Fixing the grid

NEW YORK (Fortune) -- Here's an idea that won't spark much controversy: To provide clean, reliable and affordable energy, and to effectively fight global warming, America needs to upgrade its electricity grid.

The GridWise Alliance, a coalition to promote a stronger grid, counts among its members the nation's big utility companies, as well as GE (Charts), IBM (Charts), the Tennessee Valley Authority and the U.S. Department of Energy.

But just try to build a new high-capacity transmission line - and you can't upgrade the grid without new power lines - and you'll get not only controversy, but protests, lawsuits, efforts to sidestep the regulatory process and acts of Congress, if opponents get their way.

Some of the opposition comes from people who call themselves environmentalists - even though new power lines will enable development of renewable energy sources, particularly wind power.

One case in point: The proposal by a company called the New York Regional Interconnect, or NYRI, to build a 200-mile transmission line from Utica to Middletown, N.Y., to bring more electricity to New York City and its suburbs.

The developers say the power line is needed to improve the grid's reliability in New York. They also say it will enable cleaner power, with fewer greenhouse gas emissions.

"You can't have big wind projects and hydro projects in New York City," says Bill May, the NYRI's project manager. "Transmission is the resource that connects rural areas where renewable energy can be generated with urban areas where electricity is needed."

In truth, there's no guarantee that the electricity moving from upstate to the city would come from renewables; it could come from burning coal. But better transmission makes it easier for wind and solar power sources to compete against fossil fuels. Once wind turbines are built, they can generate electricity at a lower cost than fossil-fuel plants.

"In essence, the transmission network defines the marketplace for buying and selling power: If it is robust and flexible, so is the market for power. If it is limited, congested and rigid, the market will be equally rigid," says Michael Powers, the owner of a small solar power firm and a board member of Global Energy Network Institute, a non-profit research group based in San Diego.

The NYRI planners say that about 80 percent of their route runs on existing utility or railroad corridors. They applied for a permit at the state's Public Service Commission, whose job it is to analyze the options and decide whether to grant a permit for the power line.

Then trouble arose. State legislators enacted a law designed to block the power line by denying the developers the ability to use the power of eminent domain to buy property along the way. In February, a Democratic congressman from upstate New York named Maurice Hinchey introduced a bill of his own to prevent the Federal Energy Regulatory Authority from stepping in if the state denies NYRI its permit. The 2005 Energy Policy Act grants authority to the federal government to overrule states and localities - precisely because of the difficult of getting new power lines built.

Hinchey declared: "No one wants massive towers or power lines cutting through the Upper Delaware Scenic River Valley or their backyard for that matter."

Ah yes, the backyard. This sure sounds like a classic NIMBY (not in my backyard) problem. Everyone wants electricity. Everyone's ready to blame the power company when the lights go out. Everyone favors renewables. Just so long as the 130-foot towers don't go anywhere near anyone's house, or farm, or park, or school.

This isn't just a New York issue, of course. In northern Virginia, a plan by Dominion Power to build a 240-mile power line has run into a buzzsaw of opposition, including a lawsuit by one of the region's most powerful developers, whose family lives nearby. American Electric Power has also met initial resistance as it seeks to develop a major transmission line from West Virginia through Maryland and Pennsylvania to New Jersey.

To be sure, these billion-dollar construction projects may - or may not - have make sense as planned. Other solutions to relieving grid congestion may be preferable, including energy-efficiency programs, pricing strategies to reduce demands during peak periods or more distributed or localized generation, such as small-scale solar and wind projects. The Bonneville Power Administration, a federal agency that delivers electricity to much of the Pacific Northwest, has found smart and lower-cost ways to upgrade its grid that you can read about in an article published by the Natural Resources Defense Council.

But there's no question that some new power lines are needed, and the role of state and federal agencies is to decide where - balancing local objections against the broader need for clean, reliable and low-cost power. The NYRI, at the behest to state regulators, is now looking at alternate routes.

"Why don't the legislators trust the regulatory process?" asks Len Singer, general counsel to NYRI. "It's up to us to prove our case. What are they afraid of?"

It's a good question. The NYRI's opponents charge the power lines will mean "unprecedented environmental, economic and community damage," higher electricity prices, hazards to public safety, and disruption of children's camps, schools, playgrounds, historic properties and archaeological sites.

They may well be right. But if they are, stopping the power line should not take state laws targeted at one company, let alone an act of Congress.