September 2013 Brief: Volume 20, Number 25
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Moving Electricity Is a Big, Complex Business
by Deborah D. Thornton
The electrical grid has three main components – generation, transmission, and distribution – with transmission critical to long-term delivery. Recently, approximately $63 billion a year has been spent on overall electricity system upgrades, with a larger amount spent on generation capacity ($35 billion), including renewable energy. Unfortunately, only $28 billion has been spent on high-voltage transmission and substation distribution.
According to the American Society of Civil Engineers (ASCE) annual report on U.S. infrastructure issues, transmission spending has been growing at about 7 percent a year. The overall transmission and distribution spending needed in the next 17 years is over $107 billion per year. The estimate of transmission and distribution spending gaps in the Midwest alone is $4.4 billion per year, or almost $31 billion by 2020. This is expected to grow to over $45 billion per year by 2040, as the work accumulates and inflation and regulatory requirements increase. About 17,000 miles of new high-voltage transmission lines are planned for the next five years, compared to 6,500 miles per year on average. These high-voltage lines are especially critical for managing wind energy, moving it from the plains to urban centers.
The Midcontinent Independent System Operator (MISO) is one of the largest non-profit transmission groups in the U.S., with almost 66,000 miles of high-voltage lines throughout an 11-state – and Canada – region. Power generating companies in all or parts of Illinois, Indiana, Iowa, Michigan, Minnesota, Missouri, Nebraska, North and South Dakota, Ohio, and Wisconsin are members. Additionally, MISO manages reliability programs for companies as far west as Montana and down the Mississippi River to Arkansas, Kentucky, Louisiana, and Mississippi. In the Midwest, there are 17 new MISO high-voltage (over 345kV) transmission lines proposed, at a cost of $5.2 billion. This is based on a construction cost of $2-$4 million per mile, depending on the kilovolts carried. The higher the voltage carried, the higher the construction cost.
Another solution is “extra-high” voltage transmission lines. The 2010 Strategic Midwest Area Renewable Transmission study (SMARTransmission), looked at the feasibility of building 765-kilovolt transmission lines. 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. Because of increased power losses at lower transmission strength, 345-kV towers must be taller. Importantly, one 765-kV tower carries the same amount of electricity as four 345-kV lines. 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 Green Power Express high-voltage 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.
Clean Line Energy Partners has proposed a Rock Island high-voltage (3,500-megawatt) direct current line from Iowa to Chicago. This project is different from the MISO effort in that it is a “merchant” project, where the line owners finance it through contracts with customers signed in advance, instead of through rate increases approved by regulators. It would start in O’Brien County, Iowa, north of Des Moines, and end in Grundy County, less than an hour southwest of the Chicago Loop. Developers are currently reaching right-of-way and property tax agreements. Unfortunately, current wholesale electricity prices, about $30 per megawatt-hour, are less than the cost of building and operating the line. To be profitable, they will have to move electricity at about $45 per megawatt-hour. 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.
Importantly, direct current can be moved at higher voltages than alternating current, as the power moves only one way. Therefore direct current high-voltage lines are most efficient at moving large amounts of power where it’s needed and do not give off stray current. This mitigates potential effects on both people and animals. The towers are also smaller and shorter, requiring less right-of-way.
As these projects move forward, what becomes apparent is that this is big business, with big impacts. Permitting and siting issues, cost allocations, and environmental protests all impact timely and cost-effective completion, as do multiple right-of-way owners, difficult terrain, and unique construction methods such as installing towers by helicopter. Landowners’ and consumers’ safety and security concerns must be addressed. Development is also affected by the private lending, bond markets, and overall economic risks. Both state and federal bureaucrats and regulators play a critical role in the timely start and completion of projects.
It does not matter how much “renewable” energy is generated if the power cannot get from the high generation, low-use states (Iowa), to the high-demand Northeast and Atlantic population centers. Favorable regulatory policies toward development, electricity usage, and demand are critical.
Public Interest Institute’s POLICY STUDY, Electricity – Make It, Use It – 24/7/365, can be viewed at http://www.LimitedGovernment.org/ps-13-5.html.
Deborah D. Thornton is a Research Analyst with Public Interest Institute, Mount Pleasant, Iowa. Contact her at Public.Interest.Institute@LimitedGovernment.org.
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