Chicken and Egg: Electricity Transmission and Investment in Renewable Energy

I study the impact of grid expansion on long-run renewable investment spillovers in wholesale electricity markets. Using a discrete choice model of wind project location and a Difference-in-Difference design, I analyze a large-scale grid expansion project in Texas. Results show $1.71 billion per year in lower emissions and $11 million in increased annual payments to landowners due to wind investments in areas with grid infrastructure. However, localized wind investments coupled with limited transmission capacity have led to rising curtailments in recent years. This highlights the need for a long-term planning approach to transmission policy, which is essential for achieving decarbonization.