Creating a National HVDC Transmission Network
The United States should continue to pursue its commitment to reduce greenhouse gas emissions by 50–52% from 2005 levels by 2030 and achieve net-zero emissions by 2050. To reach these goals, the United States must rapidly increase renewable-energy production while simultaneously building the transmission capacity needed to carry power generated from new renewable sources. Such an investment requires transforming the American electricity grid at a never-before-seen speed and scale. For example, the 2024 DOE National Transmission Planning study estimates that the American transmission system will need to grow between 2.4 – 3.5 times its 2020 size by 2050 to achieve a 90% greenhouse gas emissions reduction from a 2005 baseline by 2035 and net-zero emissions in 2050. A promising way to achieve this ambitious transmission target is to create a national High Voltage Direct Current (HVDC) transmission network overlaid atop the existing alternating current (AC) grid. In addition to advancing America’s climate goals, such an effort would spur economic development in rural areas, improve the grid’s energy efficiency, and bolster grid stability and security. This memo proposes several policy options the Department of Energy (DOE) and Congress can pursue to incentivize private-sector efforts to construct a national HVDC transmission network while avoiding permitting issues that have doomed some previous HVDC projects.
Challenge and Opportunity
The current American electricity grid resembles the roadway system before the Eisenhower interstate system. Just as roads extended to most communities by the early 1950s, few areas are unelectrified today. However, the AC power lines that cross the United States today are tangled, congested, and ill-suited to quickly move large amounts of renewable power from energy-producing regions with lower demand (such as the Midwest and Southwest) directly to large population centers with high demand. Since HVDC transmission lines lose less power than AC lines at distances > 300 miles, HVDC technology is the best option to directly connect the renewable generation needed to achieve net-zero emissions by 2050 with consumers.
There are few HVDC lines in the United States today. Those that do exist are scattered across the country and were not designed to facilitate renewable development. As a result, the United States is a long way from the integrated nationwide HVDC network needed to achieve net-zero emissions. Many recent attempts by the private sector to begin building long-distance HVDC transmission lines between renewable producing regions and consumers—such as Clean Line Energy’s proposal for an aboveground line that would have linked much of the Great Plains to the Southeast—have been unsuccessful due to a host of challenges. These challenges included negotiating leases with thousands of landowners with understandable concerns about how the project could alter their properties, negotiating with many local and state jurisdictions to secure project approval, and maintaining investor confidence throughout the complex and time-consuming permitting and leasing process.
However, a new generation of private developers has proposed an innovative solution that bypasses these challenges: the construction of an underground nationwide HVDC network alongside existing rail corridors. Unlike aboveground transmission built through a mosaic of property owners’ holdings, this solution requires negotiation with only the seven major American rail companies. This approach also takes advantage of the proximity of these already-disturbed corridors to many areas with high renewable-energy potential (Figure 1), does not add visual pollution to the aboveground landscape, and would weatherproof grid infrastructure against natural disasters.
Areas with high potential for wind and solar generation in the Great Plains and Southwest overlap with existing rail routes. Clockwise from left to right, routes of all seven class 1 railways (Source: Federal Railway Administration), heat map of average annual wind speed 80 meters aboveground (an indicator of the potential for wind energy generation; Source: National Renewable Energy
Importantly, these benefits apply to co-location next to highways or existing transmission lines as well. While this memo focuses on rail co-location, co-location next to other infrastructure should be simultaneously pursued by first removing regulatory barriers as was recently enacted in Minnesota and promoting the efficiencies gained from all forms of infrastructure co-location to relevant stakeholders.
In addition to the political considerations discussed above, several recent advances in HVDC technology have driven costs low enough to make HVDC installation cost-competitive with installing high voltage alternating current (HVAC) lines (see FAQ for more details). As a result, incentivizing HVDC makes sense from perspectives beyond addressing climate change. The U.S. electric grid must be modernized to address pressing challenges beyond climate, such as the need for improved grid reliability and stability. Because HVDC transmission, unlike AC transmission, can maintain consistent power, voltage, and frequency, constructing a HVDC transmission network is a promising way to support the large-scale incorporation of renewable sources into our nation’s energy mix while simultaneously bolstering grid stability and efficiency, and spurring economic growth in rural areas.
