Transmission Benefits for Consumers and the Economy

WIRES and the Environmental and Energy Study Institute held a briefing on the widespread, substantial, and long-lasting benefits of investment in electric transmission. Expanding and upgrading the grid will make it more resilient and deliver increased economic, environmental, and consumer benefits in the billions of dollars over its useful life, according to WIRES.

And yet, investment in new regional and interregional electric transmission has been incremental and subject to elaborate and expensive planning and permitting requirements that can easily last a decade. This panel discussed why transmission should be a major component of the infrastructure conversation and why the economic and societal benefits from a robust high-voltage grid are so important.

 

James Hoecker, Husch Blackwell LLP, WIRES Counsel; former chair, Federal Energy Regulatory Commission

• Hoecker started off the discussion by reminding us that with all the infrastructure talk going on, not much attention is being paid to the importance of electric transmission. The American Society of Civil Engineers gave infrastructure a grade of D+ this year, and that includes transmission.
• While everyone is getting excited about ever greater electrification of the economy, the truth is the power grid isn’t equipped to handle that yet. It needs to be more robust in order to meet the coming electricity demands, and policymakers, regulators, and the public need to be persuaded of this need if greater electrification of the electric power system is to occur.
• Hoecker also mentioned that although we might not necessarily need more transmission right now, we are in a transformational period which we should be using to prepare for the potential future need for more transmission.
• New technologies cannot replace transmission, and oftentimes increased transmission services will benefit these new technologies.
• When evaluating grid projects, we must look not only at the costs, but also the benefits accompanying the costs, and how they balance out in the long run. When doing this, it’s clear to see that transmission is a “no brainer” and is key to improving American infrastructure. Despite being big projects, transmission costs are a very small percentage of one’s electric bill.
• In the end, transmission projects are a big undertaking that require 10 – 15 years to develop, but they will pay off in the long run.

 

Julia Frayer, Managing Director, London Economics International LLC

• Frayer began by discussing the report titled “The Truth about the Need for Electric Transmission Investment: Sixteen Myths Debunked.” Most of the transmission myths have a seed of truth in them, but it has been vastly overwhelmed with misunderstanding of the topic at hand.
• One myth Frayer dispelled is that market resource alternatives (MRAs), such as distributed generation and energy storage, eliminate the need for transmission infrastructure. While MRAs can provide some of the benefits of transmission, they are usually not capable of doing everything that transmission can on the same scale.
• While transmission projects have high price tags, the uncertainties of the investment can be quantified and analyzed to avoid bad outcomes, and projects are often required to have a certain benefit-to-cost ratio before they can be implemented. For example, Midcontinent Independent System Operator (MISO), imposes a ratio of up to 3.0 for its Multi-Value Projects -- the benefits of these projects have to be 3 times greater than the costs.
• Everyone benefits from new transmission, not just the consumers on the receiving end. “Source” regions are areas where new transmission lines are constructed, “sink" regions are areas that receive more access to electric power as a result of new transmission lines, and “transit” regions are areas where transmission lines run between “source” and “sink” regions. All of these areas benefit economically.
• In order to fully seize transmission opportunities, decision-makers need to evaluate costs and benefits as a whole, plan for the future and for the unexpected, and comprehensively examine transmission alternatives.
• The second report, “How Does Electric Transmission Benefit You?” demonstrates that it is possible to quantify the benefits of transmission comprehensively.
• Transmission benefits everyone from households to power producers, throughout large geographical distances, for many years, in fact, decades. These benefits include lower energy bills, reduced emissions, more jobs, and improved grid reliability.
• Frayer explained that the report focuses on two hypothetical projects that simulated current power systems. Both these projects were analyzed using common modeling tools. Some of the benefits of the projects are a boost to local economies and job creation in the short term, electricity market cost savings, emissions reductions, efficient electricity production, and increased quality of life in the medium term, and reliability benefits, such as avoiding costly blackouts, in the long term.
• Frayer emphasized the necessity of considering all areas of benefits, such as economic, social, and reliability benefits when conducting an analysis. Just one area is not enough to illustrate the full impact of a project.
• Frayer finished up with 3 key points: we can measure the significant benefits of transmission; transmission has many different types of beneficiaries; and the benefits are long-lasting and will occur over long periods of time.

 

Nina Plaushin, President, WIRES; Vice President, Federal Affairs, ITC Holdings Corp.

• Plaushin demonstrated that while demand for power will continue to decrease as energy efficiency increases, there will still be a role for the bulk power system.  For example, new companies like Amazon require lots of power, especially in places where there might not be a sufficient amount yet.
• Additionally, even as other technologies not connected to the grid emerge, the grid is still needed to move excess power from areas of excess power into either storage or areas in need of power.
• Slightly increasing transmission costs overall could greatly bring down costs in other areas of electricity, such as generation and storage.
• Plaushin also emphasized the importance of resiliency of electric transmission in the face of extreme events, and explained that although costs of preparing for future crises are high, they will pay off in the long run, as opposed to having to rebuild everything once a crisis hits.
• Utilities have planned power outages for maintenance purposes, and the more robust our transmission grid, the faster and more efficient these outages are.
• Plaushin stressed the issue of economic projects not taking reliability impacts into account, and reliability projects not taking economic impacts into account. This prevents project managers from seeing the whole range of benefits a project could have, making them think the project is not worth it because they can’t see the whole picture.
• Plaushin concluded by saying that we need to change the way we think about planning. Specifically we need to think in terms of long term benefits and resilience, not just cutting costs in the present.