Connecting the dots: The critical role of transmission in US power markets

Intro: Welcome to The Energy Shift, a podcast series focusing on the rapidly evolving energy landscape with hosts Luisa Fuentes and James Wright.

James Wright: Hi Luisa, how are you?

Luisa Fuentes: I’m doing great, James. How about yourself?

James Wright: Wonderful. Yeah, thank you It’s a beautiful spring day here in New York. It feels like winter is behind us, which I know we’re going to regret saying in a week or so. Mother nature has a habit of calling our bluff on these things. I’m not packing away the winter coats just yet.

Luisa Fuentes: I was going to say, are you done with your ski season then?

James Wright: No, I wish. No, the knees can’t take it anymore. Getting too old. So let’s get into it. On today’s episode, we’re going to discuss the latest state of the financing market for new transmission projects to meet both growing power demand and to shore up an aging grid. Transmission is broadly agreed to be a critical need to meet the growth of power projections across the US at the moment in both the short and medium term. So with a sector that has been traditionally defined by permitting bottlenecks, we’ve been thinking about a few topics that we’re going to touch on today in this conversation. Firstly, is there relief in sight from a legislative perspective in order to ease the permitting challenges that transmission developers face? Next, how can the new administration facilitate and accelerate transmission development across the US? What are the regional nuances there? Are there differences we need to think about across different RTOs, etc. And finally, how are traditional project finance markets able to meet that demand for financing? Are public-private partnerships even going to work in this context? Luisa, who we got on today to help us deep-diverse topics.

Luisa Fuentes: We’re very lucky to have guests today hailing from Invenergy. Invenergy is the largest privately held independent power producer in the US and very well known to most of our listeners. They’re a significant player in the global energy market, both at the US and at the international level. And here to discuss transmission with us today from Invenergy are Meghan Schultz, the CFO, and Shashank Sane, EVP of Transmission. Welcome both. It’s great to have you on. Maybe before we get started, we should give the listener some context and better understanding of who you are and how your career path led to where you are today. If each of you can briefly tell us about how you came to be in the energy and infra sector and how your role at Invenergy has evolved, that would be great.

Shashank Sane: Thanks for having us. Very excited to talk transmission with you all today. As you mentioned, my name is Shashank. I lead the transmission business for Invenergy. I’ve been with the company for about 11 years now, a little more than 11 years now. Worked on a variety of different things. I actually started on the financing side. Bank market and financing activity is near and dear to the original part of my career at Invenergy. I worked on a number of our corporate capital raises, M&A transactions, and ultimately worked on our strategy side. But I’ve really been leading the transmission effort since about 2020, late 2020, when we really got into the transmission business. As you noted earlier, Invenergy is one of the biggest power producers in the country. And probably what we’re best known for is developing power plants across all different technologies for the 20, 25 year history of the company. But in 2020, we got into the transmission business with our acquisition of Grain Belt Express development rights. And from that point have continued to add to the portfolio and have a number of projects under development now across the country, all with the goal of ensuring a more reliable, affordable electric grid. So as I mentioned, excited to be here today. Love to dive into it more, but I’ll turn it over to Megan.

Meghan Schultz: Thank you. Nice to be here today with you all. So Megan Schultz, the CFO at Invenergy. I joined the company in 2008. I have been here for quite a while at this point. It’s been quite an exciting ride. My prior career was on the banking side. So I worked for ABN AMRO and Bank of America, focused on the power and utility sector. And really when I came over to Invenergy, renewables was still in its early days. So it’s been exciting to see the growth, both of the company and the industry overall. Invenergy has raised over $60 billion in capital in our 25 years of existence to finance projects across the renewable space, wind, solar, storage, transmission, as well as on the conventional side of the business with the gas fire power plants that we have developed over the years. So we’ve developed over 33 gigawatts of projects in total since our inception.

Luisa Fuentes: Meghan, I have a fun fact for you. I found when I was cleaning up my home office, I have a collection of business cards, including had to be your first business card from Invenergy, probably from, the note in the back says like 2009.

Meghan Schultz: I remember when we first met, so we’ve done quite a bit together over the years.

James Wright: That’s awesome. It’s also great talking to a reform banker, Meghan, because you can call our bluff. So anyway, all right. So let’s get into some of the meat of this topic then. So I’d like to start with a quick 101 for the listener from both a development and a capital perspective. So perhaps you could give a high level overview, Meghan, firstly with your development hat on, of what you’re seeing on the power demand side and then maybe back with your CFO hat on, the current state of the financing markets for your projects.

