Investment in electric transmission is staying strong overall, but there are some signs that it is slowing down, Kent Knutson, director of Hub Services at PennWell, said during the Sept. 14 TransmissionHub Quarterly Market Update presented by AZZ Galvanizing.
TransmissionHub is tracking $133.4bn in projects in the United States and Canada – representing 36,744 miles – that are planned and under construction. That figure is down from $135.8bn that was forecast in TransmissionHub’s 2Q16 outlook, Knutson added. Of the $133.4bn figure, TransmissionHub is tracking $22.9bn in projects that are under construction.
The average investment from 2016 to 2020 is forecast at $19.7bn per year, Knutson added.
In 2018 and beyond, the forecast stays robust, but it includes a number of projects that Knutson referred to as “early development or merchant-driven, where financing is needed.”
The question is whether those projects will be suspended or pushed out further, he added.
As noted in his presentation, TransmissionHub is tracking $46.9bn in HVDC projects, as well as $18.2bn in underground and underwater projects.
TransmissionHub is forecasting electric transmission investment in 2016 to be $10.4bn, which is down from its forecast of $10.6bn reported in June. Of that $10.4bn, $5.8bn is currently under construction. TransmissionHub is also forecasting $9.1bn in transmission investment in 2017, with $4.6bn of that under construction; $31bn in 2018, with $7.9bn of that under construction; and $25.6bn in 2019, with $4.5bn of that under construction.
Of the 126 projects expected to come online in 2016, 21 have a cost greater than $100m; of 132 projects expected to come online in 2017, 25 have a cost greater than $100m; of 160 projects expected to come online in 2018, 61 have a cost greater than $100m; and of 87 projects expected to come online in 2019, 45 have a cost greater than $100m, his presentation added.
Knutson’s presentation also listed projects that are scheduled to come online in 2016, including:
- Southern California Edison’s approximately $1.7bn, 250-mile, 500-kV Tehachapi Segments 4-11 in California
- Public Service Electric and Gas’ approximately $975m, 50-mile, 230-kV underground/aboveground Northeast Grid Reliability Transmission Project in New Jersey
- Xcel Energy’s (NYSE:XEL) approximately $500m, 153-mile, 345×2-kV Hampton–Rochester–La Crosse project in Minnesota and Wisconsin
- Transource Energy’s approximately $400m, 180-mile, 345-kV Midwest Transmission Project in Nebraska and Montana
- Electric Transmission Texas’ approximately $398m, 156-mile, 345-kV Lobo to Rio Bravo to North Edinburg project in Texas
Projects that are scheduled to come online in 2017 include:
- Basin Electric Power Cooperative’s approximately $350m, 200-mile, 345×2-kV Antelope Valley Station to Neset Transmission Project in North Dakota
- Appalachian Power Co.’s approximately $337m, 52-mile, 138-kV Kanawha Valley Area Transmission Reinforcement project in West Virginia
- ITC Midwest’s approximately $283m, 100-mile, 345×2-kV Minnesota–Iowa project in Minnesota and Iowa
- Commonwealth Edison’s approximately $277m, 57-mile, 345-kV Grand Prairie Gateway Project in Illinois
- Otter Tail Power’s approximately $227m, 70-mile, 345×2-kV Big Stone South to Brookings project in South Dakota
Projects that are scheduled to come online in 2018 include:
- TransWest Express’ approximately $3bn, 725-mile, 600-kV HVDC TransWest Express Project in Wyoming and Nevada
- Clean Line Energy Partners’ approximately $1.8bn, 490-mile, 600-kV HVDC Rock Island Clean Line project in Illinois and Iowa
- PowerBridge’s approximately $1bn, 80-mile, 320-kV HVDC West Point Transmission Project in New York
- The Nevada Hydro Company’s approximately $900m, 32-mile, 500-kV underground/aboveground Talega to Escondido/Valley to Serrano Transmission Project in California
- Westlands Water District’s approximately $593m, 87-mile, 500-kV Westlands Transmission Corridor project in California
The “incredible amount of development” in natural gas, wind and solar resources is “the big driver for transmission development,” Knutson said.
As noted in his presentation, natural gas, wind and solar represents 95% of the current electric capacity in the United States, and those sources continue to dominate the generation landscape. U.S. investment from 2016 to 2018 is forecast as such:
- Gas: 77.3 GW, or 55%
- Wind: 33.5 GW, or 24%
- Solar: 22.1 GW, or 16%
The “most important aspect to how so much investment can continue to occur in transmission and distribution, and across the border in the power generation sector, I think, is driven mostly by the incredibly low natural gas prices that we’ve seen over the last few years,” Knutson said.
According to his presentation, Henry Hub Futures listed the average price for natural gas at $2.62 in September 2016; $2.98 in September 2017; and $3.30 in January 2018.
During the most recent 12 months, ending in May, natural gas made up 35% of the U.S. electric utility fuel mix, followed by coal at 31%, nuclear at 20%, non-hydro renewables at 7%, hydro at 6%, and oil at 1%, according to his presentation.
Regarding the average delivered price of coal and natural gas to U.S. electric power plants, the presentation noted that for electric utilities, coal was down 6.4%, to $2.21/mmBtu, while natural gas was down 26.3%, to $3.23/mmBtu. For independent power producers, coal was down 8.1%, to $2.03/mmBtu, and natural gas was down 35.4%, to $2.45/mmBtu. Electric rates for residential customers were up 0.08%, to 12.7 cents/kWh, and down for all customers 1.24%, to 10.3 cents/kWh.
Discussing challenges Knutson noted that declining and flat load growth will slow transmission development. But, as noted in his presentation, meeting ever-increasing system peaks presents an opportunity for the transmission industry.
“[O]verall demand is down and it is driven by some of the energy efficiency [measures and] by more mild weather than we might have expected at various times,” Knutson said.
While energy efficiency is definitely having some impact, “at the same time, you have peak demand or peak periods,” he said.
Natural gas may be the answer but there are also new technologies to help address peak demand issues, such as energy storage, he said.
Knutson said that “it’s time to plan for the grid of the future,” and to replace aging infrastructure, adding that such matters as the Energy Policy Modernization Act, which is pending at Congress, would support faster permitting processes, and that would make much needed grid expansion happen.
Companies are spending at a high level in transmission, and investment on power generation and distribution is equally as high, he said.
Among other things, Knutson discussed the U.S. Environmental Protection Agency’s Clean Power Plan, noting that the U.S. Court of Appeals for the District of Columbia Circuit will begin hearing oral argument on the plan in a couple of weeks. It is expected that the court will decide the plan’s fate later this year or early next year, he said, adding that the plan will then return to the U.S. Supreme Court, which will likely decide the plan’s fate by late 2017 or early 2018.
“[M]eanwhile, driven by customer demand, renewable tax credits, declining technology cost and extremely low natural gas prices, [the plan’s] goals are likely to be achieved without any intervention,” Knutson said.
He also discussed the upcoming presidential election, noting, for instance, the differences on energy matters between Donald Trump, who “favors traditional energy” sources, and Hillary Clinton, who would expand on energy policy put forth by President Barack Obama.
Knutson also noted the commissioner vacancies at FERC. As TransmissionHub reported, FERC Commissioner Tony Clark on Aug. 4 said on Twitter that the commission’s September meeting will be his last meeting. Also, former FERC Commissioner Philip Moeller left the agency in October 2015 after his term expired in June 2015.