Aging electrical grid could cost $5 trillion to replace
Energize Weekly, March 29, 2017
The aging U.S. electricity grid, which has been an integral part of American life since the late 19th century, could cost almost $5 trillion upgrade and replace, according to a new analysis.
Joshua D. Rhodes, a Postdoctoral Researcher of Energy at the University of Texas at Austin, says that the currently depreciated value of the energy grid, which includes power plants, transmission lines, transformers and poles, stands at between $1.5 trillion and $2 trillion. The cost of replacing these assets would be roughly $4.8 trillion, according to Rhodes.
“That means the U.S. electric infrastructure, which already contains trillions of dollars of sunk capital, will soon need significant ongoing investment just to keep things the way they are,” he said.
Questions about how much the grid is worth and how much is needed to replace it have been asked for decades, however the debate has been given new importance since President Donald Trump proposed spending $1 trillion on American infrastructure during the 2016 election campaign.
Rhodes’ total replacement value of the grid is divided into 56 percent for power plants, 9 percent for transmission assets, and 35 percent for distribution assets. The replacement value for power plants alone stands at almost $2.7 trillion, while the current value is close to $1 trillion, according to Rhodes. The analysis shows that the average age of the nation’s power lines and transformers is 28 years old, while power generation plants are over 30 years old, with the exception of solar and wind power plants whose average age is 10 years old.
Rhodes said that the key to making good decisions regarding investment is by first understanding the value of the existing grid. For most of the grid’s existence, this was easy to calculate. There has been essentially no storage on the grid, while valuation of fuel, generation, transmission and distribution assets was typically a fixed cost.
Today, the ways in which people get power has changed dramatically. While older, more expensive power plants still exist, more recent additions to the grid have been smaller and more spread out. These include rooftop solar panels, small-scale wind farms, efficiency upgrades, and microgrid technology. These new features have greatly changed the value of modern electrical grid, and has changed the cost-benefit analysis in investment decisions.
Rhodes says the cheapest, most efficient way to upgrade the grid and enable a cleaner energy future is to leverage, as opposed to duplicating, existing electric infrastructure. Converting coal-fired power plants to natural gas using existing transmission and water infrastructure is an example of this kind of investment.
A promising area for infrastructure investment is in the bulk transmission system. Areas of rural Iowa, Texas, and Florida are home to abundant sources of renewable energy, such as wind and solar, and transporting this energy to load centers will enable many people to access low-cost power.
In the end, there is no path which does not require substantial investment. The question that should be answered is, which technologies will the country focus its resources on, and how much will that cost?