Shel Khan (3:05)

I'm Shel Khan. I lead the early stage venture capital strategy at Energy Impact Partners. Welcome. Apologies for my singing voice. We're talking transmission this week because partners I had Rob Gremlich on a year ago, a little over a year ago to talk about the woeful state of US Transmission buildout, which has truly been embarrassing for the past decade or so and even worse in recent years. And we talked about all the reasons why that was true and what might change and so on. But you know, I'd say the outlook was like we're in a tough spot and a bunch of things need to change in order to for us to start building significant transmission lines again. And just as a reminder, we need to build new transmission lines for lots of reasons. We need to integrate lots more renewables on the grid and other generation. And also now we need to serve all of this new load that's showing up in the form of data centers. So the need is doubled. And that speaks to why I want to have the conversation again today, which is a lot has changed in the past year in the electricity sector. Things in other parts of the market have changed substantially and transmission may or may not be the hardest thing to change. So I wanted to see whether all of the rapid change, all of the money that is flowing into the sector has moved the needle on building out new high voltage power lines in the US So I brought back Rob Gramlich from Grid Strategies to do an update. Here's Rob. Rob, welcome back.

Rob Gramlich (4:37)

Thanks Shail, good to be with you.

Shel Khan (4:39)

All right, so you and I talked on this podcast a little over a year ago about transmission and new transmission, I would say in particular in the US and it was a tale of woes and a big long exclamation of how amazing it is that we've been able to build so little transmission, new high voltage transmission in particular in the United States in the past decade or so. And I wanted to have you back on because you know, the past year has changed many things about the electricity sector and I wonder whether it has changed this thing. So my high level question for you is do you think we're in a fundamentally different position with regard to, I don't know, your outlook on new transmission build in the US relative to a year ago, or is it more the same place?

Rob Gramlich (5:28)

Well, we're still struggling to put the pieces together. I think we do have A good platform that actually has a pretty decent shot of, you know, surviving the political change we've all experienced because transmission is so critical for data centers and AI driven data center demand. But we don't really know that for sure yet. Things are just sort of getting settled with the relevant agencies here in Washington, Department of Energy and ferc. So we don't really know how that's going to turn out. We did actually have an uptick in new lines in 2024, so that was new because I think when we spoke we were talking about how There were only 55 miles of new high voltage transmission lines in 2023, which is down a trickle from the 4,000 that had been built 10 years prior, which hopefully wasn't all woe is me, woe is us.

Shel Khan (6:28)

When we, I was woe as us, certainly.

Rob Gramlich (6:32)

I mean, I do like to point at that experience 10 years ago and say, hey, look, we were able in this country with all the permitting challenges we have to build 4,000 miles of new high voltage transmission. I connected all this clean energy, so there is hope. And we like to point to that example of saying, look, when we get the pieces together right, we can do this. But then, you know, some things happened and we went down to a trickle of only 55 miles. Well, there was an uptick to like 880ish miles in 2024, so that's some good news. When I first saw that, I thought, oh great, we're starting to turn things around. But if you look a little bit closer, you kind of see, oh, wait a minute, these were lines that were begun 10 or 15 years ago that just finally got finished. Now you could say, all right, that's a good story, because a number of these did need federal permits from federal agencies. And I think during the Biden administration they were approving transmission projects. And so that's good news. And that could continue, might not continue in the current administration. We don't know yet, but there was an uptick. So in some ways we've gotten some permitting, but some of the key policies, like at FERC in order 1920, it could be sort of branded as a Democratic thing. I think it was bipartisan and it actually had no preferences for renewable energy or anything like that. So I think it should be safe and robust to a partisan change with new commissioners coming in. But we don't know yet. We don't know what the new commissioners are going to do about 1920. Are they going to implement it or just kind of render it sort of a dead letter And a weak order.

Shel Khan (8:21)

Can you briefly redescribe 1920?

Rob Gramlich (8:25)

Sure. So it was the order issued a few years ago for proactive long term transmission planning, 20 year plans for each region. So it applies to the, the grid operators like PJM and MISO and SPP and California ISO, but also to the non RTO utilities. They need to get with their neighbors and put regional plans together. And so, you know, significant order, very well crafted in my opinion. Chairman Glick and his team shepherded it through and Commissioner Clements and others, Chairman and then Commissioner Christie was there for the latter part of it. He made some changes. So it kind of wound up very sort of bipartisan and technology neutral, which is fine, but it's there, it should be done. The courts will have their say. Hopefully people will revoke their challenges from the courts and just let it stay as it is. And then hopefully FERC will actually implement it with teeth and not just accept any old thing that comes in on compliance. But that is the next step. As the regions file, their compliance approaches with FERC and FERC kind of on the margin can either make it be a weak rule or remain a strong rule.

