ICF Consulting Inc. (Fairfax, Virginia) recently completed a major study of transmission adequacy in the United States, which forecasts the optimal amount of new electric transmission capacity builds and the investments needed to ensure continued grid reliability.

This nationwide study was sponsored by Kohlberg Kravis Roberts & Co. (KKR). It shows that strategic investments of just over $8 billion (net present value) over the next 26 years could lower the wholesale cost of power by approximately $12.5 billion (net present value). Furthermore, if one assumes lower reserve margins from a more integrated system, the benefit is more than twice the cost, or approximately $18 billion. Finally, if one includes the benefit to the economy from reduced outages that could come from such investments (also called “value of lost load”), the benefit could rise dramatically to more than eight times the cost of such investment. The average savings per current customer would be at least $30 (net present value) — reaching as high as $450.

“These are substantial savings for consumers in the United States,” says Marc Lipschultz of KKR. “We were encouraged to see the high degree of leverage that the right transmission investments have on reducing the wholesale cost of power.”

“It's very complex and challenging to do the analysis right,” says Judah Rose, senior vice president of ICF Consulting. “Tradeoffs between generation and transmission need to be assessed, taking into account future fuel price, plant costs, regional power demand, impending environmental regulations, interregional grid transfer capabilities, and other assumptions.”

“The Value of Lost Load (VoLL) analysis is one that legislators and regulators should consider when making decisions about new transmission,” says Elliot Roseman, principal with ICF Consulting. The blackout last August proved just how dependent our economy is on electricity and how important enhanced reliability is to consumers.”
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