Investment in high-voltage transmission (greater than 345 kV) in the United States is expected to top $41 billion over the next 10 years with more than 40 percent of it being made in just the first three years, according to a major new IHS Emerging Energy Research study. Growing power demand, increasingly rigorous reliability standards and the ongoing drive to integrate larger amounts of renewables into the power mix are among the major factors driving transmission investment, the study finds.

The study, U.S. Transmission Markets and Strategies: 2011-2020 analyzes the U.S. transmission grid and evaluates the impact on renewable energy markets, the investment required in high-voltage lines and the competitive positioning of established and emerging transmission developers and owners. The study expects high-voltage transmission to account for roughly 40 percent of total U.S. transmission investment over the next decade.

“The investment focus has really shifted toward higher voltage lines,” said IHS analyst Alex Klein. “Improved regional planning and continued regulatory emphasis on regional high-voltage lines as more cost-effective than local low-voltage solutions could afford high-voltage transmission an increasing share of the total transmission investment.”

More than 40 percent of the total investment in high-voltage transmission will be made by 2013—driven by major initiatives in California and Texas that are near completion—followed by a lower level of sustained investment of $3 billion per year, the study finds.

The desire to unlock renewable resources is having a very significant impact in spurring high-voltage transmission investment, the study says. In addition to capacity investment directly related to renewables (about $11 billion), the challenge of unlocking those resources has caused developers and planners to reexamine the need for improved transmission across the board following decades of underinvestment in the sector.

“The greatest influence of renewables has been as a catalyst for rethinking procedures by which transmission is planned and paid for,” Klein said. “The drive to incorporate these new sources into the power mix has highlighted existing reliability and congestions issues and brought a renewed focus on the country's transmission networks as a whole.”

While traditional key players in transmission development—incumbent utilities—are expected to lead the new development (with many establishing innovative new partnerships and subsidiaries to pursue what they view as a growth opportunity), new non-utility players from across the energy spectrum are increasingly getting into the game.

These new entrants are almost exclusively focused on renewables and many are pursuing novel business models rather than traditional regional cost allocation structures, the study says.

“These new entrants are focusing their transmission proposals on accessing renewable resources because—compared with system reliability projects that are the traditional domain of the utilities—there are fewer competitive barriers to gaining a foothold in the market,” says Klein.

New market entrants include:

• Diversified energy players – Large oil and natural gas players with a midstream presence attracted by the opportunity to leverage their development and financing strength.
• Independent power producers (IPPs) – IPPs are broadening their role in the electricity space as the market for new renewable generation is increasingly impacted by transmission infrastructure and are leveraging their knowledge of power markets and development acumen to serve their own portfolio or larger market needs.
• Pure-play transmission developers – Transmission-development-focused firms with little, if any, operational transmission assets focused on the commercial opportunity driven by new renewable power demand. These companies are often backed by private equity or investment funds.