Shel Khan (9:53)

I mean, is this the fundamental reason why things. So in other parts of the electricity world, things have changed a lot in the past year. Right. And it's driven by just the. It's like necessity is the mother of invention. It's a combination of necessities, the mother invention. And there is essentially an endless pool of money willing to throw itself at any solution that gets more power to data centers faster. Is the reason why this hasn't, why transmission hasn't benefited from that, that the only way to solve it is kind of, it's like what you're describing, it's like a FERC order that has to go through the ISOs, that takes years to go through the process. And so it's just inherently a slower thing. Because you could imagine a scenario where sort of similar to what we're seeing in other categories, right? Like hyperscaler wants to build data center and strikes a deal with utility where they can get interconnected faster if they pay for 100 miles of new 765kv line or something like that. Like you would think that kind of thing would be happening.

Rob Gramlich (11:04)

Yeah, I think it's just, you know, it's not right in the bullseye of, you know, the data center's immediate need or the utility's immediate need. It's sort of the, you know, the background infrastructure that everybody relies on and Absolutely, you need to build up that Network, that backbone network to support all this new load. But it's not the obvious thing. It's not what, you know, incoming officials at the Department of Energy immediately go to as oh, here's immediately what we need to go focus on. And it's not, you know, it doesn't catch a lot of the press attention. A lot of the press attention is about, oh, look at this, you know, on site generation option or a new, you know, now we're doing rice, you know, generators or this or that or the other on site option. Those get for some reason more attention. But I mean my understanding from the hyperscalers and the data center developers is that they all really, really want the full network transmission service with all of the good backup and cushion that that network provides to their operations and the five nines reliability that you only get that way. And so I think the message is starting to filter through the process. I mean it was quite dramatic that the Secretary of Energy, Secretary Wright wrote this letter to FERC saying, here's a rulemaking I'm putting before you on access to the grid, right?

Shel Khan (12:34)

But it doesn't really have anything about transmission in it, right?

Rob Gramlich (12:38)

Well, it's access to transmission. And then so it begs the next question of, well, if you care that much to do this dramatic order that's almost never used authority and take all the, you know, the beating from state regulators who would be losing some jurisdiction, if you're willing to do that, well then you must care about the size of the grid, the actual capacity of the grid. You know, what's access to a grid if it has no capacity for you. So it, to me, it strongly proves the point that the whole AI industry, if you want to call it that, needs the grid and that this current administration, which is willing to do anything and everything to support AI being done in this country, it proves that the transmission network is critical to that because they're taking this major action to get access to the transmission grid. So now we need to see the next step of, okay, well let's expand the grid and all the things that come with that, which is Order 1920 and then Inter Regional Transmission and then using the DOE programs like the transmission facilitation program, we could go on. But there are a lot of things that FERC and DOE can do to, you know, actually enable the expansion of the grid.

Shel Khan (14:04)

Is it, is this a little bit of a tragedy of the commons kind of a problem?

Rob Gramlich (14:07)

100%, yeah.

Shel Khan (14:08)

It's where it's like the any given data center company needs transmission Expansion. But you can't attribute that transmission build out to that specific data center necessarily. And so they can't say, I will put down money for you to build out new transmission lines specifically for me. And as a result, it gets pushed down the order of priority list because they're like, okay, immediate concern is getting this data center connected to the grid. And so instead I'm just going to go buy a bunch of gas generators or whatever it is.

Rob Gramlich (14:42)

Exactly right. Look, these hyperscalers, and you know, you and I know them all and I'm sure we both have many friends that at each of them they are in intense competition with each other to the point where the people I know at the hyperscaler, they don't actually know which data centers are being developed for their company because it's so commercially sensitive that only a few people even in the company know which ones they're really planning to go forward with. And so if they're in that intense competition, like company to company, then it's of much less interest, just much less incentive for them to go work on the network that all of their competitors get to use just as much as they do. So that's classic public good tragedy of the commons. And it's the reason why in this scenario, this is a classic reason why you have government leadership. And as a nation, if we are in an AI race with China, then we should be using federal leadership to build out the network for all of those data centers here that want to be in this country and operating here, not the Middle east or Asia or wherever else. And so for this to happen, right, you really need federal leadership. States and regions can do a lot as well, and localities. But we really need to build out the transmission network, which is an interstate, federally regulated network.

