Investment in electric transmission has been strong overall, but it is starting to slow down, Kent Knutson, director of Hub Services at PennWell said on Nov. 28 during the TransmissionHub Quarterly Market Update sponsored by AZZ Galvanizing.
TransmissionHub is tracking $123.8bn in transmission projects that are planned in the United States and Canada – representing 36,811 miles – and that is down from $133.4bn that TransmissionHub forecast in its last quarterly update held in September.
Of that $123.8bn figure, TransmissionHub is currently tracking $20.7bn in projects that are under construction. Knutson also noted that the average investment in electric transmission from 2016 to 2020 is forecast to be $17.1bn per year.
The forecast for 2018 and beyond was revised down significantly as more projects that were expected to come online that year have been pushed out to later dates or have been suspended altogether, he said.
The forecast for 2018 continues to be robust, but most of the new projects that are being announced are smaller in size, Knutson said, adding: “We don’t see a lot of long-haul projects being announced. A lot of it has to do with aging infrastructure and reconductoring,” as well as with renewable energy integration.
As noted in his presentation, TransmissionHub is tracking $45.1bn of HVDC electric transmission projects, and $17.7bn in underground and underwater projects.
In addition, TransmissionHub is forecasting electric transmission investment in 2016 to be $9.8bn, which is down from the $10.4bn that it forecast in September. Of that $9.8bn, $2.3bn is under construction. TransmissionHub is forecasting electric transmission in 2017 to be $9.1bn, of which $5.6bn is under construction; $19.2bn in 2018, of which $9.2bn is under construction; and $28.3bn in 2019, of which $3.7bn is under construction.
Knutson noted that one of the biggest changes that occurred from the last quarterly update to now is in terms of project size.
As reported in September, 126 projects were expected to come online this year and, of those, 21 had a cost greater than $100m.
Now, as noted in Knutson’s presentation, 96 projects are expected to come online this year and, of those, 20 have a cost greater than $100m. Also, of 139 projects that are expected to come online in 2017, 24 have a cost greater than $100m; of 160 projects in 2018, 47 have a cost greater than $100m; and of 94 projects in 2019, 48 have a cost greater than $100m.
According to his presentation, transmission projects that began operating this year include:
- Southern California Edison’s estimated $1.7bn, 250-mile, 500-kV Tehachapi Segments 4-11 in California
- Public Service Electric and Gas’ estimated $975m, 50-mile, 230-kV underground/aboveground Northeast Grid Reliability Transmission Project in New Jersey
- Xcel Energy’s (NYSE:XEL) estimated $500m, 153-mile, 345×2-kV, Hampton-Rochester-La Crosse project in Minnesota and Wisconsin
Transmission projects that are under construction and expected to come online this year include:
- Transource Energy’s estimated $400m, 180-mile, 345-kV Midwest Transmission Project in Nebraska and Missouri
- Electric Transmission Texas’ estimated $398m, 156-mile, 345-kV Lobo to Rio Bravo to North Edinburg project in Texas
- MidAmerican Energy Company’s estimated $259m, 120-mile, 345×2-kV O’Brien to Webster project in Iowa
Transmission projects that are scheduled to come online in 2017 include:
- Basin Electric Power Cooperative’s estimated $350m, 200-mile, 345×2-kV Antelope Valley Station to Neset Transmission Project in North Dakota; it is under construction
- Appalachian Power Company’s estimated $337m, 52-mile, 138-kV Kanawha Valley Area Transmission Reinforcement Project in West Virginia; it is under construction
- ITC Midwest’s estimated $283m, 100-mile, 345×2-kV Minnesota-Iowa transmission project in Minnesota and Iowa; it is under construction
- Dominion’s (NYSE:D) estimated $155m, eight-mile, 500-kV Surry to Skiffes Creek project in Virginia; it is planned
- Oncor Delivery Company’s estimated $126m, 116-mile, 138×2-kV Permian Basin-Culberson project in Texas; it is planned
Transmission projects that are scheduled to be online in 2018 include:
- American Transmission Company’s estimated $580m, 180-mile, 345-kV Badger Coulee Transmission Line Project in Wisconsin; it is under construction
- Valley Electric Association’s estimated $500m, 294-mile, 230-kV Nevada West Connect project in Nevada and California; it is planned
- Bonneville Power Administration’s estimated $459m, 79-mile, 500-kV I-5 Corridor Reinforcement Project in Washington and Oregon; it is planned
- Clean Line Energy Partners’ estimated $400m, 200-mile, 345×2-kV Western Spirit Clean Line project in New Mexico; it is planned
- Northern Indiana Public Service Company’s estimated $388m, 70-mile, 765-kV Greentown-Reynolds Electric System Improvement Project in Indiana; it is under construction
Knutson also discussed generation, which “is one of the drivers of transmission,” noting that gas, wind and solar energy continue to dominate the generation landscape.
He continued, “95% of everything that we’re tracking in terms of new capacity is made up of gas, wind and solar projects.”
According to his presentation, U.S. investment in 2016-2018 is forecast as such:
- Gas: 77.3 GW, or 55%
- Wind: 33.5 GW, or 24%
- Solar: 22.1 GW, or 16%
While solar and wind are supported by the investment and production tax credits, as well as by state renewable portfolio standards, natural gas “is all economics. In fact, coal and nuclear are suffering greatly – [they] cannot compete with those natural gas prices.”
According to his presentation, for the most recent 12 months ending in August, natural gas made up 35% of the U.S. electric utility fuel mix, followed by coal at 30%, nuclear at 20%, non-hydro renewables at 8%, and hydro at 7%.
Regarding the average delivered price of coal and natural gas to U.S. electric power plants, his presentation noted that during the most recent 12 months ending in August, compared with the same period in 2015, for electric utilities, coal was down 5.6% to $2.19/mmBtu, and gas was down 25.5% to $2.74/mmBtu; and for independent power producers, coal was down 9.6% to $1.97/mmBtu, and gas was down 28.4% to $2.42.
During that period, electric rates for residential customers were down 0.16% to 12.6 cents/kWh, and they were down for all customers 1.44%, to 10.3 cents/kWh.
As noted in his presentation, capital spending on transmission projects continues at a strong pace but could slow down, and the build out of renewable and gas generation continues to be a key driver for new transmission projects.
Discussing the recent presidential election, Knutson noted that the new administration is expected to support infrastructure development. Commissioner vacancies at FERC and the U.S. Nuclear Regulatory Commission, as well as the vacancy at the U.S. Supreme Court following the death of Justice Antonin Scalia continue to be concerning for the industry, Knutson said.
He also noted that since the election, there has been a lot of discussion about the U.S. Environmental Protection Agency’s Clean Power Plan potentially not surviving.
“The real effort to reduce emissions nationwide has already been well underway, and the CPP really might not be needed because it looks like [reducing emissions is] a market-driven phenomenon” that is being driven by customer demand, he said.
He continued, “In some cases, the CPP is needed more as a stopgap against higher natural gas prices, which could lead to more coal consumption, which would lead to more carbon.”
Another area of major focus involves market design and organized markets, Knutson said, adding, “How do you protect traditional baseload capacity like coal and nuclear? It’s become a huge issue, particularly in the Midwest” as well as in the Northeast, where a number of coal and nuclear power plants have retired, or are scheduled to retire.
Permitting and securing right of way for transmission projects continue to be a challenge for the industry, he said, and as his presentation noted, an energy policy bill is unlikely to pass in the lame duck Congress.
Among other things, his presentation also noted that residential electric sales for the most recent 12 months ending in August were down 1.5% compared with the same period in 2015; commercial sales were also down 0.01%, as were industrial sales by 3%.