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Economy

What If We Just Nationalize the Power Grid?

A proposal.

An American flag and power lines.
Heatmap Illustration/Getty Images

The urgent need to build transmission infrastructure at dramatic pace, scale, and geographic scope is clear. To decarbonize the power sector, we’ll have to physically rebuild the grid once-over in the coming decades to connect and facilitate a hopeful explosion in new renewable generation capacity across our continental country. We will have to accomplish this as electricity demand grows, including on account of decarbonizing sectors such as buildings, transportation, and industrial production through electrification. Given the stakes of grid balancing, this task is akin to building and starting to operate a new beating heart and wider cardiovascular system, all while keeping the old one from failing amid surgery. Coordination and proactive planning of grid buildout will be key.

Despite the undeniable public benefits, investment in the grid has been stagnating, if not declining. A Department of Energy study found that annual net investment in the grid, as measured by new miles of line, was actually negative on average between 2016 and 2020. Some have faulted the National Environmental Policy Act for this underinvestment, while others have blamed anti-social NIMBYs, both of which, but especially combined, can thwart projects at the permitting stage.

The reality is more complicated and implicates the basic governance of the transmission system. The grid in the United States is owned, operated, and planned largely by a highly fragmented set of privately owned utilities and, in some places, their nonprofit associations, which are regulated at the federal and state level. Transmission owners do not propose and build transmission lines unless they are profitable for their business, which is not guaranteed most of the time. Indeed, new lines can cost transmission owners profits by creating a larger pool of power supply and reducing the energy sales and pricing power of their generation affiliates.

The Federal Energy Regulatory Commission has repeatedly attempted to prod utilities to do more by mandating regional planning procedures. FERC announced its latest regulatory initiative, called Order 1920, last month, and it requires transmission owners to undertake long-range regional planning that considers an array of public benefits, including lower energy prices and enhanced system reliability. In particular, the rule alleviates disputes over investment cost allocation. But stronger planning procedures can hardly ensure that private utilities will actually invest in needed lines. Indeed, FERC’s serial attempts on this front have so far been a failure.

As this FERC activity suggests, the grid is already subject to great public regulation, but this regulatory architecture still falls well short of the public control necessary to treat the grid as a vital common resource whose transformation must be proactively planned and precisely delivered at the system-level. Through public planning and development, we can overcome this structural fragmentation and counteract private utilities’ low propensity to investment across the transmission system. We need a centralized system of public planning, funding, and construction of transmission facilities. We need to nationalize the grid.

The benefits of grid expansion are manifold and go well beyond just the functionality of decarbonization. More connections between states and regions can lower the price of electricity and improve reliability, which will become an increasingly pressing issue in the face of further climate destabilization. And yet our transmission system consists of regional and subregional grids “that operate like jealous petty potentates, resisting stronger links that would allow renewable energy to flow across regional boundaries,” in the words of the New York Timeseditorial board. Projects founder over disputes between utilities over how to distribute costs, while other necessary new additions are never proposed in the first place. This is a structural problem that leads to quantitative underinvestment and qualitative poor coordination of investment across the balkanized system.

The public pays for investments in the electricity system, whether through taxes or consumer electricity bills in monopoly serviced systems down the line. Public investment in critical infrastructure is cheaper for the public than private investment due to the lower costs of debt financing or direct access to the U.S. Treasury for public agencies. These entities are also free from the imperative to maximize shareholder returns and pay dividends. Public investment is more flexible and can adopt a system-wide approach, as opposed to one blinkered at the level of the project. Instead of piecemeal line extensions, the grid can be expanded in a methodical and holistic fashion in accordance with social need.

Public power is firmly established in the United States. Public agencies such as the federal Tennessee Valley Authority and state-owned New York Power Authority generate and transmit power. In nearly the entire contiguous United States west of the Mississippi River, three federal power administrations own transmission lines and can construct new ones. Congress should set up and fund federal authorities across the country to build the power grid we desperately need, coordinating with each other and through federal level planning, and working with, and when needed against, the current assemblage of private utilities.

The Bonneville Power Administration in the Pacific Northwest offers a good model of governance. It is led by a single administrator appointed by the Secretary of Energy. This official has the broad authority to set rates on wholesale power and transmission and develop the regional grid. But these important decisions can only be made after close consultation with retail and wholesale customers, Native American tribes, elected officials, and environmental groups and are reviewed by FERC. This system ensures efficient, publicly accountable management of the grid.

Given the tight timeline we face to deliver on critical decarbonization pillars, one might ask, why experiment with a publicly led approach? We might stoke private utility backlash and weaken or slow the broader project of cleaning up the power supply. But private utilities have had decades to deliver a modern grid and failed. Because of the pressing need to decarbonize and fortify resilience against entrenched climate instability, the necessity of building state capacity is a sober reality. We cannot begin to build necessary state capacity without first acknowledging this necessity and acting in light of it.

North America’s power grid is called the “world’s largest machine” because it is a complex physical infrastructure that must be in perfect balance every second. Our homes, places of work and leisure, and increasingly vehicles are all plugged into the grid. Preserving modern living standards—and an inhabitable planet—requires expanding and rationally operating this common resource. This social undertaking is too important to be entrusted to private corporations.

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Melanie Brusseler profile image

Melanie Brusseler

Melanie Brusseler is a senior researcher at Common Wealth. Before that, she researched global macrofinance, economic management, and industrial planning policy for decarbonization at E3G, where she wrote a bi-weekly newsletter on green macrofinance and transition planning.

Sandeep Vaheesan profile image

Sandeep Vaheesan

Sandeep Vaheesan is the legal director at the Open Markets Institute. From 2015 to 2018, he served as a regulations counsel at the Consumer Financial Protection Bureau, where he helped develop rules on payday and title lending and debt collection practices. He is the author of Democracy in Power: A History of Electrification in the United States, which will be published in December by the University of Chicago Press.

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