EEI Pegs Cost for Building New Transmission at $56 Billion

Maintaining transmission adequacy at year 2000 levels would require a quadrupling of transmission investments during this decade, but the price tag for building these new facilities -- including the cost of replacing retired capacity -- is about $56 billion, according to a recent study done for the Edison Electric Institute (EEI). This transmission investment cost is roughly half of the investment likely to be made in new generating units during the same time.

The study, "Transmission Planning for a Restructuring U.S. Electric Industry," was completed for EEI by Erich Hirst and Brendan Kirby, electric industry restructuring consultants based in Oak Ridge, TN.

According to the study, transmission planning is not keeping pace with the need for such planning. Because transmission owners and independent system operators are receiving so many requests for generator interconnections, they are unable to devote the staff resources needed to develop proactive transmission plans. That is they are focused primarily on preparing the system-impact and facility studies required for these new interconnections. Thus, many transmission plans are little more than compilations of individual generator-interconnection studies.

Also, because transmission planners have insufficient time and resources, little information is being provided to energy markets on the costs and locations of congestion. Such information could help potential investors in new generation decide where to locate new units and could also help load-serving entities decide what kinds of dynamic pricing and load-reduction programs to offer customers in different locations. The study said that because generation and load can serve, in some instances, as viable alternatives to new transmission, transmission plans need to explicitly consider such nontransmission alternatives.

Meanwhile, transmission planning may be too narrowly focused on the North American Electric Reliability Council's planning standards. In other words, transmission planning may pay insufficient attention to the benefits new transmission investments might offer competitive energy markets. In particular, those benefits may include a broader geographic scope of these markets and a reduction in the opportunities for individual generators to exercise market power.

Advanced technologies offer the hope of better control of transmission flows and voltages, the report went on to note. Such improved control would allow a system to be operated closer to its thermal limits, thereby expanding transmission capability without increasing its footprint. Thus, new technologies may reduce fights about transmission siting. In addition, these technologies may make it attractive for private investors to build individual facilities because the technologies allow for control of power flows over individual elements. Unfortunately, these advanced technologies are still too expensive for widespread application, although some are economic in niche applications.

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