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Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 

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U.S. Electric Grid Could Cost $5 Trillion To Replace

Electric grid

Since Nikola Tesla and George Westinghouse lit up Buffalo from Niagara Falls at the end of the 19th century, electricity has been an integral part of American life, heating homes, freezing food, and powering computers. But the U.S. electric grid is old, with most transmission lines and power plants decades into their lives.

The grid modernization debate and initiatives have been on the table for years, but now President Trump’s proposal for a $1 trillion investment in American infrastructure is reviving questions about how much investment the energy infrastructure needs, and how much it would cost to replace, upgrade, or simply maintain the aged and strained U.S. electric grid.

Joshua D. Rhodes, Postdoctoral Researcher of Energy at the University of Texas at Austin, has estimated that currently the depreciated value of the grid – including power plants, wires, transformers and poles – stands at between $1.5 trillion and $2 trillion. Defining the ‘grid’ as including power plants, transmission lines, distribution lines, substations, and transformers, Rhodes has calculated that the replacement value of the U.S. electric grid is $4.8 trillion.

The replacement value for power plants alone stands at almost $2.7 trillion, while the rough current value is close to $1 trillion, Rhodes says. The total replacement value of the grid is divided into 56 percent for power plants, 9 percent for the transmission system, and 35 percent for the distribution system. The researcher’s analysis also shows that the average age of power lines and transformers is 28 years, while power generation plants are decades old, except for solar and wind whose average age is less than 10 years.

Referring to the possible pathways to try to fix the grid situation, Rhodes believes that “the cheapest and likeliest pathway will be the one that best leverages, not duplicates, the infrastructure we already have.”

Modernization initiatives have been launched, and various estimates point to billions upon billions of dollars of needed investment just to keep the system reliable. Related: Vital Oil Shipping Lane Becomes Target In Yemen’s Civil War

The U.S. Department of Energy (DOE) has its Grid Modernization Initiative to improve the resiliency, reliability, and security of the electricity delivery system so that it can meet the demands of the 21st century and beyond. Back in November 2015, DOE’s Grid Modernization Multi-Year Program Plan quoted a report by The Brattle Group for the Edison Electric Institute, which had estimated that the electric utility industry will need to spend about $1.5 to $2 trillion from 2010 to 2030 just to maintain the reliability of the service.

The American Society of Civil Engineers (ASCE) said in its 2017 Infrastructure Report Card – which rated energy infrastructure at a D+ -- that “most electric transmission and distribution lines were constructed in the 1950s and 1960s with a 50-year life expectancy, and the more than 640,000 miles of high-voltage transmission lines in the lower 48 states’ power grids are at full capacity.” Related: Saudis Bet Big On Houston As Drilling Activity Picks Up

ASCE placed the cumulative investment gap for electricity - including generation facilities and T&D infrastructure – at $177 billion between 2016 and 2025. In the decade between 2003 and 2012, weather-related outages and aging infrastructure are estimated to have cost the U.S. economy an inflation-adjusted annual average of $18 billion to $33 billion, ASCE said. The organization is coming up with recommendations that include adopting a federal energy policy to assess the needed changes, including alternative energy sources such as renewables and distributed generation, to provide clear direction for meeting current and future demand.

The House Subcommittee on Energy discussed last month the state of the energy infrastructure and unsurprisingly, reached the conclusions that the grid is old and needs to be reliable, dynamic and integrated. The grid needs to work in ways that optimize and build upon integrating new technologies with existing grid infrastructure when needed, Energy and Commerce Committee Chairman Greg Walden (R-OR) said.

It’s obvious that there is consensus that the ageing, strained U.S. grid needs to be modernized. Now comes the difficult part, quantifying investments and starting to employ them to ensure that a 2003-like blackout won’t happen, and the lights will not go out.


