By: Kelly de la Torre Issue: Vision Section: Business
Investing in Electricity Transmission Infrastructure
For Americans, electricity is both pervasive and essential. We love it and our appetite for it keeps growing. The average household today owns 26 electronic gadgets. Electricity consumption doubled since 1980 and is expected to grow by another 25 percent by 2030. We take for granted that when we flip a switch a light will come on and when we plug in those gadgets they will recharge. Can our existing grid continue to support this kind of growth?
The majority of the existing transmission system was built more than 30 years ago and has received only minimal incremental investment since. This underinvestment and the lack of proper maintenance has led to brownouts and chronic inefficiencies. According to the Department of Energy, transmission and distribution losses in 1970 were about five percent. Today, they have increased by 90 percent. In total, outages and power quality disturbances cost the American economy $100 billion every year. Ask Linda Blair and she will agree that we are asking our grid to do things that it was not designed to do.
Linda Blair is executive vice president and chief business officer for ITC Holdings Corp., the largest independent electric transmission company in the United States. ITCs sole focus is to invest in electricity transmission infrastructure to increase reliability, reduce constraints, increase access to competitive energy markets, and lower the total cost of delivered energy. “Since its inception in 2003, ITC has had a vision to become a leader in the build-out of a more reliable and robust transmission system capable of meeting the needs of a 21st century, energy-intensive economy,” said Blair. “Although progress has been made, there is much more work that needs to be done.”
America is at a transition point and a robust transmission infrastructure is critical to the country’s ability to grow our economy and remain competitive on a global scale. To explain, we can look to another visionary known as the Wizard of Menlo Park, Thomas Edison. It was Edison’s vision to create a system to deliver electric light into private homes in the late 1800’s and ultimately, his vision revolutionized our way of life.
During the postwar era of the 1950s and 1960s, the power industry’s growth transformed America and the American way of life. The opportunities provided by electricity seemed endless. Remarkably, in 1956, to keep demand high and increase public awareness, General Electric launched its “Live Better Electrically” campaign. The campaign, supported by 300 power utilities and 180 electrical manufacturers across the nation, was designed to extol the benefits of “better living by living electrically!” The result was a revolution in the quality and ease of domestic life. Consumers now had electric-powered vacuum cleaners, clothes dryers, toasters, refrigerators, televisions, radio and even air conditioned movie theaters.
Today, a campaign to encourage use is unnecessary. Today’s electric grid is a 164,000 mile, highly-integrated network of transmission lines and control facilities, interconnecting over 750,000 MW (megawatts) of generating capacity to millions of customers and 3,000 utilities in all regions. Recent blackouts have highlighted how vital this infrastructure is to our nation’s economy. According to reports, during the blackout of 2003, 50 million people lost power for up to two days, and the economic impact of the event was estimated at a staggering $6 billion. But that’s not all. The Electric Power Research Institute estimates that unreliable power adds a 44 percent surcharge to the cost of U.S. electricity. Adding to the mix, new EPA air regulations could alter the U.S. generation fleet and accelerate the shutdown of older generation facilities leading to more stress on our power grid. The current environment prevents the grid from meeting these challenges in a timely fashion.
As Congress debates the idea of a federal Clean Energy Standard, 33 states have already enacted laws to drive the growth of renewable energy sources. In many cases, these resources are far from population centers and require new infrastructure to reach consumers. Furthermore, the progressive integration of intermittent natural resources—such as wind—necessitates a robust transmission grid that will support this type of generation for those times of day when the wind is not blowing. What is needed is an extra-high voltage transmission grid designed to bolster the existing infrastructure and efficiently move power to the consumer.
However, the grid system is governed by a combination of state, regional and federal agencies to deal with mostly local-level incremental changes. This archaic and outdated regulatory structure is fractured across multiple jurisdictions on the local, state and federal levels. This fragmented regulatory structure is ill-suited to manage the transformational changes to the national electric system expected in the coming decades.
