Transmission investment still strong, though few large projects coming

Electric transmission investment has stayed strong overall, and fewer large projects are expected to come online during the next couple of years, according to Kent Knutson, director of Hub Services at PennWell.

As noted in his presentation during the June 8 TransmissionHub Quarterly Market Update presented by AZZ Galvanizing, TransmissionHub is tracking $135.8 billion in planned and under construction transmission projects in the United States and Canada — representing 39,173 miles of transmission line — down from the $137 billion that was reported in 1Q16. Of that $135.8 billion, $24.6 billion in project value are under construction. The average investment between 2016 and 2020 is $20.3 billion per year, the presentation added.

“If the projects that are in the hopper would all come online in 2018, or 2019, it could be a record year,” Knutson said.

According to TransmissionHub, most new project announcements have involved smaller projects that focus on reliability and interconnecting renewable energy resources, he said.

Most of the electric transmission that exists in the New York ISO footprint today — or almost 84 percent — includes projects that were built prior to 1980, he said.

“It’s been estimated that over the next several years, between now and 2030, an investment as much as $25 billion needs to happen in New York to replace and refurbish” about half of the transmission that exists in the state, or around 5,000 circuit miles, he said.

As noted in Knutson’s presentation, statistics support a robust transmission market, but it is slowing down. TransmissionHub is tracking $47.2 billion in HVDC transmission project investment, as well as $18.2 billion in underground and underwater projects.

Furthermore, TransmissionHub is forecasting electric transmission investment in 2016 to be $10.6 billion, down from its $11.3 billion forecast reported in March. Of that $10.6 billion, $8.2 billion is under construction.

Knutson noted that the change is attributed to, for instance, projects being pushed from going into service in 2016 to 2017 and beyond.

TransmissionHub is also forecasting $10.3 billion in electric transmission investment in 2017, with $5.2 billion under construction; $30.1 billion in 2018, with $7 billion under construction; and $28.5 billion in 2019, with $4.1 billion under construction.

Of the 130 projects expected to come online in 2016, 23 have a cost greater than $100 million; of the 132 projects expected to come online in 2017, 29 have a cost greater than $100 million; of the 150 projects expected to come online in 2018, 58 have a cost greater than $100 million; and of the 84 projects expected to come online in 2019, 45 have a cost greater than $100 million.

Knutson noted that according to information compiled from FERC Form 1 annual financial reports for major electric utilities, Public Service Enterprise Group invested about $4.8 billion from 2013 to 2015 in transmission capital expenditures, followed by Edison International at about $4.7 billion, American Electric Power at about $4.6 billion, Xcel Energy at about $2.9 billion, and Dominion Resources at about $2.8 billion.

Those reports also demonstrated that investment in new infrastructure from 2013 to 2015 totaled $53.4 billion, while transmission O&M expenses during the same time period totaled $32.7 billion. That is an overall investment number of $86.1 billion during the three-year period for investor-owned utilities in the United States.

Knutson said that the figures do not include large federal administrations like the Bonneville Power Administration and Western Area Power Administration, generation and transmission cooperatives, municipal utilities and Canadian transmission company data.

Transmission capital additions by operating companies showed that PSEG’s Public Service Electric and Gas invested about $4.8 billion from 2013 to 2015, followed by Edison International’s Southern California Edison (SCE) at about $4.7 billion, Dominion’s Virginia Electric and Power Co. (Dominion Virginia Power) at about $2.8 billion, and Pacific Gas & Electric, which invested about $2.4 billion during the three-year period.

In addition, transmission O&M expenses by operating companies showed that Oncor’s Oncor Electric Delivery Co. spent about $2.3 billion from 2013 to 2015, followed by CenterPoint’s CenterPoint Energy Houston Electric, which spent about $2 billion, and Eversource Energy’s NSTAR Electric, which spent about $1.1 billion.

That, Knutson said, demonstrates a robust market. While the costs are passed on to the consumer side, for the most part, the costs are being dampened somewhat by the lower fuel costs that is being experienced on the natural gas side, as well as with solar and wind resources, which are more subsidized through federal tax credits.

