Renewable energy actually reduces electricity prices for businesses and consumers. A new analysis [PDF] conducted by Synapse Energy Economics on behalf of Americans for a Clean Energy Grid found that adding more wind power to the electric grid could reduce wholesale market prices by more than 25 percent in the Midwest region by 2020 — $3–$10 per megawatt hour (MWh) in the near term, and up to nearly $50 per MWh by 2030. Those savings would be passed along to consumers through lowering retail electricity prices by $65–$200 each year.

The reason for this is surprisingly intuitive when you understand that electricity prices are based on the marginal (or operating) cost of the power plant generating the power. The marginal cost is essentially the cost of fuel, be it coal, natural gas, wind, etc. Since the fuel cost of renewable resources like wind and solar is zero, adding renewable resources always pulls down the market price of all the electricity sold in the market whenever it is available.

Infrastructure to connect renewable energy is a great investment. The Synapse analysis also found that new transmission is needed in the Midwest region to tap wind power. New high-voltage transmission lines are large infrastructure investments, but are the smallest part of a typical electricity bill — less than 10 percent, according to the U.S. Department of Energy. Generation is much more expensive, comprising two-thirds of the average bill. Synapse found that new transmission to connect more zero-fuel-cost renewable energy would save customers more than double the cost of building it. Again, it makes plain sense that transmission to connect cleaner and cheaper sources of power is a good deal for customers.

Integrating variable renewable resources is easier and cheaper than we thought. There are challenges to integrating any kind of power into the grid, but the challenges for wind are minimal and well worth the effort. Joe Gardner, executive director of real-time operations for the Midwest Independent Transmission System Operator (MISO, the regional grid for all or part of 12 Midwestern states), told his board of directors in February that “MISO does not currently anticipate significant operational management issues in the next several years.” This statement is especially remarkable when one considers the explosive rate of growth in wind on the MISO system: less than 1000 MW in 2008; 11,000 MW today; and more than 14,000 MW by the end of 2012 — about 10 percent of all generation on the system.

Why has integrating so much wind so fast been relatively painless?

• Geographic diversity: The wind blows at different times in different places across MISO’s 12-state footprint, smoothing out the variation at any single location.

• Better forecasting tools make it easier to accurately predict wind-turbine output.

• Transmission expansions and upgrades are being approved and constructed, giving operators greater flexibility to manage all resources and consumers more choices and competition.

• Grid operators around the country and the globe are gaining experience and learning from each other as they successfully integrate ever larger amounts of renewable energy into their systems.

America has far more than enough renewable energy resources to meet its entire electric demand. World-class renewable resources from wind in the Great Plains to solar in the Southwest could power the whole country more than a dozen times over. The fuel for these power plants, wind and sunlight, are unlimited and will always be free. State renewable energy standards once considered ambitious at 10 to 40 percent now look modest in light of recent growth. Given our current understanding of renewable energy resources, technology, cost, and integration, it’s now realistic to envision a future where renewable resources provide far higher shares of America’s electric generation needs — 80 to 90 percent or more.

The only remaining barriers to achieving such massive increases in renewable energy use are a lack of understanding and a lack of political will. We are overcoming the former as we discover the truth about renewable energy. It’s inexpensive, reliable, abundant, all-American — and yes, it’s still clean.

The United States is fortunate to have some of the richest and most diverse renewable energy resources in the world — wind in the Great Plains, solar in the Southwest, and even more wind off the Atlantic coast. As much electricity could be generated every year from these resources as the United States consumes as a whole — several times over. The trick is getting that energy to market.

The electric power transmission network in this country was not designed to reach deep into the lightly populated regions of the Heartland and arid Southwest, or to connect resources offshore, yet those areas are where the best renewable resources exist. Failing to build power lines to bring that energy to market would be like finding a cure for cancer and not delivering it to patients.

The Federal Energy Regulatory Commission (FERC) is expected tomorrow to issue a new rule on transmission planning and cost allocation that will support regional efforts to modernize the electric power grid and bring these low-cost renewable resources to market.

While FERC’s rule will be hundreds of pages long, it is likely to focus on just two topics: how regions plan and pay for transmission. For decades, planning and cost allocation have been the graveyards where hopes of building modern regional grids capable of delivering inexpensive clean power to customers have gone to die.

Cost allocation — the formulas that decide how ratepayers share the costs of these large investments in our infrastructure — has traditionally been simple and straightforward: Everyone pays according to how much they benefit. FERC’s new rule will not change that; it will simply help regions account for all the benefits that transmission provides — including, for the first time, the benefits of meeting state clean energy standards. The agency has signaled that its guiding principle will be to ensure that those who do not benefit from transmission do not pay for it.

That is exactly the right approach. Any other path would discourage investment in the grid and with it the resource development, jobs, and access to cleaner and cheaper forms of power it would support.

Yet some people remain stubbornly immune to the allure of a grid that would give customers everywhere access to abundant and competitively priced renewable energy. A small but powerful group of utilities are determined to protect their own generation capacity to competition, and they are bellyaching about the cost to consumers of these transmission investments.

It’s a familiar — and unpleasant — tactic to scare consumers and businesses into believing they can’t afford a better, cleaner, and cheaper energy system, but it’s a tactic that in this case has absolutely no basis in reality. Transmission is the smallest component of any electricity bill — equaling about 7 percent on average. No matter what state you live in, transmission makes up a sliver of the total cost of electricity.

Generation makes up more than 65 percent, almost two-thirds, of a typical electric bill. What drives customer costs is electric generation from utility-owned power plants.