A nationwide HVDC network would also increase grid stability by connecting the four large interconnections that make up the shared American and Canadian power grid (Figure 2). Currently, the two largest of these interconnections—the Eastern and Western interconnections—manage 700 and 250 GW of electricity respectively. Yet, these interconnections are connected by transfer stations with a capacity of only about 1 GW. A recent study led by NREL modeled the economics of building a nationwide HVDC macrogrid that would tie the Eastern and Western interconnections together. The study concluded that such an investment would have a net benefit-to-cost ratio of 1.36 due to the possible ability for a nationwide HVDC grid to (i) shuttle renewable energy across the country as different power sources begin and end generation capabilities each day, and (ii) respond more nimbly to power outages in regions affected by natural disasters.
The four interconnections comprising the American and Canadian electricity grid: the Western, Eastern, ERCOT (Texas), and Quebec interconnections. Colors within the Eastern interconnection represent the territories of non-profit entities established to promote and enhance grid reliability within the territories shown on the map. These grid-reliability non-profits should not be confused with independent system operators (ISOs). (Source: National Electricity Reliability Council (NERC)).
Many private companies are already starting to realize an upgraded U.S. grid via new co-located HVDC transmission lines. For example, Minneapolis-based Direct Connect, with financial backing from American and international investors, has begun the permitting process for SOO Green, a buried HVDC line along a low-use railway that will link the Iowa countryside to the Chicago area. Direct Connect estimates that the SOO Green HVDC link will spur $1.5 billion of new renewable-energy development, create $2.2 billion of economic output in Iowa and Illinois, and create thousands of construction, operation, and maintenance jobs. Although geographically short, the line is also significant because it will join the Midwest (MISO) and PJM Independent System Operators (ISOs), two of the seven regional bodies that manage much of the United States’ grid. The combined territory of the MISO and PJM ISOs stretches from the wind-rich Great Plains to demand centers like Chicago and the Northeast corridor. Facilitating HVDC transmission in this project will allow renewable power to be efficiently funneled from regions that produce lots of energy to the regions that need it.
The Champlain Hudson Power Express joining NY-ISO and the Quebec interconnection is another example demonstrating the promise of buried, co-located HVDC transmission. The project is projected to save New York homes and businesses $17.3 billion over 30 years through wholesale electricity costs by supplying Quebec hydropower to New York City. The line is currently permitted and under construction and when finished will stretch 339 miles underneath Lake Champlain & the Hudson River and underground through New York State to a converter in Astoria, New York City. The terrestrial portions will be built alongside existing railroad and highway right of ways.
While these two projects and the handful of other buried and co-located HVDC lines currently in permitting, permitted, or under construction are important projects, far more transmission needs to be built to meet the U.S.’ climate goals. As a result, scaling underground co-located HVDC rapidly enough to achieve the transmission required for net-zero emissions in 2050 requires federal action to make these types of lines a more attractive proposition. The policy options outlined below would encourage other privately backed HVDC projects with the potential to boost rural economies while advancing climate action.
Plan of Action
The following policy recommendations would accelerate the development of a national HVDC network by stimulating privately funded construction of underground HVDC transmission lines located alongside existing rail corridors. Recommendations one and two are easily actionable rule changes that can be enacted by the Federal Energy Regulatory Commission (FERC) under existing authority. Recommendation three proposes that the DOE Grid Deployment Office should consider rail co-location in its NIETC designation process. Recommendation four is a more ambitious proposal for federal tax credits which would require Congressional action.
Recommendation 1. FERC should issue a new order that requires ISOs to review new renewable generation and new transmission projects on separate tracks to decrease permitting time delays.
New merchant transmission projects (transmission lines developed by private companies and not by rate-regulated utilities) such as SOO Green and the Champlain Hudson Power Express are often reviewed by ISOs in the same interconnection queue as new generation projects. Due to the high volume backlog of new, often speculative, renewable generation project proposals, transmission projects can wait for years before they are reviewed. This then creates a vicious cycle holding back the clean-energy sector: a delayed review of the transmission capabilities required by new renewable-generation projects ultimately chills the market for generation projects as well.
