Renewable energy resources are inaccessible without expanding the transmission grid.
But regulations make it a lengthy, difficult process to construct new transmissions lines.
Energy leaders discussed the obstacles for doing business in the West during the 2008 Western Governors' Association conference Monday.
The best locations to collect wind and solar power are the farthest from the populations that need electricity, said Jeff Sterba, chairman, president and CEO of PNM Resources. The transmission constraints limit the nation's ability to diversify its energy portfolio.
"I think we're going to have to create a new definition of what affordable means," he said. "The era of cheap energy is over."
Another challenge is to reduce carbon emissions and meet the growing demand for energy.
Reaching this goal also requires a mixture that includes solar, wind, geothermal and even nuclear energy. By 2030, the energy industry must produce 100,000 additional megawatts of electricity to support population growth.
Technologies such as carbon sequestration provide new options for using coal, but these methods also must overcome transmission challenges. Sterba said lawmakers need to evaluate infrastructure gaps, as well as regulatory strategies that encourage the development of new technologies.
Private and public investment have decreased, even though the demand for energy continues to grow.
He added that governors also should consider the overall benefits.
Rhode Island Gov. Don Carcieri vetoed renewable energy legislation because it did not require developers to construct projects within Rhode Island.
John Fielder, president of Southern California Edison, said 16 percent of his customers use renewable energy. The goal is to reach 20 percent by 2010. But it's an unrealistic expectation because of missing links in the transmission grid.
The company also is spending $25 million to explore two sites in Utah and Wyoming for carbon storage. It will still take time to implement the expensive strategy, but energy leaders must understand how underground injection works and how it could react years later.
And nuclear energy must become part of the overall discussion.
"It's going to be one of the best resources in the West to provide carbon-free electricity," Fielder said.
California also has a unique energy rate policy. The disincentive known as decoupling means that companies do not profit from energy sales.
"So we lose nothing by encouraging customers to use less," he said. "It seems like a funny model when you are in the business of selling electricity."
But it drives customers to become more energy-efficient. Fielder added that California's energy demand remains flat on a per capita basis.
David Sokol, chairman and CEO of MidAmerican Energy Holdings Company, said global warming also must fit into long-term energy planning. Ignoring the issue means that utility rates could double. And even during the ongoing debate of the past seven years, demand grew by 1.5 percent each year.
Changing the model isn't easy, but it can be done.
"We believe Americans can reduce emissions 70 percent by 2050," he said.
Reducing transmission roadblocks would help companies feed demand and use more renewable sources. Another helpful factor would be an eight- to 10-year grace period to develop clean energy technologies instead of demanding large emission reductions now. He said he does not oppose cap-and-trade regulations as long as there is an intelligent timeframe. Any tax money collected from carbon emissions also should go toward clean technology research.
The nation is in a period of transition, and it will take time to adjust, said Michael Niggli, COO of San Diego Gas and Electric Company.
