The time-honored discounted cash flow method for determining appropriate utility returns falls short when interest rates are low. Inadequate ROEs ultimately increase cost of capital and wipe away...
Electric Transmission: Building the Next Interstate System
We must efficiently deliver wholesale power within competitive regional markets.
When President Eisenhower was growing up in Kansas, he saw America’s byways and back roads develop to meet point-to-point needs, eventually forming a loosely connected national interstate highway network.
The U.S. electric transmission system has similar roots, and it needs a similar vision to meet the needs of the 21st century.
Eisenhower realized the value of good highways in 1919 when he participated in the U.S. Army’s first transcontinental motor convoy from Washington, D.C., to San Francisco—a 62-day trip. During World War II, he crystallized his vision of an interstate highway system based on Germany’s autobahn. In 1956, Eisenhower signed the Federal-Aid Highway Act, creating the highway system we enjoy today.
Eisenhower envisioned vast societal benefits for national defense, economic development, and personal safety. He did not get bogged down in structural or control issues. He saw a solution and moved to implement his vision.
Evolution of Transmission
The nation’s transmission system has evolved from a series of source-to-load needs, but there were exceptions. In 1966, for instance, American Electric Power (AEP) announced plans to build an interstate 765-kV system to enable diverse siting of a new era of 1,300-MW generating units.
AEP’s 765-kV system was developed to meet the expanding electricity needs of our states and customers via an interstate system covering seven states. That system, which also provides states with the economic opportunities that accompany the siting of new generation, continues to expand with customer demand. The new 765-kV line AEP is building from Wyoming, W.V., to Jacksons Ferry, Va., is a case in point. Other examples of interstate network development include the 500-kV networks in the East, Southeast, and West.
But the transmission infrastructure boom of the 1960s and 1970s has dwindled. Recent development largely has been limited to addressing local reliability needs and connecting new generation to the existing grid.
The federal government has defined and refined the regulation of interstate electric transmission over the last 70 years, yet we continue to experience transmission bottlenecks, paying billions of dollars annually because of congestion, reliability must-run contracts for inefficient generating plants, and lost opportunities for technologically advanced generating plants and new industrial plant development.
Transmission remains trapped between federal and state regulatory regimes, slowing development of a truly, and much-needed, national interstate grid.
As we move into the 21st century, our national vision must be an advanced interstate transmission system that efficiently delivers wholesale power regionally within a competitive market while enhancing regional reliability. This system also should enable, at the state, regional, and national levels:
- Economic development opportunities, including the benefits of diverse siting of new generating plants in resource-rich areas and of new industrial plants. An interstate transmission system also can relieve congestion for better market efficiencies;
- Environmental optimization opportunities, including unlocking renewable potential ( e.g., wind and hydro) and creating siting opportunities for new environmentally friendly generating plants, such as integrated gasification combined-cycle (IGCC) clean-coal technology plants; and