Transmission line congestion is a widespread issue, raising consumer prices and delaying renewable energy integration. Reports from NERC and FERC suggest that 30%-50% of U.S. IOUs experience moderate to severe line congestion, which impacts clean energy adoption and increases costs. The International Energy Agency also estimates that about half of global grid infrastructure will need upgrades by 2040 to handle growing demand and renewable integration.
While many IOUs are constructing new lines, this approach is costly, slow, and environmentally impactful. An alternative, Dynamic Line Rating (DLR), increases capacity on existing lines at lower cost and shorter timelines. DLR is a practical choice when immediate capacity boosts are needed, or new line construction is restricted. Many IOUs use a dual approach, implementing DLR now and planning for new lines later.
Funding Options for GETs and DLR
Although DLR is more affordable than new lines, IOUs still need financing. Programs from FERC, state, and local governments provide funding support:
- FERC Transmission Incentives: Offers cost recovery through rate adjustments, allowing IOUs to recover GETs costs via customer rates. Key options include:
- Formula Rates: Adjusts rates automatically based on GETs costs.
- CWIP in Rate Base: Allows recovery of GETs costs before full operation.
- Deferred Recovery: Utilities can defer recovery over time.
- Accelerated Depreciation: Faster recovery of GETs investments.
- ROI/ROE Adders: Provides higher returns for using advanced tech like DLR.
Utilities must apply under FERC Order 679, including a Section 205 filing with a cost-benefit analysis to demonstrate grid benefits from GETs.
- State Regulatory Support: Many states support grid improvements, offering cost recovery and funding mechanisms like green bonds. The Federal-State Modern Grid Deployment Initiative now has 21 participating states, providing cost recovery mechanisms for GETs at the state level.
- Federal and State Grants: Programs like the Infrastructure Investment and Jobs Act (IIJA) or DOE grants support grid modernization and GETs deployment.
- Public-Private Partnerships: Collaboration with technology companies and local communities allows shared funding, especially where GETs enhance local grid resilience.
- Ratepayer-Backed Mechanisms:
- Securitization: IOUs can issue bonds backed by future ratepayer revenues to finance GETs.
- Revenue Decoupling: Separates utility revenue from energy sales, supporting investment in efficient technologies without revenue loss.
- Regulatory Pilot Programs: FERC and state pilot projects fund GETs demos, with options for full or partial financing from DOE or private vendors.
- Third-Party Ownership and Leasing: IOUs can use leasing or third-party financing to spread out DLR costs over time without large upfront investments.
ROI – DLR's Financial Benefits
DLR’s cost savings offer a rapid return on investment. An MIT study (July 2022) analyzed DLR on the ERCOT system, showing that it reduces costs by 77% over SLR, saving $776 million annually compared to $10.3 billion under SLR.
Conclusion
Federal and state programs offer financial pathways for GETs. Utilities can secure FERC incentives and state support by filing applications for ROE adders, formula rates, and CWIP. Research demonstrates that once deployed, GETs like DLR yield fast returns, achieving savings beyond traditional static or ambient ratings.
