Dive Brief:
- Investment in new U.S. transmission by investor-owned and privately-owned utilities increased five-fold between 1997 and 2012 from $2.7 billion to $14.1 billion, according to the Energy Information Administration (EIA).
- The recent uptick in transmission investment reverses the three-decade decline that began in the early 1960s after a long period of investment in new infrastructure from the early 1900s driven by new technology, growth in central station generating plants, and post-WWII electricity demand.
- The newest wave of investment has been driven by (1) a pursuit of improved reliability in the wake of the 2003 blackout, (2) the need to interconnect increasing volumes of renewables that includes wind growth from 1999’s 4 million megawatt-hours to 2012’s 141 million megawatt-hours, (3) the need to accommodate changing demand patterns caused by population expansion in the South and West, (4) more wholesale and retail regional electricity market activity after deregulation in the late 1990s, and (5) increased costs for new infrastructure after the 2004-2007 economic expansion.
Dive Insight:
The four day 2003 blackout affected 50 million people in the Northeast, Midwest, and Canada, cut off 62 gigawatts of load, and caused an estimated $4 billion to $10 billion in economic losses that produced 2005 legislation reforming FERC’s incentives for new transmission.
While overall electricity retail sales grew less than 1% annually from 1997 through 2012, increased electricity market activity created demand for access to less expensive power from independent power producers beyond traditional service territory boundaries.
Raw materials prices grew significantly during the 2004-2007 expansion, driving up the cost of equipment like transformers and towers.
Transmission investment for co-op utilities increased from 1997’s $296 million to 2011’s $892 million. Transmission investment for government-owned federal and municipal utilities increased from 1997’s $852 million to 2003’s $1.3 billion.