It’s easy to see why these utilities are opposed to transmission reforms and are supporting a transmission bottleneck of their own: to keep collecting billions in unnecessary costs every year from customers trapped in congested and uncompetitive regions. Many Americans currently do not have access to competitive energy supplies. Many regions, including much of the Northeast and Mid-Atlantic, suffer from high congestion costs. And incumbent utilities benefit from the inflated electric bills of ratepayers in these markets. Transmission has the power to open up uncompetitive energy markets to competition from cheaper forms of energy like wind.

These utilities support a bill deemed the “Electric Transmission Customer Protection Act” (S.400), crafted by Sens. Bob Corker (R-Tenn.) and Ron Wyden (D-Ore.), that would have a stifling effect on grid investment and access to clean energy.

The National Clean Energy Transmission Initiative and a group of more than 80 forward-thinking utilities, clean energy developers, manufacturers, environmental advocates, and labor unions are rejecting the divisive and self-serving approach that has kept Americans waiting far too long for the efficient and modern electric grid they deserve. Together, we sent a letter to Senate leaders asking them to oppose this bill.

We look forward to FERC’s final rule to end the disputes over aligning costs and benefits of transmission development. While tomorrow’s FERC’s ruling will not likely be the last time we see monopoly utilities cry wolf over transmission policy, it will be nice to close one chapter on this trumped up “debate.”

The Wall Street Journal recently published an editorial, “The Great Transmission Heist,” that took a swing at renewable energy. That’s not surprising. What is surprising is that the piece wholly abandoned not only the facts, but fundamental market principles related to the energy sector. The Journal attacked a new Federal Energy Regulatory Commission (FERC) proposal [PDF] that would create a more fair and rational framework for modernizing the nation’s electric grid.

Specifically, the guidelines would ensure that everyone who benefits pays, regardless of arbitrary boundaries and proposals generated by various regions. Critics of the new rule, particularly incumbent utilities that have an interest in keeping their regions closed off from new transmission, have put forth a number of misleading and inaccurate arguments in their efforts to defend the status quo. The Journal bought them hook, line, and sinker.

The Bush Administration’s 2002 National Transmission Grid Report [PDF] accurately described the modern electric grid as “an interstate highway system for wholesale electricity commerce.” Like highways, transmission networks enable markets to function efficiently, delivering better reliability, increased competition, and lower prices to consumers. Transmission is also essential to developing America’s vast renewable energy resources. What FERC is proposing is an incremental increase in the scale and scope of transmission planning and cost sharing to advance critical national energy goals.

Contrary to what the Journal’s editorial claims, ratepayers have traditionally shared the cost of transmission because a reliable and efficient grid benefits everyone. Texas became the national leader in wind energy by adopting transmission policies like those that FERC has proposed: developing lines for renewable energy and spreading their costs among all ratepayers. The state’s grid operator estimates that its $4.9 billion transmission investment will save consumers $1.7 billion annually in fuel costs. Every study of the costs and benefits of major investments in transmission infrastructure in every region of the country has reached the same conclusion: grid investments pay for themselves in a few years. Implementing the Texas model across the nation would produce similar benefits.

Support for expanding and modernizing the grid is broad. Twenty-eight governors signed on to the Governors Wind Energy Coalition letter supporting transmission. More than 60 organizations and businesses, ranging from renewable energy developers to the Sierra Club and the AFL-CIO, signed the Energy Future Coalition‘s National Clean Energy Smart Grid Vision statement in 2009, which called for new federal policies to expand and modernize the electric grid.

So, who would oppose these critical investments? Incumbent utilities, that’s who. Every member of the group that is opposing the modernization of the grid, the so-called Coalition for Fair Transmission Policy (CFTP), stands to lose quite a bit if their regional monopolies are exposed to competition from cheaper and cleaner power sources. Most of the CFTP utilities serve constrained markets with high generation prices, including Michigan, New Jersey, Connecticut, and Massachusetts. Far from being a threat to the free market, FERC’s proposed transmission policies would force competition in these regions and protect consumers from power plant owners who want to charge them monopolistic prices for electricity.

And what exactly are these groups and the Journal supporting? They are supporting a system that’s broken and congested. A system that’s inhibiting regional planning that could build more transmission to eliminate congestion. A system that’s limiting the growth of renewable resources. This is why FERC has decided to intervene and level the playing field.

Northeast states want to keep their electric markets closed to protect local developers of renewable generation from cheaper competition. By distorting support for local economic development into protectionist policies, Eastern governors are in the unenviable position of maintaining high electricity prices for all consumers to protect the competitiveness of a select few local generation projects.

Such policies are bad for both consumers and renewable energy developers. Numerous studies have shown that new transmission would benefit development of all renewable resources, while bringing high electricity rates down. The National Renewable Energy Lab’s Eastern Wind Integration and Transmission Study predicted that transmission would enable rapid development of off-shore wind in the East — equivalent to hundreds of Cape Wind projects — with power flowing both east and west according to the different profiles of on-shore and off-shore wind resources. Grid operators in the Eastern U.S. found that transmission upgrades necessary to achieve 20 percent wind energy would pay for themselves in less than seven years, while slashing electricity prices for Northeast and Mid-Atlantic consumers — even though the vast majority of the transmission lines studied would be built in the Midwest.

Americans overwhelmingly support developing their vast domestic renewable energy resources to create jobs, stimulate growth of new industries, reduce dependence on imported fuels, and address the urgent environmental problems we face. A robust electric transmission grid is essential to achieving these goals. If local monopolies prevent competition from renewable energy by blocking transmission reforms, they profit at the expense of consumers and the nation. That doesn’t sound very pro-market — or patriotic — to us.