“Wiring America: The Short- and Long-Run Effects of Electricity Grid Expansion”
Gaurav Doshi* (Georgia Institute of Technology)
A critical factor in fully utilizing the benefits of renewable energy is the availability of high-capacity electricity transmission lines. This paper examines the impact of large-scale grid expansion on price-cost markups and emissions from fossil fuel generators in the short run, and investment in renewable energy in the long run. I focus on the rollout of a $6.8 billion grid expansion project in Texas that linked windy areas in West Texas to demand centers in the East. With the stock of renewable capacity fixed in the short run, transmission expansion leads to a decline in markups and emissions (both global and local) from fossil fuel generators by integrating electricity from renewable generators into the grid. In the long run, counties with investment in transmission infrastructure see higher investments in wind project installations. The estimated benefits from lower market power, emissions, and greater wind investment translate to a payback period as short as 7.6 years. These findings highlight the potential to unlock significant economic benefits from transmission expansion in other parts of the US.