A recent research study published by the Proceedings of the National Academy of Sciences (PNAS) highlights the increasing need for transmission network expansion and enhanced market integration in the US, driven by the rapid expansion of geographically concentrated, low-marginal-cost wind and solar generation. The study examines how the geographic concentration of wind and solar resources, often located far from major demand centres, is creating spatial imbalances between electricity supply and demand, thereby leading to transmission congestion and binding interregional constraints. It further evaluates the economic benefits of improved grid integration and identifies existing market structures and stakeholder incentives as potential barriers to the timely development of high voltage transmission infrastructure.
The study finds that, if interregional transmission constraints had been eliminated across the lower 48 states, electricity generation costs could have been reduced by USD5.8 billion to USD7.1 billion in 2022 and USD3.4 billion to USD5 billion in 2023. These potential savings stem from more efficient dispatch of low-cost generation resources, including reduced curtailment of renewable energy and decreased reliance on higher-cost fossil fuel plants. The analysis also reveals that spatial constraints remain widespread, with 92 per cent of power plants responding more strongly to local demand than to demand in other regions, indicating limited market integration. While consumers would benefit from lower system-wide costs, the report identifies uneven financial impacts across regions, with producers in the Great Plains, Midwest, and Rocky Mountains gaining, and those in the Northeast, Southeast, and California facing reduced revenues.
The study concludes that, despite clear economic and reliability benefits, transmission expansion and market integration face significant institutional and political barriers. Incumbent generators in high-cost regions have incentives to delay or oppose new transmission projects that would increase competition and reduce their profits. These challenges are compounded by issues with cost allocation, regulatory approval processes, land use, and interconnection delays. The findings underscore that achieving a more integrated and efficient US electricity market will require not only substantial investment in high-voltage transmission infrastructure but also policy and regulatory reforms to address misaligned incentives and facilitate coordinated grid development.
The full report can be accessed here.
