Transmission Planning and the Need for New Capacity

The U.S. electricity industry is in the midst of a transition from a structure dominated by vertically integrated utilities regulated primarily at the state level to one dominated by competitive markets. In part, because of the complexities of this transition, planning and construction of new transmission facilities are lagging behind the need for such grid expansion.

Between 1979 and 1989, transmission capacity increased slightly faster than did summer peak demand (Hirst and Kirby 2001). However, during the subsequent decade, utilities added transmission capacity at a much lower rate than loads grew. The trends established during this second decade are expected to persist through the next decade. According to one analysis, maintaining transmission adequacy at its current level might require an investment of about $56 billion during the present decade, roughly half that needed for new generation during the same period (Hirst and Kirby 2001).

Expanding transmission capacity requires good planning (as well as appropriate market rules and regulatory oversight). The Federal Energy Regulatory Commission (FERC 1999) emphasized the importance of transmission planning in the creation of competitive wholesale markets. FERC wrote that each regional transmission organization (RTO) “must be responsible for planning, and for directing or arranging, necessary transmission expansions, additions, and upgrades that will enable it to provide efficient, reliable, and non-discriminatory transmission service and coordinate such efforts with appropriate state authorities.”