The good news is that with leadership of companies like ITC, progress is slowly being made to change these outdated rules and drive investment in the grid. “A number of regions have identified ways to pay for updates to the grid by more closely associating the costs with benefits that consumers will receive,” said Blair. “These new cost allocation formulas allow for smarter planning across regions—planning that more precisely defines how much transmission should be built, for what purpose and where.”
The Federal Energy Regulatory Commission also finalized a new rule in July 2011 that is anticipated to define a new era in transmission development that reflects the evolution of our power grid and our energy future as a whole. The rule should significantly increase regional planning of transmission systems instead of utility footprint only process, and put in place a process for allocating costs to those who benefit from new transmission facilities—even for those systems that cross state boundaries and rationalize the allocation of those costs.
We’ve come a long way from the days of the “Live Better Electrically” campaign. Electricity is integral to our way of life and our way of life is vastly different than in the 1950s. We need new solutions to our energy challenges and new leaders to guide us. Edison’s vision got us to where we stand today and taking us to the next level begins with a comprehensive national energy policy. “Having a national energy policy in place will set the standard for our nation’s utilities generation portfolio and provide regulatory certainty that will facilitate the building of a new transmission network and bring new generation resources online—whether it is wind, nuclear or clean coal technologies,” said Blair. “A national energy policy should include independent planning of the grid, federal backstop siting authority and regional cost recovery processes across a wider geography to recognize the broad-based benefits of regional infrastructure. A single, cohesive plan for America’s transmission system that begins with a national energy policy will support energy markets and benefit the entire nation,” said Blair.
Just as important, these infrastructure improvements will require a skilled workforce. However, in addition to reliability challenges and outdated regulatory structure, the energy industry is facing a significant impending challenge—an aging workforce. Now is the time to begin educating the next generation of engineers, scientists, and utility workers who will rebuild our nation’s energy grid. The U.S. Bureau of Labor statistics indicates that 30+ percent of the existing utility workforce nationwide is or will be eligible for retirement in the next five years. There is significant job creation potential for skilled workers in this sector, assuming that the appropriate political framework and regulatory environment is provided for growth. We must immediately begin developing tomorrow’s energy industry workforce to be prepared for future demands. Partnering with community leaders and educational institutions can provide a significant step forward and is just another area where Blair and ITC continue to lead. ITC has already taken steps to address this issue by making focused investments in the workforce of tomorrow by offering apprenticeship programs and partnering with community colleges and unions to educate and train utility workers.
“We have received an overwhelmingly positive response to our education partnership initiatives,” said Blair. “We will continue our emphasis on developing the energy industry workforce of tomorrow.” Just as ITC has been recognized for its leadership, including ranking on Fortune’s Fastest Growing Companies for several years, Blair continues to be recognized for her contributions to the community, which include serving on various community boards and being honored as one of Michigan’s Women Who Lead by the nationally-known WJR-AM 760 morning show host Paul W. Smith. Blair’s leadership in this area is underscored by ITC’s ongoing commitment to the communities it serves, a cornerstone of its business and its mission to be a best-in-class transmission provider.
About ITC Holdings Corp.
ITC Holdings Corp. (NYSE: ITC) is the nation’s largest independent electricity transmission company. Based in Novi, Michigan, ITC invests in the electric transmission grid to improve system reliability, expand access to markets, lower the overall cost of delivered energy and allow new generating resources to interconnect to its transmission systems. ITC’s regulated operating subsidiaries include ITCTransmission, Michigan Electric Transmission Company, ITC Midwest and ITC Great Plains. Through these subsidiaries, ITC owns and operates high-voltage transmission facilities in Michigan, Iowa, Minnesota, Illinois, Missouri and Kansas, serving a combined peak load exceeding 25,000 megawatts along 15,000 circuit miles of transmission line. Through ITC Grid Development and its subsidiaries, the company also focuses on expansion in areas where significant transmission system improvements are needed. For more information, please visit: http://www.itctransco.com.