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Shel Khan (18:19)

Let me throw a couple of recent announcements at you and just get your take on like what? How big a deal is this and what does it mean? Okay, so one was I think just recently SPP Southwest Power Pool got I think approval to build this 765kV transmission backbone as they called it. That sounds quite positive. How big a deal is that?

Rob Gramlich (18:44)

Yeah, that plan, the ITP plan is huge. I mean they went back and forth and I don't know, the final number in terms of it might be closer to the 10 billion version rather than the $20 billion version.

Shel Khan (18:59)

Yeah, it's like 8.6 or it was.

Rob Gramlich (19:00)

The one I read. Okay, so you know, it got unfortunately cut back. I hope there's a way. Here's another way, like the federal government could come in and say, hey, for, you know, AI race with China, we want to get you back up to the 20 billion and we're going to help you, but hopefully it ain't over till it's over on that. But at any rate, directionally it's fantastic. A 765kV collector loop with, you know, I mean anybody's favorite generation source is available in that, you know, Great Plains footprint. And you know, the market will decide which ones go forward. But there certainly could be a tremendous amount of clean energy that connects to that system and powers a tremendous amount of data center and new manufacturing and other load in that area.

Shel Khan (19:47)

Okay, so now an announcement that points in the opposite direction, which is that the doe, the loan program's office, canceled the loan guarantee that was going to be offered to the Greenbelt Express project. So to your point, there is, it seems from all the other indications that this administration would be super in favor of new transmission buildout, that cancellation seems like an odd decision. In light of that, what do you make of it?

Rob Gramlich (20:14)

Yeah, so many people interpreted that as oh, maybe they don't care about transmission. I don't interpret it that way. I think that was a very unique circumstance where a senator decided to use his minutes in the Oval Office to talk about a specific loan to a specific transmission line. Okay, that's not going to happen very often in our, you know, in the future and if it does, anytime a senator uses his time with the President to talk about a specific loan to a specific line, that project, that loan anyway will be in trouble. The project I expect will go forward. It's a great project, but that loan is no longer. So I just think, you know, I mean presidents do things at the request of senators sometimes and you know, that's what happened.

Shel Khan (21:11)

How many? Okay, I guess the way to ask this question is you said before like, okay, to the extent that we built anything out recently, it's been stuff that was in the works for the past 10 years etc. So presumably we should have pretty good visibility then into how much we will build for the next two, three, four, five years. How much is it?

Rob Gramlich (21:35)

Yeah, I think it's looking pretty good. I mean you've got 765kv AC plans. We mentioned SPP, but miso in the more like the Great Lakes part of the Midwest and is looking at 765 PJM as well. And they just came out with a new, very much more ambitious plan than we've seen from them in the Mid Atlantic. And ERCOT in Texas also have 765kV plans. So that's four regions who are for the first time in many decades doing the highest AC voltage transmission lines that we have. So you know those take time but those are now being planned. And there were also plans that started more like five, seven years ago. The MISO long range transmission plan. Some of these are still facing some challenges like that one has. There's a challenge at FERC with some states but hopefully that will go forward. California ISO has continued they've been cranking along quietly for many years. Pretty much they're the only ones who have kind of gone non stop on transmission. So every year they're doing more and it's bringing in resources from around the west. So yeah, I do think there's a lot of indications New York has some. There's a new line that the NECEC from Quebec into New England is finally going forward after, you know, some back and forth and tough court decisions and opposition. But I do think there are a bunch that are on their, on their way and looking promising.

Shel Khan (23:21)

So the curve may bend back up a little bit. At least like that stuff comes together, we could be building hundreds, thousands of miles per year.

Rob Gramlich (23:30)

Yeah, yeah, we could be getting into the few thousand or more miles per year.

Shel Khan (23:35)

And then how much is all this stuff tied up in the question of permitting reform? How much does that matter? Because it doesn't. It's not clear to me whether that's actually on the horizon. It may be, but certainly hasn't happened yet. Do we need it?

