A growing appetite in Congress to constrain carbon dioxide emissions and a desire tap the nation's domestic energy sources to reduce dependence on energy imports will likely give a political boost to a federally-mandated national grid.

Although the country has substantial wind and solar potential, much of the generation capacity is located hundreds of miles from the demand centers. A corridor along the Rocky Mountains from North Dakota into the Texas panhandle, for example, could provide nearly a fifth of the U.S.'s power needs, but the largest consumers are located on the East and West coasts. The highest solar potential is in Southwestern states that have comparatively smaller populations.

"We have a chicken and egg problem," said George Pataki, former New York state Republican Governor. "Developers won't build a solar system because there isn't any transmission capacity to move it and utilities won't build the needed transmission because there isn't any generation," he said. Pataki and his consulting firm, the Pataki-Cahill Group, are pushing for Congress to establish federal siting authority that would overcome one of the major challenges to current transmission infrastructure: permitting.

Federal Energy Regulatory Commission Chairman Joseph Kelliher in late July called for Congress to give the agency more power to site high voltage grid lines as the country faces severe power bottlenecks in coming years. A "not-in- my-backyard" syndrome has plagued the utility industry, and Kelliher warned that without such siting authority, congestion would likely worsen.

"The Commission is increasingly confronted with transmission issues that involve multiple states and must be considered from a multi-state, interconnection-wide, or North American perspective," the FERC commissioner told a recent congressional hearing. Congress should give the regulator the same federal powers that lawmakers gave the agency for siting of natural gas pipelines.

Democratic leadership is also warming up to proposals proffered by billionaire investor T. Boone Pickens that aim to move the country's natural gas use to transportation, supplanting gas-fired generation with renewables. Pickens' plan also calls for a national grid.

Although Congress in 2005 gave the regulatory body and the Department of Energy greater siting authorities - including the power to designate national transmission corridors, states currently retain primary jurisdiction to site transmission facilities, and federal transmission siting effectively supplements a state siting regime.

The federal government in the past year has declared large swaths of the southwest and mid-Atlantic regions as critical to the U.S. energy grid, saying the corridors are vital to reduce critically congested areas where transmission is needed to meet electricity demand and prevent power crises.

It is the first use of a new federal power to help approve construction of electric lines in some places where state officials have stymied them. Some lawmakers and community groups argue the government corridors wrongly expand the potential use of eminent domain power.

Local and state authorities, as well as a host of advocacy groups, have harshly criticized the DOE's designations, in some cases suing the government, alleging the corridors are illegal under the National Environmental Policy Act and the Endangered Species Act.

But Pataki and others say the process is taking too long and more authority is needed. Otherwise, those renewable energy corridors won't be built, he said.

FERC Commissioner Phillip Moeller argues that creating a national grid - and giving the regulator the authority to site the infrastructure - is a constitutional issue, given that it represents interstate commerce.

While Congress would have to establish the federal authority, FERC already has the powers to encourage growth through cost allocation, Moeller said.

Some industry experts say a regional approach, where rates would depend on the use of the renewable energy transmitted through the grid, would offer the best cost-allocation, but Moeller said he would prefer rolling costs into rates evenly across the country.

A national grid could also gather traction if Democrats deliver on their promise to revisit a renewable energy portfolio mandate that would require utilities across the country provide a certain percentage of their generation from renewable sources.

Moeller said that while an RPS isn't necessary, "it would develop transmission, because areas that don't have the renewable resources would realize they need the transmission built in order to access it."

Congress is expected to revisit proposals for a federal standard under a larger Democratic majority and many lawmakers see expanding the program as stimulating the economy.

-By Ian Talley, Dow Jones Newswires, 202-862-9285; ian.talley@dowjones.com

(END) Dow Jones Newswires

10-14-081851ET

Copyright (c) 2008 Dow Jones & Company, Inc.

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