ASCE: Nation’s Aging Grid Needs $566 B, Funding Gaps Could Prove Costly

The nation’s complex, patchwork system of regional and local power plants, power lines, and transformers is in the worst shape it has ever been, with 70% of transmission lines and power transformers aged more than 25 years, and 60% of the nation’s circuit breakers currently more than 30 years old, suggests new report from the American Society of Civil Engineers (ASCE). At least $566 billion will be needed to revitalize the grid through 2020, the group warns.

The report, “Failure to Act: The Economic Impact of Current Investment Trends in Energy Infrastructure,” points out that during the past decade, electric energy infrastructure has improved through an upturn in investment, and the negative economic impacts noted in studies of 10 and 20 years ago have been partially mitigated. “However, more investment is needed to further reduce the incidence of service disruptions to households and businesses. The needs to maintain and update existing electric energy infrastructure, to adopt new technologies, and to meet the demands of a growing population and evolving economy over the next 30 years will impose  significant requirements for new energy infrastructure investment,” it says.

Extending current investment trends for these assets through 2020 shows an anticipated investment of $566 billion, but also reveals a $107 billion shortfall compared to needs. That investment gap is equivalent to approximately $11 billion in new funding needed each year until the year 2020.

By 2020, the analysis showed that distribution and transmission infrastructure needs will account for more than 88% of the investment gap while generation infrastructure represents roughly 11%.

“A projected investment gap will be some combination of aging equipment and capacity bottlenecks that lead to the same general outcome—a greater incidence of electricity interruptions. The interruptions may occur in the form of equipment failures, intermittent voltage surges and power quality irregularities due to equipment insufficiency,  and/or blackouts or brownouts as demand exceeds capacity for periods of time,” the report suggests.

The funding gap “is not insurmountable,” ASCE says. From 2001 through 2010, annual capital investment in transmission and distribution infrastructure averaged $62.9 billion, including $35.4 billion in generation, $7.7 billion in transmission and $19.8 billion in local distribution (in 2010 dollars), it notes.

“The outlook for our grid and the system overall is good because the rate of investment has increased substantially in the past few years. In fact, the total needs projected for each year between 2012 and 2020 fall within the range of spending seen between 2001 and 2010. We saw an increase from $44 billion to a high of $101 billion in that timeframe, and so if spending keeps pace we will be able to close the gap,” said Steven Landau of the Economic Research Group of Boston, the lead author of the report.

Divergence in demand for electricity across different regions of the U.S. is not expected until the 2021-2040 period. Longer term projections show significant regional differences in demand with a 40% expected increase in Florida, 34% increase in western states and a 20% increase in the mid-Atlantic region. Regionally, the funding gap for all three sectors (generation, transmission and distribution) will be highest in the Southeast, the West and the mid-Atlantic area, and lowest in the Southwest and Florida.

Compiled by the Economic Research Group of Boston in coordination with ASCE, the report uses a “trend scenario” that presumes the mix of electricity generation technologies (e.g. oil, natural gas, coal, nuclear, hydro, wind, solar) continues to evolve as reflected in recent trends. U.S. Energy Information Administration data was used for demand projections.

The analysis accounted for the nation’s approximately 5,800 major power plants and numerous other smaller generation facilities; 450,000 miles of high-voltage transmission lines that connect those facilities to population centers; and the local distribution systems that bring electric power into homes and businesses via overhead lines or underground cables.

Sources: POWERnews, ASCE