Increased Transmission Investment to Support Growing Electrification Demand and Access Low-Cost Resources Can Reduce Customer Rates
A new report authored by Brattle economists and prepared for WIRES finds that the growing electrification of end uses currently powered by fossil fuels will significantly increase electricity demand in North America. To support this electrification and reduce emissions, additional low-carbon electricity generation resources will need to be built and integrated by robust transmission (and distribution) infrastructure. The report suggests that the overall impact of increased transmission investment on consumer rates is only modest—likely decreasing overall customer rates in a carbon-constrained future through improved access to and diversification of low-cost generating resources.
In the study, authors Jurgen Weiss, Michael Hagerty, and María Castañer provide insights into the extent to which additional investment in electric infrastructure will be necessary to support the transition to a low-carbon future. The authors project that $30–$90 billion in incremental transmission investments will be necessary in the U.S. by 2030 to cost-effectively meet the changing system needs due to electrification, with an additional $200–$600 billion needed between 2030 and 2050. Compared to the average annual transmission investment during the past 10 years, this projected level of investment would represent a 20–50% increase through 2030 (equivalent to $3-$7 billion per year), and a 50–170% increase in transmission investment between 2030 and 2050 ($7-$25 billion per year).
While such transmission investments are high relative to historic investment levels, the authors note that the resulting impact on customer rates likely is very modest or even beneficial for three reasons: (1) transmission costs represent a small share of customer rates; (2) the total transmission investment will be spread over greater electricity demand with electrification; and (3) the higher costs of transmission are likely to be more than offset by lower generation costs, since much of the transmission investment is needed to access and diversify low-cost renewable resources.
The authors also offer several important takeaways for transmission planners and policymakers, noting that it will be increasingly important for policymakers that set decarbonization goals to appreciate the infrastructure investments necessary to cost-effectively achieve these goals. In addition, a reduction in customer rates can only materialize if the transmission system is built in anticipation of the electrification demand so that low-cost renewable generation additions become possible.
The report further finds that connecting fast-charging infrastructure to existing transmission assets (rather than the distribution grid) may help build the needed fast-charging infrastructure more quickly and cost-effectively—particularly along highway corridors but also in urban areas.
The full report, “The Coming Electrification of the North American Economy: Why We Need a Robust Transmission Grid,” is available on the WIRES website.
Prepared for WIRESView Report