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April 23, 2015
Delaying Investment in U.S. Transmission Infrastructure Can Result in Higher Costs and Increased Risks, According to Report by Brattle Economists

A report released today by economists at The Brattle Group finds that U.S. transmission planning processes need to more fully recognize the benefits of enhanced transmission to protect consumers from the high costs and risks of an inadequate and insufficiently flexible grid. Commissioned by WIRES, the study finds that, taken as a whole, today’s transmission planning techniques are not likely to optimize the benefits of transmission investment.

An update to a 2013 WIRES study conducted by Brattle economists, the current study recognizes three principal deficiencies within the transmission planning process, which collectively create significant barriers to developing the most valuable and cost-effective regional and interregional transmission projects and infrastructure. The deficiencies are identified as:

  1. Planners and policy makers do not account for the high costs and risks of an insufficiently robust and insufficiently flexible transmission infrastructure on electricity consumers and the risk-mitigation value of transmission investments to reduce costs under potential future stresses;
  2. Planners and policy makers do not consider the full range of benefits that transmission investments can provide and thus understate the expected value of such projects; and
  3. The interregional planning processes are ineffective and are generally unable to identify valuable transmission investments that would benefit two or more regions.

If not addressed, these deficiencies could lead to higher overall costs, lost opportunities to identify and select alternative solutions that are lower-cost or higher-value in the long term, and an insufficiently robust and flexible grid.

According to the authors, transmission planning continues to be “compartmentalized” into projects mostly justified by a reliability need or by narrowly-defined economic benefits. Instead, the authors suggest a more realistic determination about the potential benefits of a project, especially the economic and public policy value of interstate and interregional transmission, which would ensure that projects that are approved and built are the optimal solutions. Additionally, the authors recognize the key role of policy makers, including industry regulators, in influencing the scope of regional and interregional planning efforts.

The study recommends that state and federal policy makers encourage transmission planners to pay greater attention to transformation underway by the electric power system, the risks and costs associated with challenging and extreme market conditions, and the ability of a more robust, flexible transmission infrastructure to reduce the costs and risks of delivering power to consumers.

“Toward More Effective Transmission Planning: Addressing the Costs and Risks of an Insufficiently Flexible Electricity Grid,” is authored by Brattle principals Hannes Pfeifenberger and Judy Chang, and associate Akarsh Sheilendranath. The full report, along with a summary and recent presentation, can be downloaded below.