Fact Check: Transmission pays for itself, saves consumers money
Studies show that expanding America’s electricity grid to meet 21st century needs more than pays for itself, and can even result in significant consumer savings. Improved transmission planning could save American families and businesses up to $47 billion every year, according to a recent white paper from the Brattle Group.
However, some groups remain unaware of these findings, wringing hands and missing the forest for the trees by focusing on upfront costs and ignoring long-term benefits.
The latest attacks focus on the Competitive Renewable Energy Zones, or CREZ lines. Built to relieve congestion on the Texas grid, the CREZ lines have been a major success. They allowed Texas to more than double the amount of wind energy it can transmit from the low-population northern and western parts of the state to large cities like Dallas, Austin, San Antonio and Houston. As a result, Texas now has more wind capacity under construction than any other state, providing a nearly $10 billion investment in the state’s economy.
These transmission lines, and all others planned in the state, passed rigorous cost-benefit tests showing they will pay for themselves in a matter of years by providing consumers with access to lower-cost energy. Recent analysis showed that continued growth of wind power can save Texans $15 billion on their electric bills through 2050.
Texas has always correctly recognized that a strong transmission system is essential for the state’s free market for electricity, as a congested grid allows monopoly pricing and other uncompetitive outcomes. Transmission benefits all users of the power system by providing greater access to low-cost energy and improving electric reliability, so Texas has always broadly allocated the cost of that transmission. Through the CREZ line process, Texas wisely pioneered the policy of pro-actively planning transmission to access high-quality renewable resources, as the timing mismatch between the long time to build transmission and the short time to build wind projects had prevented either from moving forward.
It should also be clarified that the transmission lines currently being developed in the Texas Panhandle were part of the initial CREZ proposal. Moreover, other lines being built in the Rio Grande Valley of southern Texas are being constructed to reliably meet the electricity growth in the region, with an added benefit that new wind capacity will be able to use those lines. Some have raised concerns that additional transmission will be needed going forward, based on the speed at which the existing CREZ lines have been successfully fully subscribed. As the state examines the best way to cost-effectively diversify its energy mix and reduce carbon emissions, the success of CREZ offers a compelling option for the path forward.
How transmission saves money
As we have explained in the past, new transmission more than pays for itself by improving electric reliability and reducing consumers’ electricity costs. Upgrades to America’s obsolete and congested transmission grid are needed anyway, and the benefits from bringing new clean energy sources online are just another reason to expand the grid.
Transmission accounts for around 10 percent of a typical electric bill. However, the costs of building new transmission are more than offset by reduced energy costs (which account for the majority of the typical electric bill) by providing access to cheaper sources of energy.
Putting a number on savings
The Southwest Power Pool (SPP), a grid operator for Kansas, Oklahoma, Nebraska and nearby states recently conducted a study to quantify the consumer and reliability benefits that resulted from transmission upgrades it performed between 2012 and 2014. Among SPP’s findings were:
- $800 saved for every person the SPP serves.
- Savings 3.5 times greater than the cost of the grid upgrades.
- Almost $12 billion in net present value benefits for consumers over the next 40 years.
The Midcontinent Independent System Operator (MISO), a grid operator for all or parts of 13 states throughout the Midwest, also conducted analysis whose findings mirrored SPP’s. MISO found transmission upgrades currently underway will result in:
- Up to $1,000 in savings for each customer it serves.
- Benefits 2.6 to 3.9 times greater than their cost.
- Between $13 billion and $50 billion in net benefits over the next 20 to 40 years.
Building transmission to move wind-generated electricity from the best resource sites to the towns and cities where energy demand is highest is not a new concept. In the past, we built railroads to transport coal and pipelines to move natural gas, and in many cases we built transmission to deliver low-cost fossil, hydropower, and nuclear electricity. Now it’s time for the next chapter in our country’s energy story, and new transmission is necessary if we want to realize America’s full energy potential.
Focusing only on the up-front cost of transmission, without looking at ongoing benefits that quickly repay initial investments, presents a misleading picture of transmission assets’ value, which will provide benefits for generations to come.