Since Nikola Tesla and George Westinghouse lit up Buffalo from Niagara Falls at the end of the 19th century, electricity has been an integral part of American life, heating homes, freezing food, and powering computers. But the U.S. electric grid is old, with most transmission lines and power plants decades into their lives.

The grid modernization debate and initiatives have been on the table for years, but now President Trump’s proposal for a $1 trillion investment in American infrastructure is reviving questions about how much investment the energy infrastructure needs, and how much it would cost to replace, upgrade, or simply maintain the aged and strained U.S. electric grid.



Joshua D. Rhodes, Postdoctoral Researcher of Energy at the University of Texas at Austin, has estimated that currently the depreciated value of the grid – including power plants, wires, transformers and poles – stands at between $1.5 trillion and $2 trillion. Defining the ‘grid’ as including power plants, transmission lines, distribution lines, substations, and transformers, Rhodes has calculated that the replacement value of the U.S. electric grid is $4.8 trillion.

The replacement value for power plants alone stands at almost $2.7 trillion, while the rough current value is close to $1 trillion, Rhodes says. The total replacement value of the grid is divided into 56 percent for power plants, 9 percent for the transmission system, and 35 percent for the distribution system. The researcher’s analysis also shows that the average age of power lines and transformers is 28 years, while power generation plants are decades old, except for solar and wind whose average age is less than 10 years.

Referring to the possible pathways to try to fix the grid situation, Rhodes believes that “the cheapest and likeliest pathway will be the one that best leverages, not duplicates, the infrastructure we already have.”

Modernization initiatives have been launched, and various estimates point to billions upon billions of dollars of needed investment just to keep the system reliable. Related: Vital Oil Shipping Lane Becomes Target In Yemen’s Civil War

The U.S. Department of Energy (DOE) has its Grid Modernization Initiative to improve the resiliency, reliability, and security of the electricity delivery system so that it can meet the demands of the 21st century and beyond. Back in November 2015, DOE’s Grid Modernization Multi-Year Program Plan quoted a report by The Brattle Group for the Edison Electric Institute, which had estimated that the electric utility industry will need to spend about $1.5 to $2 trillion from 2010 to 2030 just to maintain the reliability of the service.

The American Society of Civil Engineers (ASCE) said in its 2017 Infrastructure Report Card – which rated energy infrastructure at a D+ -- that “most electric transmission and distribution lines were constructed in the 1950s and 1960s with a 50-year life expectancy, and the more than 640,000 miles of high-voltage transmission lines in the lower 48 states’ power grids are at full capacity.” Related: Saudis Bet Big On Houston As Drilling Activity Picks Up

ASCE placed the cumulative investment gap for electricity - including generation facilities and T&D infrastructure – at $177 billion between 2016 and 2025. In the decade between 2003 and 2012, weather-related outages and aging infrastructure are estimated to have cost the U.S. economy an inflation-adjusted annual average of $18 billion to $33 billion, ASCE said. The organization is coming up with recommendations that include adopting a federal energy policy to assess the needed changes, including alternative energy sources such as renewables and distributed generation, to provide clear direction for meeting current and future demand.

The House Subcommittee on Energy discussed last month the state of the energy infrastructure and unsurprisingly, reached the conclusions that the grid is old and needs to be reliable, dynamic and integrated. The grid needs to work in ways that optimize and build upon integrating new technologies with existing grid infrastructure when needed, Energy and Commerce Committee Chairman Greg Walden (R-OR) said.

It’s obvious that there is consensus that the ageing, strained U.S. grid needs to be modernized. Now comes the difficult part, quantifying investments and starting to employ them to ensure that a 2003-like blackout won’t happen, and the lights will not go out.

By Tsvetana Paraskova for Oilprice.com

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