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Financing grid expansion takes centre stage in this week’s Power Playbook with the UK as a case study; namely, which will prove the better financially: overhead buildout, or alternative transmission technologies?
By now there is little need to discuss how exorbitant the price tag is on decarbonising and expanding the power grid to ensure it is fit for purpose.
But in case you missed it: on the global stage, investments would need to exceed over $200 billion annually by the mid-2030s to meet the rising needs for electricity, estimates the IEA.
The number boggles the mind, not only globally but by country. Let’s look at the UK as an example: National Grid says a total of £58 billion ($78.2 billion) of direct investment is needed into electricity networks.
All this begs us to ask: How do different transmission components compare cost-wise? Are there cheaper ways of tackling the topic, rather than just build, build build.
And with the UK rolling the ball on its Great Grid Upgrade, how can costs best be managed?
Apparently, I’m not the only one pondering these questions – research from consultancy Mott MacDonald looks into the UK, while and commentary in MIT Technology Review explores this in the US, citing the UK as an example.
Overhead the way to go?
According to a report released by Mott MacDonald and the Institution of Engineering, it is an unfortunate fact that overhead lines are simply one of the most cost-effective solutions.
The report states that, compared to overhead lines, underground cables are on average around 4.5 times more expensive; offshore HVDC subsea cables are around 5 times more expensive; and an offshore HVDC network connecting multiple sites to the onshore grid is 11 times more expensive.
Although the numbers here are important there are a couple of points worth noting.
Firstly, this all works on a case-by-case basis.
Specifically, says the report, the actual cost ratio depends on the context and relative impacts of fixed costs to connect new infrastructure into the existing network and the costs that vary with the length of a new or rebuilt route.
Additionally, the costs and benefits of different technologies depend heavily on the specifics of individual transmission projects, their locations, and their desired outcomes.
Therefore, to quote Katherine Jackson, member of the report’s Project Board and an energy specialist, “there is no one-size-fits-all solution.”
Alongside costs, the report emphasised the importance of considering each technology on its merits in each specific grid development context considering environmental impact, engineering challenges and local impacts.
Secondly, although the costs for overhead builds are cheaper, external factors muddy the waters.
Supply chain bottlenecks, especially in cable manufacturing, for example, affect delivery times and create a need for long-term relationships with providers.
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The ATT sidestep
All this isn’t even to mention the hassle of permitting – expensive and slow.
As described in a blog post by MIT, this challenge has created one of the biggest obstacles to getting more electricity generation online, reducing investment in new power plants and stranding others in years-long ‘interconnection queues’ while they wait to join the grid.
In answer to this quandary, the MIT Technical Review discusses ‘advanced transmission technologies’ (ATTs) which provide an interesting option to circumvent the bloated costs of grid build out.
ATTs generally fall into four categories: dynamic line ratings (DLR), high-performance conductors, topology optimisation, and advanced power flow control devices.
MIT describes these technologies as ‘shortcuts’ that provide an option of expanding system capacity without requiring installation of completely new infrastructure.
And certainly, in the UK we’ve already seen companies looking into these solutions, especially in the realm of DLR.
Just this month, National Grid installed a software DLR solution from LineVision on its transmission system. The technology covers five circuits between Penwortham (Preston) and Daines (Manchester) and four circuits from Norton (Middlesborough) to Thornton (York) – together increasing the capacity of over 275km of OHL conductor.
According to the utility giant, the DLR has the potential to unlock enough additional capacity to power 75,000 homes a year, saving UK consumers around £20 million ($27.1 million) annually.
This DLR is but one such technology they’ve installed. Others include advanced power flow controllers, which intelligently and instantly route power through the circuits which have available capacity, and as well as drones and AI to monitor overhead lines daily.
Other utilities such as SSEN Transmission have been installing DLR tech, so it clearly has significant potential for grid management and savings.
However, that age-old adage mentioned by Mott MacDonald of case-by-case rings true, barring it from being deployed globally. The UK for example may be a leader, but on the other end of the spectrum, market design across the pond makes it less a less fiscally attractive option.
To go back to MIT, they say that, under the current regulatory system in the US, utilities generally make money by passing the cost of big new developments along to customers and earning a fixed annual return on their investment. That comes in the form of higher electricity rates, which local public utility commissions often approve after power companies propose such projects.
Utilities thus have financial incentives to make large and expensive investments, but not to save consumers money. When ATTs are installed in place of building new transmission capacity, the smaller capital costs mean that utilities make lower profits.
MIT also cites an example from LineVision – that same tech company contracted by National Grid for DLR in the UK – of dynamic line ratings that increased capacity by more than 50% for only $45,000 per mile—roughly 1% of the price of building new transmission.
Considering this, one has to question the sustainability of these investment decisions, looking towards large and expensive investments first, with consumer savings second. This also isn’t to mention the potential offered by these savings alongside increased capacity, ultimately bringing more consumers, and business, onto the grid.
Regardless, the business case for DLR is clearly there. But context, as always, is king.
But what do you think? What other countries have been deploying DLR and other forms of ATT cost-effectively? And, at the end of the day, will ATTs be a more fiscally attractive–or responsible–option?
Reach out and let me know so that I can feature your thoughts in the Power Playbook.
Cheers,
Yusuf Latief
Content Producer
Smart Energy International
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