Global Power Transmission Report

The US power transmission system consists of three major synchronised grid systems – the Eastern Interconnection, the Western Interconnection and Texas. They function largely independently, with limited power exchange between them. The Eastern Interconnection comprises the area from the Great Plains states (excluding most of Texas) eastward to the Atlantic coast. The Western Interconnection covers the area west of the Rocky Mountains and the Great Plains to the Pacific coast. The transmission operations of most of Texas are covered by the Electric Reliability Council of Texas (ERCOT).

It is a fragmented business, with grid operations being carried out by over 1,700 utilities. Some of the system operators stand out for the scale of their operations in the respective grid systems. The California Independent System Operator (CAISO), for instance, controls the largest share of the Western Interconnection. The PJM Independent System Operator is the largest in the Eastern Interconnection. Many utilities holding the transmission networks often operate across the states, thus governed by multiple states’ rules.

Over 60% of the total line length is concentrated at 150-390kV voltage levels, while the higher ratings constitute a residual share. It reflects an inadequate capacity added at higher voltage levels typically utilised in long-distance evacuation projects or interregional transmission corridors. There has been a marked slowdown in capacity addition over the years. Between 2010-2014, the network had an additional high- voltage line length averaging 1,700 miles. From 2015 to 2019, the average addition reached 925 miles. The decline from 2020 to 2023 resulted in an average of 350 miles (Clean Energy Grid, 2024).

In the last couple of years, there have been some concerted efforts to fast-track the transmission projects, which can help revive the momentum. The present challenges for grid utilities are, however, severe as they must plan for and manage inadequacy and ageing. The latter is a critical issue – about 70% of the transmission grid assets are 30 years or older (NCSL, 2023) and new transmission lines often have a lead time of 6-10 years or more.

The signs of grid stress from a transitioning energy mix are all too clear. However, it is striking that this is taking place at a stage when the aggregate renewable energy share is not significant, at least relative to some of the major European countries. Further progress in the energy transition, thus, may need to be balanced against practical considerations. The treatment of conventional energy resources such as coal and gas illustrates this. Coal-based power plants are due for retirement, in line with emission norms and decarbonisation goals. The trend shows a decline in coal, but the rate has slowed down. By 2024, only about 3GW would have been retired. About 14GW is aimed for phase out by 2025 – less than the 16.6GW planned initially (S&P Global, 2024). Policy provisions allowing coal and gas co-firing may enable extensions for a few other coal-based generation capacities in the grid supply. Many generators have also sought to switch from coal to gas, taking advantage of the competitive fuel prices.

Defying expectations in a decarbonising framework, the share of gas-based power in grid supply has risen from 35% in 2018 to 43% in 2023. Utilities’ plans indicate capacity expansion in gas-based power. As of May 2024, about 133 new plants were in the planning stages. Some of them are marked as hydrogen-capable plants, making them presentable for regulatory approval in the existing plans (S&P Global, 2024). The shutdown of coal-fired plants in many regions has, in fact, promoted gas-based generation as a reliable alternative (Reuters, 2024).

Conventional power generation, as in coal and gas, finds support from the demand outlook in the US power system. Many utilities are operationalising coal and gas-based power plants to help bridge the possible demand gap. Data centres are the prime movers of the emerging power demand. There is a 15% rise in power demand likely from data centres planned or under development, requiring about 47GW of incremental capacity through 2030 (Goldman Sachs, 2024). In terms of network planning, such a demand outlook marks a sharp reversal from the past trend of flat demand.

A study by the National Renewable Energy Laboratory (NREL), mapping the scenarios of achieving the targeted 100% clean energy supply by 2035, projected a requirement of over 10,000 miles of new high-capacity lines per year (assuming the construction starts in 2026) (NREL, 2022). The same study estimated the additional cost of decarbonising the power system by 2035 to be between $330 billion and $740 billion. The projections indicate the scale of the challenge facing policymakers, regulators, investors, and other stakeholders.

As the project pipeline expands, interregional transmission could be among the most vital to focus on. These projects continue to face hurdles in gaining approvals from multiple state authorities and have also been stuck for the determination of cost allocation among beneficiaries (WRI, 2024). The launch of designated transmission corridors under NIETC is one major step in this direction. There is, however, a significant scope for expanding the investment flow in this segment.

The demand pressure adds to the grid operator’s and utilities’ concerns. For most of them, the power system needs to be prepared for the rather unanticipated high-demand outlook. The emerging data centre hub in the US and its resulting power requirement are forcing an urgency in grid reinforcement and replacement, as much as feasible. Projections point to at least 2%-3% annual growth in demand through 2030 – a massive departure from the last two decades of near-flat demand growth trend. Besides network infrastructure, the US power demand outlook may also impact the decarbonisation goals. Utilities have already taken to delayed coal retirements and new gas capacities to keep their service reliability levels intact (Wood Mackenzie, 2024).

The outlook of the US power system is, therefore, one of significant flux with several moving parts. Yet, the requirements for the power transmission infrastructure are clear and necessitate progress on a war footing. Some of the recent policy and regulatory measures have been encouraging for their fundamental impact on investments. It remains to be seen how far the bottleneck could be avoided in the ongoing progress for Net Zero.