FERC recently reformed its regulations for interconnection requests (FERC Order 2023). FERC’s expectation is that switching to a first-ready, first-served system, clustering projects together in groups to be approved en masse, and increasing both submission deposits and withdrawal penalties should prevent speculative submissions and reduce approval times. Order 2023’s removal of the reasonable effects standard (i.e. hardening deadlines for transmission providers to complete impact and interconnection studies) as well as allowing multiple generation projects to share interconnections should also reduce wait times.
FERC Order 2023 is a laudable first step to address interconnection backlogs; however there is a chance that reality may not match FERC’s expectations. Therefore, FERC should continue to improve the regulatory regime in this area by issuing a new order that requires ISOs to review new renewable generation and new transmission projects on separate tracks. Such a rule would greatly decrease the permitting time for co-located HVDC transmission projects.
Recommendation 2. FERC should encourage ISOs to re-examine older transmission interconnection rules that are appropriate for AC transmission regulation but do not take into account the benefits of HVDC. External capacity rules, which govern the ability to trade power across ISO boundaries, are a specific area in need of action because they can create barriers to building HVDC transmission across ISO boundaries.
One granular example is described in SOO Green’s complaint to FERC about the PJM ISO (FERC Docket EL21-103). Under current rules set by the PJM ISO, energy generated outside of the PJM service area can participate in PJM’s energy marketplace only if grid operators can directly dispatch that energy. This rule was established because grid operators cannot otherwise control the free flow of power through cross-ISO AC transmission, but it results in the exclusion of external, non-dispatchable renewable energy resources from PJM’s market. However, HVDC lines offer the capacity to schedule current flow at pre-agreed upon times, allowing PJM to directly control transmission and negating the need to control energy dispatch. PJM should look for solutions to this issue from ISO New England and NYISO’s external capacity rules, which have enabled them to import external capacity through HVDC lines into their territories.
FERC should encourage PJM ISO to revise its external capacity rules to enable less burdensome pathways to market participation for external resources connecting through HVDC transmission. PJM can look to ISO New England and NYISO as examples.
Recommendation 3. As the DOE proposes possible National Interest Electric Transmission Corridors (NIETCs), it should pursue co-location with rail, highways, and existing transmission whenever possible.
Previous attempts by Congress to establish greater federal power over transmission siting and permitting have revolved around the DOE’s authority to designate areas as NIETCs. NIETCs are regions that the DOE identifies as particularly prone to grid congestion or transmission-capacity constraints. Creation of NIETCs was authorized by the Federal Power Act (Sec. 216), which also grants FERC the authority to supersede states’ permitting and siting decisions if the rejected transmission project is in a NIETC and meets certain conditions (including benefits to consumers (even those in other states), enhancement of energy independence, or if the project is “consistent with the public interest”). This “backstop” authority was created by the Energy Policy Act of 2005, was recently reformed in 2021’s Infrastructure Investment and Jobs Act, and was further clarified by FERC Order 1977 through the creation of a landowner bill of rights.
While a laudable attempt to spur transmission investment and respect landowners, the revised authority in its current form is unlikely to lead to the sudden acceleration of transmission siting and permitting necessary to achieve the United States’ climate goals. This is because NIETC designation, as well as any FERC action under Section 216, (i) trigger the development of environmental impact statements under the National Environmental Policy Act (NEPA), and (ii) may still engender strong political opposition by states and landowners whose properties would be part of proposed routes but would not receive any benefits from transmission investments.
The DOE recently released a list of proposed NIETCs, which if designated would be the first corridors in the country. Some of the NIETCs were designed with co-location in mind, for example the NY – NE ISO link is located alongside roadways and mid-Atlantic routes are co-located with already existing transmission. However, rail co-location was not mentioned, yet the DOE’s proposed NIETCs overlap with the nation’s class 1 railways in many locations, especially in the Southwest and Midwest. In order to speed up the NEPA review process and reduce NIETC opposition, the DOE should i) consider discussing rail co-location in addition to highway and transmission infrastructure during the upcoming public engagement process, and ii) promote the possibility of co-location to transmission developers in all relevant NIETCs after they are officially designated.
Recommendation 4. Create federal tax credits to stimulate domestic manufacturing and construction of HVDC transmission, including HVDC lines along rail corridors.
