The development of regional transmission is central to unlocking the potential of our economy because it will deliver lower cost power to businesses, while also spurring growth in America’s clean energy industries. New transmission lowers costs by making energy markets more competitive through the introduction of cheaper, cleaner sources of power to consumers. When clean energy is allowed to compete, those industries will also grow and create jobs. Similar to other infrastructure investments, rebuilding our grid will also create construction jobs and economic activity in states hard hit by the economic downturn.
Businesses Need Access to Low Cost Power to Grow
When businesses have access to low cost power, they can grow and create jobs. Right now, many regions of the country have closed energy markets that only offer high cost power to businesses and residents. Regional transmission will link more businesses to competitive wholesale energy markets, and give them access to cheaper forms of energy.
New transmission projects save businesses from paying millions each year in unnecessary congestion costs.
Did you know that in the Northeast alone, congestion on the grid cost consumers and businesses $2.12 billion in 2008 – approximately 6 percent of total electricity bills? (Congestion costs in the PJM Regional Transmission Organization within the Eastern Interconnection. Department of Energy’s National Electric Transmission Congestion Study, December 2009.) These congestion costs equal the total cost of the existing transmission infrastructure as reflected in these electricity bills, but could be eliminated with a relatively modest investment in targeted incremental transmission.
Competitive markets offer choices and lower costs
The Department of Energy called the modern electric grid “the interstate highway system for wholesale electricity commerce.” Just as the interstate highway system is integral to the free flow of commerce and open markets, so too is an integrated national energy grid.
The grid’s current capacity and aging condition prevents the interconnection of new renewable energy sources. This congested and inadequate grid forces customers to pay for increasingly expensive power while keeping cleaner and cheaper alternatives out of the market. By investing in the creation of a more modern power grid, we can connect consumer to the lowest cost generation sources to meet their demands – and keep costs low.
The reality of costs: Transmission makes up the smallest part of consumers and businesses electric bills.
In the delivery of power to customers, there are three stages: generation at the power plant, transmission across high-voltage lines, and distribution to the end-user. Electric generation by utilities makes up more than two-thirds of an electric bill. This is the portion of a bill that would shrink with increased access to the competitive wholesale energy market. In the U.S., electricity generation makes up for 68% and distribution 24% of the average electricity price, transmission represents only 7% of what the customer pays (U.S. Energy Information Administration).
Investments in the grid will create jobs
Building a truly 21st Century electric transmission grid will create jobs. A recent study from the Working Group for Investment in Reliable and Economic Electric Systems (WIRES) and The Brattle Group provides compelling evidence to highlight the employment and economic benefits of investment in transmission infrastructure in the U.S. and Canada. The study finds that expanding and upgrading the grid to meet identifiable economic and reliability needs, as well as state renewable energy mandates, will help drive economic recovery and set the stage for the electric economy of the 21st century.
This new analysis shows that annual investment in new electric transmission facilities could soon reach $12-$16 billion in the United States, resulting in $30-$40 billion in annual economic activity. Economic growth of this kind would support 150,000-200,000 new full-time jobs in the U.S. in each of the next 20 years. The study also predicts that investment in needed transmission will annually support 130,000-250,000 full-time U.S. jobs in the emerging renewable energy industry to which transmission capacity is so critical.
Case Study: Michigan
A new study released by the Anderson Economic Group, highlights several expected benefits to the state of Michigan if a regional cost-sharing plan is implemented to allow large-scale transmission projects or multi-value projects to move forward.
- Improved access to electricity in other states, especially those where electricity prices are significantly lower than Michigan prices.
- Strengthened regional economy and more reliable grid across the region benefits Michigan businesses, especially those relying on just-in-time supply chains.
- Strengthened demand for Michigan-based manufacturers of wind turbines and other alternative energy components.
- Access to wind energy from across the region better prepares Michigan for more stringent energy policies that may develop.
The study specifically points out that the projects will improve access to electricity in other states, including where prices are more than 20 percent cheaper than in Michigan.