Electric transmission investment has stayed strong overall, and fewer large projects are expected to come online during the next couple of years, according to Kent Knutson, director of Hub Services at PennWell.
As noted in his presentation during the June 8 TransmissionHub Quarterly Market Update presented by AZZ Galvanizing, TransmissionHub is tracking $135.8bn in planned and under construction transmission projects in the United States and Canada – representing 39,173 miles of transmission line – down from the $137bn that was reported in 1Q16. Of that $135.8bn, $24.6bn in project value are under construction. The average investment between 2016 and 2020 is $20.3bn per year, the presentation added.
“If the projects that are in the hopper would all come online in 2018, or 2019, it could be a record year,” Knutson said.
According to TransmissionHub, most new project announcements have involved smaller projects that focus on reliability and interconnecting renewable resources, he said.
Most of the electric transmission that exists in the New York ISO footprint today – or almost 84% – includes projects that were built prior to 1980, he said.
“It’s been estimated that over the next several years, between now and 2030, an investment as much as $25bn needs to happen in New York to replace and refurbish” about half of the transmission that exists in the state, or around 5,000 circuit miles, he said.
As noted in Knutson’s presentation, statistics support a robust transmission market, but it is slowing down. TransmissionHub is tracking $47.2bn in HVDC transmission project investment, as well as $18.2bn in underground and underwater projects.
Furthermore, TransmissionHub is forecasting electric transmission investment in 2016 to be $10.6bn, down from its $11.3bn forecast reported in March. Of that $10.6bn, $8.2bn is under construction.
Knutson noted that the change is attributed to, for instance, projects being pushed from going into service in 2016 to 2017 and beyond.
TransmissionHub is also forecasting $10.3bn in electric transmission investment in 2017, with $5.2bn under construction; $30.1bn in 2018, with $7bn under construction; and $28.5bn in 2019, with $4.1bn under construction.
Of the 130 projects expected to come online in 2016, 23 have a cost greater than $100m; of the 132 projects expected to come online in 2017, 29 have a cost greater than $100m; of the 150 projects expected to come online in 2018, 58 have a cost greater than $100m; and of the 84 projects expected to come online in 2019, 45 have a cost greater than $100m.
Knutson noted that according to information compiled from FERC Form 1 annual financial reports for major electric utilities, Public Service Enterprise Group (NYSE:PEG) (PSEG) invested about $4.8bn from 2013 to 2015 in transmission capital expenditures, followed by Edison International (NYSE:EIX) at about $4.7bn, American Electric Power (NYSE:AEP) at about $4.6bn, Xcel Energy (NYSE:XEL) at about $2.9bn, and Dominion Resources (NYSE:DOM) at about $2.8bn.
Those reports also demonstrated that investment in new infrastructure from 2013 to 2015 totaled $53.4bn, while transmission O&M expenses during the same time period totaled $32.7bn. That is an overall investment number of $86.1bn during the three-year period for investor-owned utilities in the United States. Knutson said that the figures do not include large federal administrations like the Bonneville Power Administration and Western Area Power Administration (WAPA), generation and transmission cooperatives, municipal utilities and Canadian transmission company data.
Transmission capital additions by operating companies showed that PSEG’s Public Service Electric and Gas (PSE&G) invested about $4.8bn from 2013 to 2015, followed by Edison International’s Southern California Edison (SCE) at about $4.7bn, Dominion’s Virginia Electric and Power Company (Dominion Virginia Power) at about $2.8bn, and Pacific Gas & Electric, which invested about $2.4bn during the three-year period.
In addition, transmission O&M expenses by operating companies showed that Oncor’s Oncor Electric Delivery Company spent about $2.3bn from 2013 to 2015, followed by CenterPoint’s CenterPoint Energy Houston Electric, which spent about $2bn, and Eversource Energy’s (NYSE:ES) NSTAR Electric, which spent about $1.1bn.
That, Knutson said, demonstrates a robust market. While the costs are passed on to the consumer side, for the most part, the costs are being dampened somewhat by the lower fuel costs that is being experienced on the natural gas side, as well as with solar and wind resources, which are more subsidized through federal tax credits.
As noted in his presentation, transmission projects that are scheduled to come online this year include:
- SCE’s estimated $1.7bn, 250-mile, 500-kV Tehachapi Segments 4-11 project in California
- PSE&G’s estimated $975m, 50-mile, 230-kV, underground/aboveground Northeast Grid Reliability Transmission Project in New Jersey
- The estimated $500m, 153-mile, 345×2-kV Hampton–Rochester–La Crosse project in Minnesota and Wisconsin by Xcel and other companies
- The estimated $400m, 180-mile, 345-kV Midwest Transmission Project in Nebraska and Missouri by Transource Energy and the Omaha Public Power District
- Electric Transmission Texas’ estimated $398m, 156-mile, 345-kV Lobo to Rio Bravo to North Edinburg project in Texas
Transmission projects that are scheduled to come online in 2017 include:
- The estimated $350m, 200-mile, 345×2-kV Antelope Valley Station to Neset Transmission Project in North Dakota by Basin Electric Power Cooperative and WAPA
- Appalachian Power Company’s (APCo) estimated $337m, 52-mile, 138-kV Kanawha Valley Area Transmission Reinforcement Project in West Virginia
- ITC Midwest’s estimated $283m, 100-mile, 345×2-kV Minnesota–Iowa transmission project in Minnesota and Iowa
- Commonwealth Edison’s estimated $277m, 57-mile, 345-kV Grand Prairie Gateway Project in Illinois
- APCo’s estimated $237m, five-mile, 345-kV Cloverdale Expansion Project in Virginia
The presentation further noted that transmission projects that are scheduled to come online in 2018, that are under construction at this time include:
- PSE&G’s estimated $1.2bn, 56-mile, 345-kV underground/aboveground Linden to Bergen reliability project in New Jersey
- The estimated $468m, 181-mile, 345-kV Winco to Hazelton Project in Iowa by MidAmerican Energy Company and ITC Holdings(NYSE:ITC)
Policy and generation matters
Knutson noted that “this is the summer of uncertainty, with an election year gearing up and vacancies” at FERC needing to be filled, for instance.
“There’s a wait-and-see kind of attitude among investors and planners,” he said.
Also at FERC, a technical conference will be held later this month to assess the commission’s Order 1000, and will include a look at such issues as interregional projects as well as cost allocation, he said.
Knutson further discussed the “surprise decision” last month at the U.S. Court of Appeals for the D.C. Circuit delaying oral arguments on the U.S. Environmental Protection Agency’s Clean Power Plan from June 2 to Sept. 27.
Meanwhile, he said, “America’s utilities are already more than halfway to complying with the plan – the main reason has been cheap natural gas and tax credits for solar and wind” resources.
In addition, the U.S. Senate in April passed by a vote of 85-12 the Energy Policy Modernization Act, which, among other things, promotes investment in aging electric transmission, he said. The next step is for the U.S. House of Representatives to work out a compromise and move the bill to the White House.
“[I]f that happens, it could be the first time an energy bill is passed since 2007,” Knutson added.
On generation, he noted that natural gas, wind and solar resources continue to dominate the generation landscape. U.S. investment from 2016 to 2018 includes a forecast of 87.4 GW of natural gas, 29.7 GW of wind, and 21.3 GW of solar, according to his presentation.
Opportunities for transmission involve the country’s planning for a carbon-constrained future – that is, now is the time to plan for 2030 and beyond – as well as replacing aging infrastructure, and the near-term boom in tax credits supporting wind and solar resources, which rely on transmission projects, his presentation noted.
Challenges include that a declining and flat load growth will slow development.