Congress should create two federal investment tax credits (ITCs) to stimulate a market for American HVDC lines. One tax credit should be directed to American manufacturers of cross-linked polyethylene (XLPE) which serves as the material for the liner in HVDC cables. Since most producers are based in Asia, such an incentive would help ensure a reliable domestic supply of this essential material. The second tax credit should be directed to HVDC line developers who propose new regionally significant transmission projects that join ISOs or the three interconnections together. Since the United States’ grid grew in an ad-hoc, decentralized way, a Congressional tax credit of this type would further build on FERC’s recent order 1920, which requires transmission providers to think more big picture, long-term and strategically by developing a long-term regional transmission plan that covers at least the next 20 years.
Such a tax credit was recently introduced into Congress. In 2023, Sen. Martin Heinrich (D-NM) proposed a 30% ITC for “regionally significant” transmission projects which was also introduced in a companion bill by Rep. Steven Horsford, (D-Nev). Their Grid Resiliency Tax Credit Act would provide a 10-year credit for projects that begin building before 2033. The bill is currently under discussion by the Senate Finance committee and should be amended to also include a tax credit for XLPE manufacturers. The expiration of parts of the Tax Cuts and Jobs Act in 2025 will focus attention on tax legislation in the next Congress and offer a legislative window for transmission construction and component manufacturing tax credits. In the potentially acrimonious debate about the future of tax policy, transmission tax credits could be a rare point of agreement and an opportunity for both parties to invest in American manufacturing and infrastructure growth.
Conclusion
A significant increase in transmission capacity is needed to meet the United States’ efforts to achieve net-zero emissions by 2050. Creating a nationwide HVDC transmission network would not only greatly aid the United States’ efforts to address climate change, it would also improve grid stability and provide sustained economic development in rural areas. Direct Connect’s SOO Green project and the Champlain Hudson Power Express are examples of innovative solutions to legitimate stakeholder concerns over environmental impacts and individual property rights – concerns that have plagued previous failed efforts to construct long-distance HVDC transmission. The federal government can stimulate private development of HVDC infrastructure via rule changes to the transmission interconnection process by FERC, promoting rail co-location in the NIETC design and designation process, and by passing new HVDC transmission-specific tax credits.
This idea was originally published on May 5, 2022; we’ve re-published this updated version on November 12, 2024.
This action-ready policy memo is part of Day One 2025 — our effort to bring forward bold policy ideas, grounded in science and evidence, that can tackle the country’s biggest challenges and bring us closer to the prosperous, equitable and safe future that we all hope for whoever takes office in 2025 and beyond.
Direct current (DC) runs continually in a single direction. DC became the standard current for American electricity early in the development of the U.S. grid, due largely to Thomas Edison’s endorsement. However, at that time DC could not be easily converted to different voltages, making it expensive and difficult to supply power to consumers since different end uses require different voltages. Alternating current (AC), or current that reverses direction at a set frequency, could be converted to different voltages and had its own prominent proponent in Nikola Tesla. Due to the lower costs associated with AC voltage conversion, AC became the technology of choice as city-wide and regional scale power plants and transmission developed in the early 20th century.
In general, AC transmission is more cost-effective for lines that cover short distances, while HVDC transmission is ideal for longer projects. This is mainly due to the physical properties of DC, which reduce power loss when compared to AC transmission over long distances. As a result, DC transmission is ideal for moving renewable energy generated in rural areas to areas of high demand.
An additional factor is the need for HVDC lines to convert to AC at the beginning and end of the line. Due to the history discussed above, most generation and end-use applications respectively generate and require AC power. As a result, the use of HVDC transmission usually involves two converter stations located at either end of the line. The development of voltage source converter (VSC) technology has significantly shrunk the land footprint required for siting converter stations (to as little as ~1 acre) and reduced power loss associated with conversion. While VSC stations are expensive (costing $100 million or more), the expenses of VSC technology begin to be balanced by the savings in efficiency gained through HVDC transmission at distances above 300 miles.
Additional factors that lower the costs for underground rail co-located lines are (i) that America’s fracking boom has led to significant technological advances in horizontal drilling, and (ii) the wealth of engineering experience accumulated by co-locating much of America’s fiber-optic network alongside roads or railways.
The current backlog is estimated to be 30 months or more, according to SOO Green’s first FERC complaint.
