Upgrading the High-Voltage Grid Could Serve as Economic Stimulus Package, Report Says

Increased capacity could spur new jobs, report asserts, as well as drive down the cost of power in congested regions

Could modernizing the nation’s high-voltage transmission system power an economic revival?

If the nation invests tens of billions of dollars in improving power grids, it could be a major potential source of jobs, according to an industry-financed study released yesterday.

The Brattle Group, an energy consulting firm, projected that spending on new electric transmission facilities could soon reach $12 billion to $16 billion a year, an investment that could translate into $30 billion to $40 billion in economic activity. It also has the potential to create up to 200,000 fulltime jobs over each of the next two decades.

Beyond its economic impact, the investments could lead to greater reliability of the power grids and lower electricity bills as a result of reduced congestion on high-voltage lines, the study said. It further indicated that promoting a more competitive wholesale electricity market could also reduce energy bills.

Ramping Up Investments

The release of the study, commissioned by WIRES (Working group for Investment in Reliable and Economic electric Systems), comes at a time when the industry is ramping up investments in high-voltage lines and regulatory officials are debating how the costs of those improvements are going to be allocated among ratepayers.

“We think the transmission system is part of the solution to the job problem,” said James Hoecker, general counsel to WIRES, an industry trade association representing transmission owners and investors.

“This report provides strong evidence that meeting the grid’s challenges — including delivery of power from remote renewable generation to distant load centers — is good for the economy and will help create jobs,” said Jolly Hayden, vice president of Transmission Development at NextEra Energy Resources and president of WIRES.

The study did not detail the impact such a huge investment would have on energy bills, but Hannes Pfeiferberger, one of the authors, argued that while transmission costs (which account for about 8 percent of an electric bill) may rise, that would be more than offset by an overall decline in energy prices. In the PJM Interconnection, the study asserted, high-voltage upgrades will reduce congestion costs by $1.7 billion annually.

Energy analysts, however, said that may not always be the case.

“It depends on the location,” said Paul Patterson, an analyst at Glenrock Associates. “In areas where energy prices are expensive, it may, but if prices are low, it may not.”

Patterson agreed there is a need for new transmission capacity and upgrades, but noted the requirement faces two huge challenges: dealing with people who are opposed to a site because of the Not In My Back Yard (NIMBY) syndrome and cost allocation, which is not a small issue.

Renewable Hurdle

The study also argued that renewable energy sources, such as wind and solar, won’t be developed without transmission capacity capable of delivering that energy from areas where wind and solar resources are plentiful to more congested urban areas. If that capacity is created, the study noted, it could translate into another 130,000 to 250,000 jobs in renewable energy.

That view, however, is disputed by some environmentalists. Jeff Tittel, director of the New Jersey chapter of the Sierra Club, said the expansion of the transmission system would undercut development of solar and wind power by allowing the industry to wheel cheaper and dirtier power to the region.

“The problem is it would make it easier for these companies to build transmission lines and earn a 13 percent return on equity, while burdening ratepayers in the process,” he said.
The study’s positive outlook is nevertheless contingent on solving several nettlesome regulatory problems.
“Although transmission investment is on the rise, there is plenty of evidence that good projects are falling victim to duplication and delay, lack of regional coordination, and parochial interests,” Hayden said. “That means the economy suffers too. If regulatory risk can be diminished, private capital will do the rest. Today, many utilities, developers and technology firms are trying — often in vain — to participate in strengthening our energy infrastructure.”