Meghan Schultz: Sure. So I was just taking a look at a recent report that was issued by S&P Global. I think it really exemplifies what we’re all seeing and what many folks have been talking about in this space is really the unprecedented expectation for demand growth driven by data centers, manufacturing and overall electrification. And so what that report says is there’s an expectation of 35 to 50% growth through 2040. So it’s incredibly unprecedented. We’re coming off of a period of more than 20 years of a really flat demand. To see this type of growth, what that means in terms of megawatts or really gigawatts of new capacity that will be needed in this period of time through 2040 is something like 60 to 100 gigawatts of gas and over 900 gigawatts of renewables. So it’s a pretty exciting time to be in the industry. I think we’ll talk today a little bit about both these opportunities that we’re seeing as well as some of the challenges. We’re coming off of a record year for renewables. In 2024, almost 50 gigawatts of new capacity was added, and renewables represented 93% of the newly installed capacity for the year. So I think it’s really showing the ability for renewables to meet the moment of bringing this new energy and capacity online. We also see quite an opportunity for new gas fire generation development as we approach the later part of the decade. And so for Invenergy, we were well positioned to play across the entire sector and bring our pipeline of projects, both on the renewable side and on the gas side. And then as Shashank will speak more about the importance of transmission to facilitate all types of new generation coming online and bringing both the energy and capacity to where the need is.

James Wright: That’s awesome. I was thinking while you’re speaking, Meghan, as well, is that like, you know, I hear all those kind of gigawatts, you’re talking about a demand. I mean, I’m trying to put myself in your shoes, a day in the life of your job. Is the kind of phone ringing off the hook right now? Is that kind of how life feels a bit?

Meghan Schultz: So I think that’s the case really for our folks on the development and origination side. We have really strong customer relationships across the utilities as well as the CNIs and the hyperscalers themselves. So I think all parts of the sector are really trying to triangulate around these forecasts and determine how to meet the need. And there’s the need in the very immediate term, and then there’s the need for the longer term. So absolutely, there’s a significant amount of demand from our customers. And that really drives what we do is we’re building projects that meet the needs of our customers. We generally have a strategy of building projects and advancing development on projects once they have been contracted under long-term agreements with our customers. So we’re not in the business of developing significant amounts of capacity on a merchant basis. So it really is being driven by the demand by our customers.

James Wright: That’s great to hear. And certainly we feel the same on our side. When folks like you are busy, we’re busy doing the same thing. So good to hear. 

Luisa Fuentes: We’re taping this on March 11th. There’s a lot happening in the kind of broader macroeconomic world. I think the new normal for us is to kind of address some of those issues pretty head on in our discussions when we can. I think you mentioned the word unprecedented with regard to increasing energy and electricity demand. I think that we’re running out of ways to say we’re living in unprecedented times here, with that being the uncertainty being felt in large parts of the economy. Having said all that, we each know because we’ve lived through different cycles that energy, power and infra tend to be very resilient spaces. And so we’re watching with a continued air of optimism, at least as much as those of us are able to. Maybe you can discuss a little bit how this uncertainty has impacted the project finance for Invenergy, if at all.

Meghan Schultz: Sure, as a very prolific developer, privately held company, we certainly are a company that raises significant amount of financing every year in the capital markets. Last year, we raised about $9 billion of project finance and tax equities. And I think that’s one of the closest, if not the largest, one of the largest issuers in the space across more than 15 projects. So we saw very strong appetite in the market for our projects last year. We’ve seen more than 50 active lenders in the space. The Terminal B market is very active right now and very strong, especially for projects that are operating. So overall, we see the market to be positive. Of course, when we’re talking about project finance, which is much of what we do, whether it’s project finance debt or project finance tax equity, really relies on projects to be fully developed and de-risked. And as you all know, being on the lender side of things, to the extent that there are any open items on development or uncertainty around change in law or tariffs, things like that, generally lenders and tax equity investors are looking for the sponsor to bear those risks. And certainly there’s a lot of negotiation that goes into the transaction around those points. But that is something that I think Invenergy is, with the track record that we have, the experience that we have, and the balance sheet, we’re maybe more able to bear some of those risks than others. I think though it’s really for us, like anyone, we really rely on and need a steady policy, political, regulatory backdrop. And so I think that’s been challenging at times really over the course of the last 20 years, but certainly in this current environment with tariffs being on one day, off one day, the possibility of tax reform through a reconciliation process. Those are things that we’re monitoring really closely and having to work through, as you guys know, in the details on every specific transaction. And so it certainly presents challenges that can slow things down and if we, the more uncertainty that we have, think the more risk there is across the sector for a slow down in deployment of projects. On the positive side, we have seen a strong start to the year for us. We’ve announced a number of new projects that we have entered into offtake agreements on, but we also recently closed a one billion plus financing for a wind project. So I think that shows that on well-developed and de-risk projects, the appetite continues to be there in the project finance space.

