Humza Khan, Northwestern University
Energy is foundational to modern society, with the scramble to secure this resource driving large parts of history. However, at a time when the U.S. is producing more oil than ever and renewable technology is rapidly advancing, it is ironic that greater energy production and transmission are severely needed.
The existing power grid is facing a forecasted 128 GW of additional demand in the next five years, a 15% increase from 2024, following the passage of three of the Biden Administration’s signature bills: the Creating Helpful Incentives to Produce Semiconductors for America Act (CHIPS), the Inflation Reduction Act (IRA), and the Infrastructure, Investment and Jobs Act (IIJA). These acts helped spur a resurgence in domestic manufacturing, with semiconductor fabrication and other manufacturing facilities putting significant pressure on the grid. Additionally, the boom in AI has spurred a massive build-out of data center capacity, sending demand skyrocketing in regions like Northern Virginia, where construction has been most dominant.
Other factors, like the shift toward electric-powered household devices, are projected to grow in scale as legacy residential systems, primarily in the Northeast, are phased out. Additionally, modern power plants and transmission infrastructure are needed to support decarbonization goals as coal and oil plants shut down. The question is then, despite the technology, government support, and market demand, why have energy projects not materialized on the scale needed?
The answer is permitting and zoning, which is by far the most important constraint on the development of new power generation and transmission facilities. Potential projects have to satisfy a plethora of federal regulations, causing massive delays and driving up costs. One of the primary impediments is the National Environmental Policy Act (NEPA), which requires impact assessments in the thousands of pages, adding years to project timelines or simply stopping them altogether. Even environmentally beneficial projects like clean energy are subject to these rules. In recent years, this problem has only worsened as projects that use new federal incentives (such as production tax credits through the IRA or loans through the Loans Program Office (LPO) in the Department of Energy) are subject to even stricter permitting rules.
Stringent permitting rules or moratoriums on various sources of energy also exist on the state and local level. Dozens of counties have banned wind and solar entirely, and more across the country heavily regulate wind turbines or solar panels through size and height restrictions or noise limitations. These restrictions prevent the construction of new power plants in locations oftentimes perfectly suited for that type of energy. This ranges from bans on wind in the Great Plains and windy Northeast Atlantic coast to solar bans in sunny California and Arizona. Many states also have bans on nuclear energy and actively try to shut down pre-existing plants, being successful at sites like Indian Point in New York. The loss of nuclear energy is especially damaging to utilities as it provides baseload power: energy generation that is always on to meet the continuous demand for power. Baseload power plays a key part in smoothing out the variability of renewables. The combination of these rules and regulations has created a problem so acute that there is currently more energy capacity waiting to be approved than active on the grid.
The situation is even direr for transmission. Transmission refers to the nationwide network of substations and power lines that deliver electricity to consumers while balancing the grid—an essential mechanism for managing the variability of renewable energy sources. Recent years have seen rolling blackouts in Texas because of cold snaps and hurricanes. In other parts of the country, existing transmission is aging and already insufficient to meet current demand, resulting in higher prices. The infamously high cost of electricity in New York City is a result of this, as overburdened transmission lines bottleneck power delivery and drive up electricity prices. These problems will only worsen, as the U.S. is expected to need three to four times its current energy capacity by midcentury to meet demand. Again, the root problem is permitting, but the interstate nature of transmission drives further delays. A typical project will require permission from the federal government, each state that the line passes through, and sometimes from localities. The permitting process is only getting worse, as the median connection time has risen from less than two years to nearly five years.
Nonetheless, recent progress has been made. The Federal Energy Regulatory Commission (FERC) recently finalized a rule to require interstate transmission planning, and there have been attempts to reach various permitting reform deals, such as the recent Energy Permitting Reform Act of 2024 (EPRA). ERPA aimed to ease regulations on both clean and fossil energy while supporting critical minerals mining and transmission infrastructure. However, it ultimately fell apart due to opposition from Democrats over environmental concerns and Republicans over state control issues.
Despite ERPA’s failure, its core ideas remain relevant. To support these ideas, federal policymakers should centralize permitting authority within a single agency, such as FERC for transmission, and empower it to issue categorical exclusion for key projects, essentially a broad exemption from most environmental review. Congress could couple this with by-right permitting zones and exemptions for clean energy, similar to already existing exemptions for oil and gas, as well as expanding the use of transmission corridors exempt from state and local approval. Another key reform would be to create a judicial shot clock for decisions, putting an upper limit on how much time can be spent on a decision, granting certainty to developers.
However, given the gridlock of the federal government, movement from the bottom-up is also necessary. Localities are ill-suited regulators in this space, as energy projects create broad benefits but localized disruptions. When multiple localities reject projects based on local concerns, statewide progress stalls, causing harm to everyone.
States, on the other hand, are well placed to accelerate projects by centralizing permitting and zoning decisions like Illinois has, preventing local governments from blocking critical infrastructure. States can also limit community hearings and public input processes, as well as narrow the scope of lawsuits for new projects. This is likely to be controversial but is empirically successful in countries like Spain, a country with far lower construction costs and quicker timelines than the U.S. Hearings and lawsuits are often hijacked by special interest groups or particularly motivated local opponents drawing out the process as long as possible, many times with the explicit goal of driving up costs to kill the project.
Historically, nations do everything in their power to avoid energy scarcity, whether it be by war, trade, or innovation. This time, however, the U.S. is heading straight into a self-inflicted energy crisis caused almost entirely by red tape. From decarbonization to the nascent manufacturing revival to national security, nearly every national priority depends on affordable, reliable energy. There is no better time than now to act and secure a stable, resilient energy system.