Yes, FERC has the authority to issue these proposed rule changes under Section 206 of the Federal Power Act (FPA), which states:
“Whenever the Commission, after a hearing held upon its own motion or upon complaint, shall find that any rate, charges, or classification demanded, observed, charged, or collected by any public utility for any transmission or sale subject to the jurisdiction of the Commission, or that any rule, regulation, practice, or contract affecting such rate, charge, or classification is unjust, unreasonable, unduly discriminatory or preferential, the Commission shall determine the just and reasonable rate, charge, classification, rule, regulation, practice, or contract to be thereafter observed and in force, and shall fix the same by order.”
FERC has the authority under Section 206 of the FPA to issue the proposed rule changes because the classification of HVDC transmission as generation by ISOs (recommendation 1) and ISO rules governing external capacity (recommendation 2) are practices and rules that affect the rates charged by public utilities.
Large-scale HVDC transmission projects do not meet the categorical exclusion criteria under the National Environmental Protection Act (NEPA) for transmission construction (<20 miles in length along previously disturbed rights of way; 10 C.F.R. 2021 Appendix B). As a result, environmental impact statements are required to be created by all relevant federal agencies (possibly including the Environmental Protection Agency as well as the Departments of Commerce, Energy, the Interior, Labor, and Transportation). All relevant state and local permitting requirements also apply.
To take advantage of the political momentum granted to the newly created DOE Undersecretary of Infrastructure and the relevant expertise within FERC, the new undersecretary, in partnership with FERC’s Office of Energy Policy and Innovation (OEPI), should together lead the collaborative effort by DOE and FERC to work with states, utilities, class 1 railways, and interested transmission developers. To expedite transmission development, efforts to bring representatives from these stakeholders to the table should begin as soon as possible. Once a quorum of interested parties has been established, the Infrastructure Undersecretary and FERC OEPI should facilitate the establishment of regular “transmission summits” to build consensus on possible transmission routes that meet the concerns of all parties.
When necessary, the Undersecretary of Infrastructure and OEPI should also include other relevant agencies and offices in these regularly scheduled planning summits. Possible DOE offices with valuable perspectives are the Office of Clean Energy Demonstrations; the Office of Energy Efficiency, and Renewable Energy; and the Joint Office of Energy and Transportation (co-managed by the DOE and Department of Transportation (DOT)). Possible additional FERC offices include the Office of Energy Market Regulation and the newly created Office of Public Participation. Other relevant agencies include the National Railway Administration within DOT, the Department of Labor, and the Department of the Interior (since lines built in the West are very likely to cross federal land).
Because HVDC transmission is a young industry, coordination among all these agencies and all relevant stakeholders for rail co-located HVDC transmission to proactively develop a clear regulatory framework would greatly aid the maturation of HVDC transmission in America.
Tax credits for HVDC transmission projects and components are a logical extension of existing renewable energy tax credits designed to strengthen the positive economic effects of renewable energy growth in many rural American communities. The original renewable energy tax credits within the Energy Policy Acts of 1992 and 2005 were passed with large, bipartisan margins (93 – 3 and 85 – 12). A focused advocacy effort that unites all stakeholders who stand to benefit from these new proposed tax credits (including rural communities where new renewable generation will be spurred, railroad companies, HVDC developers and manufacturers, urban centers with high renewable demand) would generate the needed bipartisan support.
China leads the world in installed point-to-point HVDC transmission. China also recently opened the world’s first HVDC grid. Behind China, the European Union has made extensive investments in deploying point-to-point HVDC lines and is planning to develop an integrated European grid by requiring EU members to meet a 15% interconnection target (meaning that each country must be able to send 15% of its electricity to neighbors) by 2030. India, Brazil, Australia, and Singapore have opened or are planning ambitious HVDC projects as well.
Increasingly, U.S. national security priorities depend heavily on bolstering the energy security of key allies, including developing and emerging economies. But U.S. capacity to deliver this investment is hamstrung by critical gaps in approach, capability, and tools.
The United States should continue to pursue its commitment to reduce greenhouse gas emissions by 50–52% from 2005 levels by 2030 and achieve net-zero emissions by 2050.
While the National Labs have a strong workforce, they also face challenges that make it difficult to recruit and retain the people they need to continue leading the world’s scientific research.
If FESI is going to continue to receive Congressional appropriations through DOE, it should be structured from the start in a way that allows it to be as effective as possible while it receives both taxpayer dollars and private support.