By Tsvetana Paraskova for Oilprice.com

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  • Bill Simpson on March 24 2017 said:
    Sounds like some utility companies, and supply companies wanting to replace poles and wires long before they have reached the end of their lives, to me. Fix it as it breaks, until an area gets so undependable that power outages get too frequent from failing poles or transformers. Then change all the bad poles and transformers in that entire area, charging the customers whatever it costs over a period of 50 years, or so. The new stuff might last a century. Where I used to live, the poles were installed in 1956, most are still there. And that is after being hit by 2 strong hurricanes. The wires are the original, and so are many of the transformers. Some cross arms were changes on a 30 KV line nearby. One man did the work from a bucket truck with the power on. Who knows how long the underground wires will last. If they aren't overloaded, it might be centuries. The grid isn't a major problem unless a massive solar storm, like the 1859 Carrington Event hits, or the North Korean nut hits us with an EMP from a nuke. THAT is what we should be preparing for - EMP and CME.
  • toobroketofundthewealthyanylonger on March 24 2017 said:
    100 years ago.
    Tesla wanted to give all the world "free" alternating current
    but Westinghouse and Rothschild banker JP Morgan didn't want that.
    Now warren buffet is in the $ energy $ business & $uddenly taxpayers have to rebuild his grid?
    warren buffet, largest recipient of $700 billion dollar taxpayer funded too big to fail bailout .
    & Now these privately owned corporations are looking for more taxpayer funded assistance ..?
    who benefits ?
  • Clique777 on March 24 2017 said:
    If the grid goes down in the USA, 100 nuclear powered electricity-generating power plants are going to melt down, and make Fukushima look silly. It will be an extinction-level event for the entire Earth, along with another 600 nuclear reactors nationwide.
  • Chuck Morrison on March 25 2017 said:
    The biggest problem with the grid is it is too reliant on itself. If a major event occurs, it takes down too large an area due to too much interconnectivity. Each state or region should take responsibility for a stand-alone portion of the grid, and take the appropriate action to harden and upgrade it. I'm not buying the 5-trillion price tag. We have enough natural gas reserves in this country to last 150 years at current consumption. Don't you think it likely that we will have zero-point energy within the next 75 years? I do. And if we don't, it will probably be because there is only a few of us left, competing with vermin and using wood/trash/whatever for fuel. So we should sink money into our natural gas infrastructure, and start decommissioning nuke reactors and coal furnaces, and converting those steam turbine plants to natural gas. The reason this isn't happening is because Big Energy wants to sell NG to Europe, which currently gets most of its gas from Russia; which is, of course, a big reason for re-igniting the cold war. As far as hardening goes, the new tunneling technology that is available should make it possible to bury the grid and build a new passenger transport system in one fell swoop.
  • Ike Kiefer on March 27 2017 said:
    It is convenient for investor-owned utilities whose income is regulatorily linked to capital investment expenditures, and for the politicians supported by these corporate interests, to pretend the U.S. power grid is fragile and in need of trillions of dollars in rate-payer-funded recapitalization. However, grid components are designed for 30-60 year lifespans, so most are naturally going to be "decades old" at any point in time. The better question is whether recapitalization cycles are exceeding component lifespans, and breaking ithings down by sector (generation, transmission, distribution).

    The truth is that, since 2005, generation and transmission have been overcapitalized at the expense of Distribution, and the spending has not been done in the best interests of rate-payers. Unfortunately, the previous administrations subsidized and mandated huge investments in new wind and solar generation infrastructure that is unreliable, duplicative, low-density, has low capacity/load factor, is remote from load, and required tens of thousands of line-miles of new transmission towers and conductor to tie them into the grid, as well as a fleet of new quick-reacting natural gas plants needed to backup and firm-up their spasmodic power output. Today we have far more generation capacity, but the load is unchanged from what is was 10 years ago, and much of the new capacity is weather-dependent and uncontrollable.

    The overall effect has been to lower the capacity factor (utilization rate) of U.S. generation from 47% in 2005 to 40% in 2016 -- we are doing less with more -- and that is a huge blow to efficiency, balanced infrastructure spending, and consumer price. The good news is we haven't gone as far overboard as a nation as have California and Hawaii and Germany and the UK. Still, the distorted markets have done much damage to our nuclear power and coal sectors, and stolen dollars that could have been better spent on Distribution or elsewhere in the economy. Hopefully the mandates and subsidies will soon be rolled back for all forms of generation, at least federally, and rational capital investment will return to the electric power sector.
  • Helen Nowlin on March 28 2017 said:
    Hello? Wasn't the 2003 rolling black outs deemed artificial and caused by the Enron implosion? While true, there is no doubt that U.S. infrastructure is dated and based on old technology. What if you could have a modernized system with micro-grids, all utilities owned by the public and be fully self-contained with no waste? It is possible and I am working on such a proposal right now!

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