As noted in his presentation, transmission projects that are scheduled to come online this year include:

·      SCE’s estimated $1.7 billion, 250-mile, 500-kV Tehachapi Segments 4-11 project in California

·      PSE&G’s estimated $975 million, 50-mile, 230-kV, underground/aboveground Northeast Grid Reliability Transmission Project in New Jersey

·      The estimated $500 million, 153-mile, 345×2-kV Hampton—Rochester—La Crosse project in Minnesota and Wisconsin by Xcel and other companies

·      The estimated $400 million, 180-mile, 345-kV Midwest Transmission Project in Nebraska and Missouri by Transource Energy and the Omaha Public Power District

·      Electric Transmission Texas’ estimated $398 million, 156-mile, 345-kV Lobo to Rio Bravo to North

Transmission projects that are scheduled to come online in 2017 include:

·      The estimated $350 million, 200-mile, 345×2-kV Antelope Valley Station to Neset Transmission Project in North Dakota by Basin Electric Power Cooperative and WAPA

·      Appalachian Power Co.’s estimated $337 million, 52-mile, 138-kV Kanawha Valley Area Transmission Reinforcement Project in West Virginia

·      ITC Midwest’s estimated $283 million, 100-mile, 345×2-kV Minnesota—Iowa transmission project in Minnesota and Iowa

·      Commonwealth Edison’s estimated $277 million, 57-mile, 345-kV Grand Prairie Gateway Project in Illinois

·      APCo’s estimated $237 million, five-mile, 345-kV Cloverdale Expansion Project in Virginia

The presentation further noted that transmission projects that are scheduled to come online in 2018, that are under construction at this time include:

·      PSE&G’s estimated $1.2 billion, 56-mile, 345-kV underground/aboveground Linden to Bergen reliability project in New Jersey

·      The estimated $468 million, 181-mile, 345-kV Winco to Hazelton Project in Iowa by MidAmerican Energy Co. and ITC Holdings

Knutson noted that “this is the summer of uncertainty, with an election year gearing up and vacancies” at FERC needing to be filled, for instance.

“There’s a wait-and-see kind of attitude among investors and planners,” he said.

Also at FERC, a technical conference will be held later this month to assess the commission’s Order 1000, and will include a look at such issues as interregional projects as well as cost allocation, he said.

Knutson further discussed the “surprise decision” last month at the U.S. Court of Appeals for the D.C. Circuit delaying oral arguments on the U.S. Environmental Protection Agency’s Clean Power Plan from June 2 to Sept. 27.

Meanwhile, he said, “America’s utilities are already more than halfway to complying with the plan — the main reason has been cheap natural gas and tax credits for solar and wind” resources.

In addition, the U.S. Senate in April passed by a vote of 85-12 the Energy Policy Modernization Act, which, among other things, promotes investment in aging electric transmission, he said. The next step is for the U.S. House of Representatives to work out a compromise and move the bill to the White House.

“[I]f that happens, it could be the first time an energy bill is passed since 2007,” Knutson added.

On generation, he noted that natural gas, wind and solar resources continue to dominate the generation landscape. U.S. investment from 2016 to 2018 includes a forecast of 87.4 GW of natural gas, 29.7 GW of wind, and 21.3 GW of solar, according to his presentation.

Opportunities for transmission involve the country’s planning for a carbon-constrained future — that is, now is the time to plan for 2030 and beyond — as well as replacing aging infrastructure, and the near-term boom in tax credits supporting wind and solar resources, which rely on transmission projects, his presentation noted.

Challenges include that a declining and flat load growth will slow development.

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Corina Rivera-Linares, chief analyst for TransmissionHub, has covered the U.S. power industry for the past 10 years. Before joining TransmissionHub, Corina covered renewable energy and environmental issues, as well as transmission, generation, regulation, legislation and ISO/RTO matters at SNL Financial. She has also covered such topics as health, politics and education for weekly newspapers and national magazines. She can be reached at .

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