James Wright: So, Shashank, maybe turning over this to you now, this next one. If we kind look back over the past 20 years or so that the four of us have all been doing this in this space, this really does feel like the first time we’ve seen that kind of consistent upward demand curve that Meghan was talking about earlier really being driven by the underlying fundamentals of what’s happening on the demand side, so in that context, could you perhaps remind the listeners of why we’re all now talking about HVDC, so that’s high voltage direct current lines. Why is it so important for the US to develop these lines, what we think of as these super highways on the transmission side, and how they kind of change the transmission picture versus the grid we currently have?

Shashank Sane: Yeah, absolutely. As you noted, the environment we’re in right now really is the first significant demand growth environment of the last 20 plus years. And what that means is that as a country, we’re going to need to build many more power plants to meet that growing demand, right? We need an expansion of the energy system, an electricity system in particular in the country to meet that demand. What transmission does and in particular, long distance HVDC, backbone type transmission is it allows us to just be a lot more efficient and reliable in how we do that electricity expansion that build out of the power system across the country and really the reason for that is that if we look at how the electric grid and the electric system was built out in this country, it was really done on a regional basis, right? You had initially cities and then multiple cities, states come together and develop electric grids. So that’s how you ended up with PJM and MISO and SPP. And you have this regionalization of the electric market, but it is still a regional electric market. What HVDC projects, long distance HVDC projects allow you to do is connect to those regional grids in a way that enables electricity sharing on a scale that we just haven’t seen before. If we take a project like our Grain Belt Express project that ultimately will connect five gigawatts across four different energy markets between SPP, MISO, PJM, and the ACI market. In total, that’ll cover nearly 40% of the electric consumers in the country. But as we think about what that can enable, each regional grid is going to have its own supply and demand dynamics over the coming years. And as we talk about uncertainty, I think there’s general consensus that electric demand will grow across the country and it will grow substantially. But with the nature of that demand being so data center centric and AI centric, my view at least is that that demand is going to be very concentrated in different regions. You have these pockets of data centers that have been developing, whether it’s in Virginia or Indiana, Ohio or other places. And if we just look at every region building out its electric grid to meet the needs of that region, I think what you’ll end up with is building more resources than you actually need, building more power plants than you need if you had a more broadly connected electric grid around the country. So rather than MISO building out entirely to meet the needs of MISO and SPP building out entirely to meet the needs of SPP, I think you get to a more efficient solution on the long-term basis by having the transmission to connect the two so that when there’s excess energy supplies in SPP, those can be shared with MISO, or vice versa, or between MISO and PJM. And the more you can share those energy supplies, the lower the aggregate amount of power plants that you need to build, again, driving a more affordable grid that can still reliably meet the needs of all the customers. That’s at like a long-term macro level. Then there’s even the short-term micro level of being able to deal with either weather events or other reliability issues that arise on the grid on a day to day or week to week basis. Things like we’ve seen historically with winter storm Elliott or winter storm Uri where either PJM or MISO or SPP have reliability issues because these severe winter storms affect the entire footprint of a PJM or the entire footprint of an SPP. And in those scenarios, having the ability to import gigawatts of energy from neighboring regions or neighbors of neighbors, right? Long distances away where the weather is not as significant as it is in your region, drives the reliable grid that we need to have as a country to meet what is becoming a more and more, not just energy intensive, but electricity intensive industry base that we have here between AI and manufacturing. You know, manufacturing, there’s a lot of talk about wanting to re-shore manufacturing. That manufacturing is becoming high tech manufacturing that has large needs, large electricity needs, and therefore reliability of electrical infrastructure is critical to bringing those manufacturing facilities back to the U.S. and ensuring the reliable operation of those. So the HVDC technology in particular, you know, allows you to build those long distance, high capacity, inter-regional links, and then control those links back and forth, you know, moving energy from west to east and east to west on a second to second type control basis to bring the energy from where it may be in excess to where it’s needed.

James Wright: Right, right. That was helpful, Shashank. I guess just to put a finer point on it, I one thing that Luisa and I often talk about in this podcast is newer, more novel technologies. This is not the case here, right? This technology has been around for a while. This is just a situation where the technology hasn’t been deployed here yet because of some of those permitting and regulatory challenges you touched on, right? This is not a technology challenge.

