Transmission faces more hurdles as utility bills climb

According to Consumer Price Increase data, customers paid on average 14.3 percent more in 2022 than they did in 2021. That number is more than twice the 6.5% year over year rise in prices overall in the country. 

Given how expensive electric bills have become, it makes sense that The Federal Energy Regulatory Commission would look for ways to bring consumer costs down. 

Recently, the federal agency’s commissioner, Mark Christie, spoke to the media about revising financial and regulatory incentives to build power lines to make sure not too much of a burden is passed on to consumers. His message, however, was part of the same announcement that the commission had unanimously approved a number of incentives for Great River Energy’s $970 million transmission project in Minnesota and a second $573.5 million project between South Dakota and Minnesota. 

Christie’s announcement illustrates the tough spot the industry is in right now. We need more transmission to boost renewable adoption, improve reliability, and lower prices long term. However, it seems we also need to do something to curtail record electric prices in the short term. The problem is that those two goals, as we see in Minnesota, are in direct conflict. 

Before energy markets went wild and transformer prices went through the roof, the U.S. was benefiting from the cheapest energy/generation of all time. Electricity prices, although much lower than they are now, did not reflect the cheapness of energy at the time. They were normal. This was in large part due to the country’s insufficient transmission infrastructure. 

Here’s how the paradox was summed up in an article at CanaryMedia.com: 

“Two trends are clear. First, the cost of generating power has declined significantly — from 6.8 cents per kilowatt-hour in 2010 to 4.6 cents per kWh in 2020, using 2020 inflation-adjusted figures. That’s due largely to falling natural gas prices and the growing share of power coming from wind and solar. With renewables making up the vast majority of new generation capacity, the generation share of utility costs is likely to continue declining over the coming decade. 

At the same time, the costs of the infrastructure needed to deliver power rose from 2.6cents per kilowatt-hour in 2010 to 4.3 cents per kWh in 2020 — nearly equal to the cost of generating the power itself. Delivery costs have in fact been rising steadily since 1998, according to the EIA — an outgrowth of the need for new grid infrastructure to replace aging lines and equipment and accommodate new wind and solar power farms, as well as for new technologies such as smart meters to modernize the utility system. And according to multiple studies, the U.S. will need much bigger grid investments in future years to accommodate the massive growth in renewable energy that will be required to decarbonize the power sector.”

Canary Media’s findings are not unique. Utilities and other research committees have come to the same conclusions again and again. CapX2050 Transmission Vision, a 2019 study put together by 10 major upper-midwest utilities, including Xcel and Great River Energy, predicted the need for major transmission upgrades in the region. 

So, again, we need more transmission to bring prices down and for many other reasons, but prices are so high right now that we can’t subsidize transmission. In my humble opinion, we should prioritize our massive structural problems over short term financial concerns. Energy markets and the transformer problem will fix themselves eventually, but our broken transmission system will not.