By - Jim Vess

AEP’s $33 billion capital improvement plan focuses on transmission and distribution

Energize Weekly, November 21, 2018

American Electric Power (AEP) is planning to invest $33 billion in capital projects between 2019 and 2023 with three-quarters of the money focused on transmission and distribution, the company said.

The company will also spend $2.7 billion on renewable generation and another $2.2 billion on competitively bid contracted renewable projects.

“AEP’s capital investments over the next five years will be focused on advanced infrastructure, innovative technologies and cleaner generation resources,” Nicholas K. Akins, AEP CEO, said in a statement. “We plan to invest approximately $16.6 billion in our transmission businesses and another $8.3 billion in our distribution businesses over the next five years.”

AEP’s emphasis on transmission and distribution are part of an industry trend as capital investment in large fossil-fuel power plants—which can be added to a utility’s rate base—wanes.

“Utilities have doubled down on distribution spending as a primary growth opportunity,” Ric O’Connell, executive director of GridLab, a grid consulting group, wrote in a perspective piece for GTM Daily. “Capital expenditures on the distribution and transmission system have skyrocketed since 2008.”

Distribution assets per customer grew an average of $217.50 a year between 2010 and 2016, a compound growth rate of 4.5 percent, according to GridLab.

“Overall distribution system costs grew from around $30 billion in 1997 to $50 billion in 2017, with almost all the growth coming from capital investment,” O’Connell said.

In February, AEP proposed a plan to cut the utility’s carbon dioxide emissions 60 percent from 2000 levels by 2030 in part by adding 3,065 megawatts (MW) of solar generation and 5,295 MW of wind power. It also said it planned to add 2,600 MW of natural gas-fired generation.

“The transition of our generation mix to cleaner resources will continue,” Akins said. 

In addition, AEP said it will invest in renewable energy in competitive markets with $1.2 billion in contracted renewables and renewables integrated with energy storage by 2020.

Since 2005, AEP’s coal-fired generation capacity has dropped to 47 percent coal from 70 percent, while its natural gas capacity rose to 27 percent from 19 percent. Renewable generation reached 13 percent, up from 4 percent.

AEP in its capital plan said it intends to work with regulators to identify additional opportunities to add renewable generation in its regulated jurisdictions.

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