Shashank Sane: No, no, you’re exactly right on that. The HVDC technology has been around in the US since the sixties, really. So, you know, the Pacific Intertie project that brought hydropower from the Northwest down into California, that was the first HVDC project built in the country back, as I said, in the sixties. And it’s been deployed successfully around the world to a much greater extent than the US over the past couple of decades. Sadly, in the US, there have only been a couple of projects built in the past couple of decades using HVDC technology, largely because of that regionalization that I talked about. You don’t need HVDC to build a 50 or 100 mile line. You need HVDC to build lines that are 400 or 500 miles, 800 miles in the case of Grain Belt, and that can transmit gigawatts of capacity. And so I think there’s finally that realization that we need this sort of backbone infrastructure and that’s what HVDC can deliver.

James Wright: Got it. That was some great perspective. Thank you.

Luisa Fuentes: The efficiency point just leads me to believe that all of this regional development is just work around for lack of a more integrated system, which hopefully we’ll be addressing in the coming decade, I guess, because it will take at least that long. There are words that come up when we talk about transmission, and I’m wondering if they’re fair. So often when we have these conversations, especially when it comes to things like permitting and just the length of the development time, it’s words like roadblock and bottleneck. Are these a fair assessment of the landscape for transmission development? Are we overstating it? Should we be looking at kind of the lack of infrastructure that’s interconnected and integrated as a national emergency of sorts? I was just curious to see if you would think of this as catastrophizing what’s a more normal situation or where do you see that?

Shashank Sane: So on the first point of roadblocks or bottlenecks, I think about it more in the lens of consistency and incentives. To me, that’s really been the biggest impediment to getting long distance backbone infrastructure built in the country is just the consistency of approach on really everything as it pertains to development. Every time we go to a different RTO or to a different state, it’s a whole different set of rules that we’re playing by. Now, SPP has different rules about how you go through the interconnection process on a HVDC transmission line than MISO has, than PJM has, than they have out west. So, you know, just it’s such a different standard that you have to go through depending on where you are from an RTO process. Same thing applies at the state level. Transmission lines are permitted at the state level. And I think that is probably the right approach and requires a commitment to engagement with the community, which we are certainly committed to. We spent a lot of time in the communities that we’re working with to ensure buy-in and support and benefits for those communities. But every state is a little bit different in terms of the process they follow and how you get permit and how you get your route established. So greater consistency, I think, would drive better outcomes around the transmission side. But really more than anything from my perspective, it’s the incentives, creating the right incentives to make sure that the value proposition is there for developers to build and invest in those long distance transmission lines. These lines can bring great value to the grid, as I talked about earlier, between the efficiency it brings of needing to build less power plants overall or being there in a time of need to supply energy to where it’s needed. But right now, those are not things that are compensated for in the market. There are no market mechanisms to recover the value or to be compensated for the value that is brought from those attributes that a transmission line brings. So that’s where I think we’d like to see the most changes, really creating the incentive mechanisms to compensate lines for the values that they bring. In terms of whether, is this an emergency or not? I think certainly looking ahead with where electric demand is projected to go, we don’t take actions in the near term, I think we could end up in a real difficult place on the electric grid. The reality of situation is it just takes a long time to build electric infrastructure, whether it’s power plants or transmission lines. You know, there’s only so much supply chain capacity out there. There’s so many construction crews out there. And so we need to be proactive in addressing the needs that might come five, seven years down the line. Otherwise, even though we may not be in an emergency necessarily today, we will end up there in the near future.

Luisa Fuentes: Really good point, Shashank, and I really like the economic incentive argument. I think that that is a framework that does not get discussed enough. I think we’ve talked about your Grain Belt development. Is there any other development in the transmission space that Invenergy has on that they would like to discuss and maybe throw some color on for the audience?

Shashank Sane: Yeah, you know, Grain Belt is certainly the marquee project that we have out there from truly the idea of a national backbone type infrastructure for the electric grid. We have other projects that we’re developing in, you know, Oklahoma, in New Mexico, and a few others around the country. I think, you know, for the most part, they’re all kind in a similar vein of bringing this HVDC infrastructure to bear. That can enhance the reliability, access resources that they otherwise be unable to come to market and really drive the affordability and reliability of the grid by accessing the best resources out there and interconnecting the grid in a way that allows the most efficient resources to be employed rather than needing to focus on overbuilding in certain circumstances, but really that sharing element. So we’re very active around the country and are participating more in some of the RTO processes. We see the RTOs quite active now in proposing large-scale transmission build-outs with the expertise that we’ve developed and built out here at Invenergy. We hope and expect to be a large part of that, both on the merchant model, which is really what Grain Belt and our other current projects are pursuing, but then also on the RTO sponsored projects as you see out of MISO and SPP and the other RTOs.

