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July 2013 Policy Study, Number 13-5

   

Electricity – Make It, Use It – 24/7/365

Review of Electrical Grid Issues

   

Transmission Solutions Exist, but Costs Are High

   

 

Recently, approximately $63 billion a year has been spent on overall system upgrades, with a larger amount spent on generation capacity ($35 billion) including renewable energy generation methods, and only $28 billion spent on transmission and distribution.[18]

 

High-voltage transmission lines get the electricity from the generation point to substations, while distribution is the part of the system which delivers electricity from substations to the point of end consumption, either via overhead or underground lines.

 

According to the ASCE, transmission spending has been growing at about 7 percent a year. In contrast local distribution spending has declined since 2006. Nationally, ASCE estimates the overall transmission and distribution spending needed in the next 17 years to be over $107 billion per year.[19]

 

Yet, according to ASCE, this is not enough. For example, the estimate of transmission and distribution spending gaps (the difference in expected spending compared to estimates of needed upgrades and expansions) by 2020 in the Midwest alone is $4.4 billion per year, or almost $31 billion by 2020.[20] This is expected to grow to over $45 billion per year by 2040, as the work to be done accumulates, and inflation and regulatory requirements increase.

 

The 17 new MISO high-voltage transmission lines in the Midwest are expected to cost $5.2 billion. The cost for these new lines ranges from $2-$4 million per mile, depending on the kilovolts carried.[21] The higher the voltage, the higher the cost.

 

Utility repair and improvement costs are passed onto the customer, as might be expected. According to utility consulting firm PA Consulting Group, the amount customers are billed which is attributable to normal infrastructure repair is $232 per year, not including unusual, large investments such as new power plants or major transmission lines.[22]

 

Nationwide, according to the ASCE report, about 17,000 miles of new high-voltage transmission lines are planned for the next five years, compared to approximately 6,500 miles per year on average. These high-voltage lines are critical for managing wind energy, moving it from the plains to urban centers.

 

Utilities are therefore attempting to address critical needs – but permitting and siting issues, cost allocations, and environmental protests are impacting the timely and cost-effective completion of this work. Other issues which must be addressed are cross-state and intra-state jurisdictional permitting and coordination, multiple right-of-way owners, difficult terrain with environmental impacts, and unique construction methods such as transporting and installing towers by helicopter.

 

The Chicago federal appeals court recently ruled that it was appropriate for the construction costs of the 17 new high-voltage (over 345kV) transmission lines proposed by MISO to be pro-rated to states and customers throughout the region, based on the percent of the overall Midwest grid electricity use.[23] These new lines are critical to the successful transmission of electricity from the high generation, low-use states of the upper Midwest to the Northeast and Atlantic population centers.

 

Because electric utilities are generally private companies versus public entities, development is affected by the private lending and bond markets, overall economic risks, and regulatory rigor and uncertainty. Favorable regulatory policies toward development, electricity usage, and demand are critical.

 

One of the main problems with improving the transmission system, according to industry experts, is the “complex process of permissions across states, planning, constructing and meeting interstate and inter-regional regulations.”[24]

 

One solution for moving electricity from generation point to consumers is the building of “extra-high” voltage transmission lines. The Strategic Midwest Area Renewable Transmission Study (SMARTransmission), completed in 2010, looked at the feasibility of building 765-kilovolt transmission lines in the Upper Midwest.[25]

 

The 765-kV towers are only slightly larger overall than 345-kV towers – approximately 130 feet tall with a 200-foot right-of-way compared to 150 feet tall and a 150 foot right-of-way for the lower capacity towers.[26] Because of increased power losses at the lower transmission strength, these towers must be taller. Additionally, one 765-kV tower carries the same amount of electricity as four 345-kV lines. These towers were first used in Quebec, Canada, in 1965 to carry hydroelectricity.[27]

 

Though an enormous project in terms of scope and cost, the higher voltage towers will contribute significantly to the overall load capacity of the system as well as increased reliability. The MISO project is a result of that study.

 

Another high voltage project, the Green Power Express, which would cover some of the same areas as the MISO project, is being considered by a Michigan company, ITC holdings. This would be a 3,000-mile network from North Dakota to Indiana. Its estimated cost is $10-12 billion, with a 2020 projected completion date.[28]

 

Clean Line Energy Partners has proposed a Rock Island clean line high-voltage (3,500-megawatt) direct current line from Iowa to Chicago.[29] The costs for this project are also well over $1 billion. This project is different from the MISO effort in that it is a “merchant” project, where the line owners must finance it through separate contracts with customers signed in advance, instead of through rate increases approved by regulators which apply to any current or future end user.

 

This transmission line would start in O’Brien County, Iowa – north of Des Moines, in an area thick with wind turbines. It would end in Grundy County, less than an hour southwest of the Chicago Loop. Clean Line developers are currently reaching right-of-way and property tax agreements with individual property owners and counties.

 

Unfortunately, current wholesale electricity prices, about $30 per megawatt-hour, are less than the cost of building and operating the line. In order to be profitable, the Rock Island line will have to move electricity at a 50 percent higher price, or about $45 per megawatt-hour.[30] Much of the electricity carried by these lines will come from wind turbines, including the NorthStar and Wind Rock wind farms.

 

Recently the company and the State of Illinois announced they have reached an agreement on mitigating agricultural impacts caused by the tower installation; however, eminent domain issues still remain a concern for many landowners in Illinois.[31] These concerns mirror the ones expressed by landowners in Kansas, where Clean Line is also proposing a high-voltage line (600 kV) through prime farmland.[32]

 

Importantly, direct current can be moved at higher voltages than alternating current, as the power all moves only one way. Therefore the direct current high-voltage lines are most efficient at moving large amounts of power from the generation source to the area where it’s needed.

 

An important aspect of direct current lines is that they do not give off stray current as some alternating current lines do.[33] This mitigates potential effects on both people and animals in the area.

 

The towers required for direct current lines are also smaller and shorter, requiring less right-of-way. However, converting the current to alternating for end users requires expensive converters at the distribution end.[34]

 

As all of these various projects move forward, with estimated completion dates from 2016 to 2020, long-distance transmission concerns are being addressed. This will generally impact the bottleneck, congestion, and availability issues in the urban centers of the central-Midwest and East Coast.

 

   

 

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