Extending current investment trends leads to funding gaps in electric generation, transmission and distribution that are projected to grow over time to $107bn by 2020, or about $11bn per year, according to a new report by the American Society of Civil Engineers (ASCE).
The report, “Failure to act: The economic impact of current investment trends in electricity infrastructure,” found that closing that gap would lead to fewer brownouts and blackouts and save American businesses $126bn, prevent the loss of 529,000 jobs and $656bn in personal income losses, ASCE said April 26.
The country’s economic competitiveness would also benefit by protecting $496bn in gross domestic product and $10bn in revenue from United States exports, ASCE said.
“This report shows that when we make the necessary investments in our energy infrastructure, we see tangible results for our economy, American businesses and family budgets,” ASCE President Andrew Herrmann said in the statement.
Investment in electricity infrastructure has increased in the past decade, according to the report, which noted that from 2001 through 2010, annual capital investment averaged $62.9bn, including $35.4bn in generation, $7.7bn in transmission and $19.8bn in local distribution systems, in 2010 dollars.
The average rate of this investment was used as the basis for calculating the gap between investment rates and expected future increases in investment needs. However, the report added, it is important to note the widely varying annual investment levels from 2001 to 2010, which ranged from $44bn to $101bn.
The report used a “trend scenario” that presumes the mix of electricity generation technologies continues to evolve as reflected in recent trends.
Without new investments, ASCE added, service interruptions and capacity bottlenecks will contribute to more frequent and unpredictable service interruptions that impose direct costs to businesses and households. Those consequences will cost households $6bn this year, $71bn in total by 2020 and $354bn in total by 2040, ASCE said, adding that businesses will pay $10bn this year, $126bn in 2020 and $641bn by 2040 in avoidable costs.
The state of the country’s grid is in dire shape with 70% of transmission lines and power transformers aged more than 25 years and 60% of the country’s circuit breakers more than 30 years old, ASCE said. By 2020, distribution and transmission infrastructure needs will account for more than 88% of the investment gap while generation infrastructure represents about 11%.
Divergence in electricity demand across different regions of the country is not expected until the 2021 to 2040 period, ASCE said, noting that longer term projections show regional differences in demand with a 40% expected increase in Florida, 34% increase in western states and a 20% increase in the mid-Atlantic region.
A need for strategic long-term planning
Samir Succar, a staff scientist with the Natural Resources Defense Council said during an April 26 roundtable discussing the report in Washington, D.C., that a long-term vision for the grid is needed.
“We need to plan far into the future in order to identify the best near-term path for infrastructure,” he said. “We can’t afford to be near-sighted when it comes to building transmission and distribution.”
That means integrating solutions like demand response and energy storage and leveraging technologies like advanced wind forecasting.
Succar also said that tomorrow’s grid will need to perform different set of functions than what it does today. “The only way, therefore, to build the right lines is to do careful planning that identifies future system needs under a broad set of scenarios that considers economic, environmental and reliability considerations.”
Former FERC Chairman Jim Hoecker, who is also senior counsel and energy strategist at Husch Blackwell, principal of Hoecker Energy Law & Policy and adviser to the WIRES group, said: “We’ve got a congested system that keeps electricity prices artificially high and that translates into higher rates for consumers. … [I]f we’re talking about a clean energy economy and accessing high quality wind and solar resources – biomass resources – those resources tend to exist where there aren’t a lot of customers. The electric delivery system needs to be seriously upgraded for that purpose.”
Hoecker praised the report, but noted it is on the conservative side. Among other things, he said, the report assumes that energy policy is going to remain unchanged during the time period it highlighted, which is unlikely to happen as Congress could, for instance, pass a national renewable energy standard, which would probably increase the need for infrastructure.
Former FERC Chairman Curt Hébert Jr., now CEO of Lexicon Strategy Group, noted that funds are available for investment. “The money is out there,” he said. “The money is sitting on the sidelines…for the most part, because we haven’t inspired anyone to get out and build this infrastructure and get what they might believe to be a return that would get the money off the sidelines.”
Hébert told TransmissionHub after the discussion: “[W]e need to focus on exactly what those infrastructure needs are and then give the added incentives to that group. [There is] no need to give an incentive to something we really don’t need, [or] something that’s not going to bring energy to the marketplace and get to end-use customers.”
Otto Lynch, vice president of Power Line Systems, said siting remains a challenge, noting that the siting process really has not improved over the past 10 years. “[M]ost of our improvements have been pushing our existing transmission system even further and way beyond what it was originally designed for,” he said. “We’re running these lines hotter and hotter than we ever had before and in some cases, too hot and it’s causing some problems. We’re at a point of near capacity on our grid now.”
While electricity was primarily a luxury when most of the grid was built decades ago, technological advancements and the increased use of computers, for instance, have made it so that “business comes to a screeching halt when the electricity goes out,” he said.
The American public needs to understand the importance of such investments highlighted in the report “and hopefully will become more accommodating to siting the new transmission lines.”
Hoecker told TransmissionHub after the discussion that customer education is going to be important at all levels.
To build support at the grassroots level for investing in these kinds of facilities, he said it is key to site such projects responsibly and make sure that people understand the need as well as the consequences.