James Wright: That was great. Well, I feel like once again, we’ve just about barely scratched the surface on a really vital topic of infrastructure space. We’re going to have to put a pin in it for now and probably do another go around on this with you both later in the year when we see where some of this permanent reform stuff pans out. So with that, we will finish this episode. And what we’d like to do is do a quick outtake with you both on something that shifted your week. So, Louisa, do want to kick us off?

Luisa Fuentes: Sure. I will take it back to the angsty 90s with Alanis Morissette’s Ironic. I find it very ironic and I believe this is appropriately used that at the same time that we’re talking about some of the most advanced technologies that any of us have seen in our lifetimes, which are OpenAI and these language models, artificial intelligence, et cetera, that we’re talking about the potential for that to be held up by something which we can all agree has not been technologically evolved or particularly innovative in decades and decades. So it’s the clash between kind of the data center push and the advanced manufacturing push and the role of transmission and potentially being, maybe not a roadblock, maybe not a hurdle, but definitely something that causes people to slow down and take a pause.

James Wright: Who knew building transmission was so hard, huh? What about you, Shashank?

Shashank Sane: Yeah, on a little bit of a lighter note, it’s been an interesting week in Chicago. The clock’s changed on Sunday and then it was 65 degrees yesterday, so it feels like maybe we’ve broken through the winter. But James, as you noted earlier, it’s not just a head fake.

James Wright: Don’t say that you just jinxed it. You just jinxed it. 

Shashank Sane: Yeah, exactly. But it’s just amazing how much just little things like that can kind of change the whole energy of a whole city, frankly. I think as everyone knows, you know, Chicago is not the best place in the world to be during January and February, but once the clocks turn and the temperature starts ticking up, it’s a really, really exciting place to be. So it’s better things ahead here.

James Wright: Yeah. Megan, what about you?

Meghan Schultz: This just happened this afternoon. I got a little bit of a laugh out of it. So, you know, we always say that being developers, especially developers of transmission projects, we really have to be resilient. We managed through so many different ups and downs over the course of developing, financing, building and operating projects. So Invenergy recently moved into a newly renovated headquarters here in Chicago. And the company, our owner has a pretty significant, pretty varied art collection. And so they’re kind of walking around looking to see where do they place some of these large pieces of art. And there was a little gathering outside my office, and there was a debate I could see with the team and the facilities team that was evaluating what picture should go outside my office. And these are massive paintings. And so what they determined was, we have to have the same one that we had outside the office before and sort of kind of in front of the bullpen area of our team. And it’s basically this big hulking guy that looks like he’s maybe a construction or shipyard worker. Very kind of dark and foreboding. He looks like he’s just got his head down. He’s got a big cigarette hanging out of his mouth. He’s trudging through, kind of looks like a shipyard. And just, he looks incredibly tough and resilient. And so we kind of view him as our mascot. And we said, of course he has to be outside of Meghan’s office, he has to be by the finance team. Because I think we really, it resonates with us. And so. I like that the team appreciated that too, because I’ve always felt some sort of kinship with that guy.

James Wright: That’s amazing. I think I’m seeing you later on this week, Meghan. you need to show me that picture. I’ve got to see it myself now. 

Meghan Schultz: Definitely.

James Wright: I think I’m going to finish off with a shout out to the newsrooms of the world this week. I mean, the pace of news has just been blistering. It feels like my phone is blowing up every 30 seconds at the moment. it’s challenging, right? I mean, markets are bouncing all over the place and there’s a lot happening on the global security side. And what sort of comes to mind for me at the moment is the old British phrase of keep calm and carry on. As we’ve just been all discussing on this part, there’s a lot of noise out there. But fundamentally, the country still really needs a lot of new infrastructure, which is what we’re all here to help with. And importantly, this is infrastructure that will need to outlive these political and economic cycles over many decades ahead. So yeah, a lot of noise, but we’ve got to try keep on top of it. And with that, I’m going to catch up on the news we’ve missed in the past 30 minutes. So, Meghan, Shashank, thank you both very much again. That was a great conversation and we’ll talk to you both soon.

Meghan Schultz: Thank you.

Shashank Sane: Thanks very much.

Outro: Please join us next time on The Energy Shift as we continue to tackle some of the hottest topics in the US energy transition landscape, providing fresh insights and viewpoints to help you shift your perspective.

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