Rob Gramlich (23:48)

I do think we need it. I mean you can, you can build things here and there under the current regime, which again, you know, was proven by 10 years ago we did it. But there are real limitations with that. And some of it is this big inter regional opportunity. Like we don't really have a system in place to build inter regional transmission from region to region, MISO to SPP or SPP to the interior west, or interior west to the coast, all of these neighboring regions. There's a massive untapped value of transmission there. And we don't have a regional transmission organization with a planning process to deal with that. And this whole looking at the whole industry on a more macro scale. We're evolving out of a industry that started with 3,000 utilities doing their local thing in their local fiefdom without much of tie between them. And so we're grafting onto the top this more regional and then inter regional approach. And it's a process, a multi decadal process that we're still working through. And we're nowhere near the end game on that. So we're still working through on that permitting reform at least as set up in the Manchin Barraso Energy Permitting Reform Act EPRA from a couple years ago. It has a transmission title that has a big focus on inter regional transmission planning and kind of determining what are the list of benefits that are the basis for cost allocation and some federal permitting role in there. So those things in my opinion are extremely helpful. It's a great bill it was bipartisan. Passed the Senate Energy Committee 11 to 4. Only one Republican opposed, same one Senator Hawley who opposed the grain belt loan, but otherwise very strong showing at the Senate Energy Committee. And now I think it's teed up for the broader permitting pact which there are complexities on the other components of the package that both House and Senate are working through. I expect to see the House moving pretty quickly on one piece, the NEPA related piece, and that'll be an important milestone. So I do think there's a chance and I do think it would have a very big impact on transmission and enabling transmission going forward.

Shel Khan (26:24)

How much innovation do you see in the transmission world in the sense of either planning? Right. Like people have talked about siting transmission lines along railways, that kind of thing. Undergrounding technology innovation. What do you think is interesting?

Rob Gramlich (26:40)

Yeah, I do think there are some very interesting, I'll call them advanced transmission technologies. You know, one category is high performance conductors with carbon core or superconductors where you put up a new wire either on the same tower or rebuild the tower.

Shel Khan (26:57)

That's for reconductor more than new builds, right?

Rob Gramlich (26:59)

Yeah, that's right. It's for both. But, but yeah, but it does open up the opportunity for reconductoring, which is very fast because you don't need a new right of way for that. So that's one category. Another category is grid enhancing technologies, which are more the operational type technologies, topology optimization, advanced power flow control, dynamic line rating, that sort of thing and storage as transmission you could put in there. So and those increase headroom and capacity in a quick way. And again the mantra in Washington anyway is speed to power because that's kind of the mantra for the data center community right now. And those things are speedy. They're relatively inexpensive and they're speedy. They don't fully solve the problem. It's not like you don't need new transmission as well, but they do increase the headroom and we all need headroom because it's a very constrained, congested grid right now.

Shel Khan (27:58)

So final question, I guess you mentioned we don't really have a system for inter regional transmission. There are those out there, folks at Grid United, run by Mike Skelly, famous longtime transmission developer Invenergy and others who have planned projects that are inter regional. So how are they doing it?

Rob Gramlich (28:17)

Yeah, that's right. I mean I think there is a little market for some transmission that you can cobble together enough basically money from customers like voluntary subscriptions from utilities along the route or at either end in order to pay for some lines long term, I don't think that's enough to build anywhere near the optimal amount. But there is some and these developers to their credit are looking at some super high value pathways and they have, I think in many cases very cleverly figured out good routes that can be put together and work things out with landowners. So many of them are pretty far along on that and what they do, I mean, they kind of pass the hat to utilities and say, hey, would you pay this much? And if they get enough then they can go forward. And you know, they do often need federal permits and one hopes that there are actual staff at the Department of Interior and places like that to actually issue permits. It does rely on that in many cases. But you know, some of these lines are, you know, looking very, very promising. So I do think we will get some of those under the current regime even if we don't get permitting reform. But if we get permitting reform, you know, and or significant FERC action in the inter regional space, I think we would get a lot more.

Shel Khan (29:45)

All right, Rob, thanks for the update on the lines. We'll be back in another year and see if things have changed substantially from now.

Rob Gramlich (29:52)

All right, we'll be ready for it. Good to talk to you, Shel.

Shel Khan (29:56)

Rob Gramlich is the founder and president of Grid Strategies. This show is a production of Latitude Media. You can head over to latitudemedia.com for links to today's topics. Latitude is supported by Prelude Ventures. This episode was produced by Daniel Waldorf. Mixing and theme song by Sean Marquand. Stephen Lacy is our executive editor. I'm Sheil Khan and this is Catalyst.