This is an extract from a recent report “High Voltage, High Reward Transmission: Evidence from Operational Transmission Projects that Deliver Cost Savings to American Consumers” by RMI. 

Planners and regulators are actively evaluating new investments in transmission projects to address growing electricity demand; integrate new, lower-cost electricity generation resources into the grid; and maintain a reliable and resilient system, among other drivers. As the need for and scale of proposed transmission investments grow, so do concerns about rising costs, underscoring the importance of a well planned and coordinated regional and interregional transmission system to maximize benefits and reduce costs for families and businesses. This report uses evidence from seven case studies of operational regional and interregional transmission projects to show the savings that large-scale transmission can bring to ratepayers — residential, commercial, and industrial. The projects are geographically diverse, touching all seven regional transmission organizations (RTOs), and include enough historical data for meaningful evaluation after the line was energized (10+ years).

The analysis looks at actual line performance, specifically the realized benefits and costs of the projects in operation. We consider three ways that transmission saves money for consumers: reduced grid congestion (congestion relief savings), access to cheaper sources of generation capacity (resource adequacy savings), and access to renewable sources of generation that meet public policy goals (public policy savings). This report calculates the benefit-to-cost ratio of the seven transmission lines and finds that every one of them has provided benefits that exceed their costs. Even under a conservative assessment of a narrow range of benefits, these lines lowered overall electricity system costs, rather than raising them.

Key findings

Finding 1: Ratepayer savings exceed costs

Although the seven projects were built for various purposes, including reliability, economics, and public policy needs, for every dollar invested, ratepayers received at least that amount or more in savings. All seven projects achieved benefit-to-cost ratios between 1.1 and 3.9. These results highlight large-scale transmission’s ability to deliver tangible cost savings to American consumers and businesses while addressing critical grid needs.

Finding 2: Projects aimed at delivering economic benefits exceeded planners’ expectations

Analysis looked at five projects that were built with economic benefits in mind — multi-benefit or public policy driven. It was found these projects outperformed planners’ original expectations. Three projects with pre-existing benefit-cost analyses (BCAs) exceeded the anticipated benefit-to-cost ratios in the original plans. The other two projects, while lacking pre-existing BCAs, also delivered significant economic benefits. Regionally planned non-reliability projects are expected to surpass the Federal Energy Regulatory Commission’s (FERC) 1.25 benefit-to-cost ratio standard. Each of these five non-reliability projects significantly surpassed that threshold.

Finding 3: Reliability-driven projects delivered unintended economic benefits 

Analysis looked at two projects that were built to address critical reliability issues on the grid. In these instances, economic benefits were not anticipated or factored into the original planning process. Analysis shows that, in addition to successfully addressing their reliability objectives, these projects also generated significant, unexpected economic benefits. These reliability projects are not required to meet the FERC 1.25 benefit-to-cost ratio standard because the investments are necessary to maintain grid safety and functionality.

Finding 4: Transmission is a long-term investment, delivering enduring savings over time

Transmission projects represent long-term infrastructure assets with financial lifespans of over 40 years, and operational lifespans often extending decades beyond. Benefit-to-cost ratios improve over time, as up-front capital costs depreciate and benefits remain stable. While benefits may take time to exceed costs, they ultimately will surpass total cost, delivering enduring savings to ratepayers. The payback period — the date when benefits exceed total lifetime costs — for these seven projects occurs between 8 and 34 years. 

These findings demonstrate that regional and interregional transmission projects can serve as prudent investments that meet many priorities simultaneously. These projects showcase cost-effective investments that deliver long-term savings to ratepayers. Regulators and planners can move forward with confidence that regional and interregional transmission investments will not only meet today’s energy challenges but also provide long-term value for American consumers and businesses — all while strengthening the grid. They should prioritize and invest in multibenefit, large-scale, coordinated regional and interregional transmission projects that deliver system-wide savings. These projects, when designed and implemented effectively, are poised to pay for themselves, often many times over.

Case Studies on Regional and Interregional Transmission Savings Delivered to Ratepayers

Conclusion

The report examines the costs and benefits of seven operational regional and interregional transmission projects. It compares each project’s actual operational benefits during its financial lifetime with the benefits anticipated during the development of the project. The report found that all projects delivered a wide range of economic benefits, regardless of the original intent of the project, with benefit-to-cost ratios ranging from 1.1 to 3.9. It finds that the benefit-to-cost ratios increase throughout the financial lifetime of the investments, making the case that these projects are long-term investments that only get better over time. Finally, it found that all seven projects outperformed their predicted benefits and are on track to pay for themselves over their financial lifetime. 

The findings suggest that regulators and planners can have confidence in the regional and interregional transmission investments being planned and constructed today. These projects are likely to pay for themselves, potentially multiple times over, underscoring the importance of strong, coordinated, and multibenefit regional and interregional planning to maximize benefits and reduce costs for families and businesses. Luckily, planners and regulators have a critical moment to encourage the development of cost-effective regional and interregional projects. Load growth, falling costs for new technology, and new federal regulations are driving renewed interest and need for regional and interregional projects. Specifically, FERC Order No. 1920-A revolutionizes regional planning to ensure benefits are comprehensively evaluated in long-term planning and that transmission is viewed through a multi-value lens that simultaneously considers multiple drivers, such as reliability and economics.

Access the report here