Is Transmission Expansion for Decarbonization Compatible with Generation Competition?
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2022-08
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Brennan, Tim. Is Transmission Expansion for Decarbonization Compatible with Generation Competition? Resources for the Future Working Paper. Aug. 8. 2022. https://www.rff.org/publications/working-papers/is-transmission-expansion-for-decarbonization-compatible-with-generation-competition/
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Abstract
Decarbonization of the electricity sector, and expanding it to facilitate decarbonization
of transportation, heating, and other energy applications primarily using fossil fuels,
is an important step in mitigating climate change. A widely advocated step in that
direction is long-term planning to massively expand the transmission system to
deliver electricity generated by wind and solar units that are far away from population
centers. The transmission system has seen substantial investment in recent years,
with few examples of failure to construct new lines, but future climate imperatives may
justify moving away from the process of adding incremental capacity in response to
specific requests. However, the planning process may sacrifice much of the benefits of
competition that electricity policy has striven to achieve over the past three decades.
These benefits are not only those from independent output and capacity responses
to market prices but also dynamic benefits from technological innovation and market
information acquired over time. Reconciling the benefits of competition with central
planning has long been necessary in the electricity sector. I propose options for
preserving some of the benefits of competition, if long-term transmission planning
remains an imperative.