Out of sight, out of mind? Costs and benefits of undergrounding overhead power lines

Brad Johnson, contributing Editor

In the last decade, the U.S. East Coast and Midwest regions have experienced several catastrophic “100 year storms.” These storms have left widespread electric power outages that have lasted for several days.

Given the critical role that electricity plays in our modern lifestyle, even a momentary power outage is an inconvenience. A days-long power outage presents a major hardship and can be catastrophic in terms of its health and safety consequences, and the economic losses it creates.

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Why then, don’t we bury more of our power lines so they will be protected from storms?

The fact is we already are placing significant numbers of power lines underground. Over the past 10 years, approximately half of the capital expenditures by U.S. investor-owned utilities for new transmission and distribution wires have been for underground wires. Almost 80 percent of the nation’s electric grid, however, has been built with overhead power lines.

This report finds that burying existing overhead power lines does not completely protect consumers from storm-related power outages. However, underground power lines do result in fewer overall power outages, but the duration of power outages on underground systems tends to be longer than for overhead lines.

Also, undergrounding is expensive, costing up to $1 million/mile or almost 10 times the cost of a new overhead power line. This means that most undergrounding projects cannot be economically justified and must cite intangible, unquantifiable benefits such as improved community or neighborhood aesthetics for their justification.

Does undergrounding improve reliability?

Comparing the reliability of overhead power lines to underground power lines is difficult. Most utility outage-reporting systems do not separately track overhead and underground systems.

Another problem in trying to evaluate underground lines is that most underground circuits have at least some component above the ground. Installing monitoring equipment to distinguish between outages on the overhead and underground components of the same circuit is prohibitively expensive.

Comparative reliability data indicate that the frequency of outages on underground systems can be substantially less than for overhead systems. However, when the duration of outages is compared, underground systems lose much of their advantage.

Table 1 summarizes five years of underground and overhead reliability comparisons for North Carolina’s investor-owned electric utilities—Duke Energy, Progress Energy Carolinas and Dominion North Carolina Power. The data indicate that the frequency of outages on underground systems was 50 percent less than for overhead systems, but the average duration of an underground outage was 58 percent longer than for an overhead outage.

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The following summary points, taken from reports produced by utilities and conversations with industry experts, provide additional information on the reliability characteristics of overhead and underground power lines.

“- Overhead lines tend to have more power outages primarily due to trees coming in contact with overhead lines.
“- It is relatively easy to locate a fault on an overhead line and repair it. A single line worker, for example, can locate and repair a fuse. This results in shorter duration outages. Underground lines require specialized equipment and crews to locate a fault, a separate crew with heavy equipment to dig up a line, and a specialized crew to repair the fault. This greatly increases the cost and the time to repair a fault on an underground system.
“- In urban areas, underground lines are four times more costly to maintain than overhead facilities.
“- Underground lines have a higher failure rate initially due to dig-ins and installation problems. After three or four years, however, failures become virtually non-existent.
“- As underground cables approach their end of life, failure rates increase significantly and these failures are extremely difficult to locate and repair. Maryland utilities report that their underground cables are becoming unreliable after 15 to 20 years and reaching their end of life after 25 to 35 years.
“- Pepco found that customers served by 40-year-old overhead lines had better reliability than customers served by 20-year-old underground lines.
“- Two Maryland utilities, Choptank and Conectiv, have replaced underground distribution systems with overhead systems to improve reliability.
“- Water and moisture infiltration can cause significant failures in underground systems when they are flooded, as often happens in hurricanes.
“- Due to cost or technical considerations, it is unlikely that 100 percent of the circuit from the substation to the customer can be placed entirely underground. This leaves the circuit vulnerable to the same types of events that impact other overhead lines, e.g. high winds and ice storms.

Costs of undergrounding

In the U.S., the North Carolina Utilities Commission recently estimated it would take its three investor-owned utilities 25 years to underground all of their existing overhead distribution systems at a cost of approximately $41 billion. This six-fold increase in the existing book value of the utilities’ current distribution assets would require a 125 percent rate increase.

In other words, consumers would have to pay more than twice as much for electricity to enjoy the “benefits” of underground lines.

Underground cost data for other U.S. utilities is summarized in Table 2, which indicates that the cost of placing overhead power lines underground is five to 10 times the cost of new overhead power lines.

Based on the projected benefits and costs for undergrounding much of its existing urban and suburban power lines, an Australian study calculated that the benefits would offset only about 11 percent of total costs.

For the U.S., no comparable benefit cost analysis exists. However, based on the high costs of undergrounding projected in Table 2, it appears that placing existing overhead lines underground is difficult to justify economically. Today, most undergrounding costs appear to be justified by aesthetic and public-policy considerations.

In spite of its high cost and lack of economic justification, undergrounding is very popular across the country. In nine out of 10 new subdivisions, contractors bury power lines. In addition, dozens of cities have developed comprehensive plans to bury or relocate utility lines to improve aesthetics.

When it comes to converting existing overhead lines to underground, a variety of programs are being utilized. They include special assessment areas, undergrounding districts, and state and local government initiatives.

Aesthetics rule

Placing existing power lines underground is expensive, costing approximately $1 million/mile. This is almost 10 times the cost of a new overhead power line.

While communities and individuals continue to push for undergrounding—particularly after extended power outages caused by major storms—the reliability benefits that would result are uncertain, and there appears to be little economic justification for paying the required premiums.

Indeed, in its study of the undergrounding issue, the Maryland Public Service Commission concluded, “If a 10 percent return is imputed to the great amounts of capital freed up by building overhead instead of underground line, the earnings alone will pay for substantial ongoing overhead maintenance,” implying that utilities could have more resources available to them to perform maintenance and improve reliability on overhead lines if they invested less in new underground facilities.

For the foreseeable future, however, it appears that the undergrounding of existing overhead power lines will continue, justified primarily by aesthetic considerations—not reliability or economic benefits. Many consumers simply want their power lines placed underground, regardless of the costs. The challenge for decision makers, is determining who will pay for these projects and who will benefit.

Note: This article was excerpted from a January 2004 report prepared by Johnson, an independent energy advisor, for the Edison Electric Institute. To access the full report, visit www.eei.org/industry_ issues/energy_infrastructure/distribution/ UndergroundReport.pdf

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