how such a strategy could viably be implemented. CSG in partnership with CATF and UC Berkeley's Center for Law, Energy and the Environment are currently performing these analyses. An initial estimate suggests that public financing could reduce transmission costs by up to 57%, or tens of billions of dollars over the next two decades, equating to significant ratepayer savings. 

Competitive solicitation 

• Background: Competitive tenders are widely employed by governments to reduce infrastructure costs. However, they are not often used in support of transmission. Between 2013-17 less than 7% of California transmission projects were competitively solicited. 

• Status: Where it has been employed, analysts have studied the effects of competitive solicitation on transmission. A 2019 study by The Brattle Group estimates that savings of 20-30% are possible from competitively soliciting transmission projects instead of sole-sourcing through utilities. On a $1 billion project, this equates to $200-300 million in savings. Additionally, competition may increase the speed of deployment. A 2023 report by CATF analyzed California’s transmission project pipeline, finding that incumbents were slower to submit transmission permit applications to the CPUC than third parties - a key source of overall project delays. 

• Next steps: Expanding the use of competitive solicitation presents an important and largely unexplored policy opportunity. As identified by the Public Advocates Office, CAISO has the authority to remove current voltage thresholds that exempt projects less than 200 kV from competition. Other regions including the Southwest Power Pool, New England ISO and New York ISO have lower (100 kV) or no voltage thresholds. As most transmission projects in California are less than 200 kV, this policy change could deliver significant transmission cost savings. 

Grid-enhancing technologies and advanced reconductoring 

• Background: Grid-enhancing technologies (GETs) and advanced reconductoring are solutions to increase the capacity of existing transmission lines, thereby avoiding the need to develop some new lines. Common GETs include dynamic line ratings and advanced power flow control, which improve the performance of existing infrastructure and networks. Reconductoring involves replacing existing transmission lines with advanced materials to directly boost line capacity. 

• Status: There has been significant recent interest in GETs and reconductoring, with both the White House and FERC calling for greater consideration of these options in regional and state transmission planning. CAISO does already assess the potential for GETs and advanced reconductoring in its annual transmission planning and interconnection approval processes, however it is possible that these reviews could be improved. 

• Next steps: GETs and reconductoring are an essential and cost-effective solution to boost near-term grid capacity. However, it should be noted that they cannot replace the need for new transmission in cases where lines do not yet exist, such as for offshore wind. AB 2779 (Petrie-Norris) is a key bill that would require CAISO to report to the CPUC and the legislature on any new use of GETs in the annual plan as well as the cost and efficiency savings. 

Interregional transmission 

• Background: Although the vast majority of California’s clean energy needs are expected to be met by in-state resources, a portion of out-of-state supply has been identified as important for grid reliability and to lower ratepayer costs. These projects would require interregional transmission to move electrons from Mountain states to California load centers. 

• Status: It is challenging to facilitate interregional transmission in the west given the lack of west-wide ISO. However, in June 2023 CAISO approved a novel subscriber model as a way to overcome this obstacle, where the upfront cost of developing the line would be paid for by subscribers seeking to use it and would not increase CAISO’s transmission access charge. CAISO has approved two interregional transmission projects under this model to tie into the California system, including TransWest Express (732-mile line carrying 3 GW of wind from Wyoming) and SunZia (550-mile line carrying 3 GW of wind from New Mexico). 

• Next steps: CAISO’s subscriber model is a promising option to facilitate interregional transmission. State leaders should consider how to provide enabling support for proposed projects where relevant. Another opportunity is the proposed Pathways Initiative, which seeks to establish an independent organization to administer electricity markets for the west. Although this effort is not aimed at establishing a west-wide ISO, to the extent it can increase market participation it could increase the pressure for additional interregional transmission. 

Offshore wind 

• Background: California is planning for 25 GW of offshore wind by 2045 as a key component of a 100% clean energy portfolio. This ambitious goal requires the development of major new transmission lines and related infrastructure. 

• Status: State officials have adopted a number of key policies already in support of offshore wind. AB 1373 (Garcia) empowered the Department of Water Resources to centrally procure new clean energy resources, including offshore wind. CAISO’s 2023-24 transmission plan authorized multiple new projects to support an initial 4.7 GW of offshore wind. The CEC also recently released an interim version of the AB 525 Offshore Renewable Energy reports, including a strategic plan that analyzes barriers and opportunities to offshore wind in California. 

• Next steps: Despite this progress one needs to look no further than recent project failures on the East Coast to know that major challenges still lie ahead. Additionally, with the potential for a new President that is hostile towards offshore wind, proposed projects must reach a more stable footing soon. In this regard, support for new infrastructure to connect offshore wind facilities to the grid is a key need, as are creative solutions to the Jones Act that have stifled projects to date. 

Public financing a promising option 

One of the key factors that drive up the cost of new transmission is how the asset is financed. Assuming the asset is financed by an investor-owned utility with 50% equity, the cost ultimately passed on to ratepayers could be four-times higher than the cost of the physical infrastructure alone. With California electricity rates already extremely high, as the state seeks to expand its transmission capacity this presents a critical barrier to getting to scale. 

A public financing strategy could address this problem and – with other supportive reforms – also enable more rapid deployment. For example, public financing could be targeted to a subset of priority lines identified by CAISO as essential to the state’s climate goals. These projects could also be subject to competitive tender and receive permit streamlining. North Coast offshore wind appears to be a clear candidate for this kind of strategy. Forthcoming analysis from CSG, CATF and UC Berkeley CLEE will examine this and similar options in more detail. 

Conclusion 

The ultra slow and expensive deployment of transmission is a critical threat to California's climate goals. Although the state has adopted some important policies to date, a suite of additional reforms are still needed. In adopting these reforms, California can provide learnings and leadership to other regions interested in climate action. A public financing and deployment strategy for high-priority infrastructure is one way to expedite the development of projects that could crowd-in multiple new GW of clean energy. 

For more information on California transmission policy, please contact Neil Matouka (neil@csgcalifornia.com) or Sam Uden (sam@csgcalifornia.com).