Last week’s release of the White House’s Policy Framework For The 21st Century Grid signals that the national policy focus will shift back to energy in the coming months. This development is welcome news to a transmission industry that has weathered the ambiguity created by the absence of a national energy policy for years. It is smart for the Obama Administration to focus on our energy grid – a vital piece of infrastructure that is long past due for an upgrade, but a focus on “smart grid” technologies may be putting the cart before the horse.
Americans now rely on an antiquated grid that is used in ways it was never intended to be used. The majority of the existing transmission system was built more than 30 years ago and has received incremental investment since. Consider these facts:
-70% of our transmission lines are 25 years or older
-70% of our large power transformers are 25 years or older
- -60% or our circuit breakers are more than 30 years old
This underinvestment and the lack of proper maintenance have led to brownouts and chronic inefficiencies. According to the Department of Energy, in 1970 transmission and distribution losses were about 5 percent. Today, they have increased by 90 percent. In total, outages and power quality disturbances cost the American economy $100 billion every year.
These inefficiencies are compounded by a nation that is consuming more electricity than ever before. The average American family owns 26 plug-in electronic devices. And demand for electricity is projected to grow by another 25 percent by 2030.
So what is preventing investments that can expand and modernize our grid? It’s an archaic and outdated regulatory structure that is fractured across multiple jurisdictions on the local, state and federal levels. The current set of rules is balkanized and easily manipulated by industry players that want to block transmission investments because they will open up power markets to cheaper energy sources, and competition. After all, transmission makes up the smallest part of an electric bill – less than 7 percent on average – but can connect consumers to far cheaper generation and more fuel options.
The good news is that progress is slowly being made to change these outdated, unfair rules and drive investment in the grid. A number of regions have identified ways to pay for updates to the grid by more closely associating the costs with benefits that consumers will receive. These new cost allocation formulas allow for smarter planning across regions, planning that more precisely defines how much transmission should be built and where.
The Federal Energy Regulatory Commission (FERC) is scheduled to finalize a new rule soon that will ensure these types of agreements can take place throughout the country. This is a new era in transmission development that reflects the evolution of our power grid and our energy future as a whole.
While the Obama Administration’s plan for a 21st Century Grid is forward looking in its focus on new smart meter and other energy technologies, the benefits of these technologies will not be fully realized without a robust transmission system. Federal regulators need to support a regulatory structure that attracts Investment in our country’s traditional infrastructure that can truly make progress toward a brighter energy future, and a more competitive America. The smartest solutions are sometimes the most obvious ones.
Linda Blair is the Chief Business Officer of ITC Holdings Corp.
ITC is the holdings company that wholly owns ITC Transmission, the first independently owned and operated electricity transmission company in the United States. ITC invests in teh electricity transmission grid to improve electric reliability, expand access to markets, lower the overall cost of delivered energy and allow new generating resources to interconnect to its transmission systems.