Congestion on the U.S. electric grid added $20.8 billion in costs in 2022
Energize Weekly, July 26,2023
The increasingly choked U.S. electric grid – sometimes preventing the cheapest generation from getting online – cost consumers $20.8 billion in 2022, a 55 percent year-over-year increase, according to utility consultant Grid Strategies.
“This trend reflects the greater frequency and higher cost of thermal generators running in place of renewables curtailed due to inadequate transmission capacity, among other factors,” the Grid Strategies analysis said.
Construction of new high-voltage transmission lines, however, has significantly decreased since 2010, with the average installations going to 645 miles for the period between 2015 and 2020 from 1,700 miles between 2010 and 2015.
Grid Strategies analyzed congestion data from six regional grid operators – so-called independent system operators (ISOs) or regional transmission operators (RTOs) – which serve about 58 percent of the national electricity load.
For the California ISO, which does not publish comparable congestion data, and the portion of the grid operating outside the RTOs, primarily the Western and Southeastern U.S., the analysis extrapolated costs based on available data.
The regional grid operators in the analysis included the Electric Reliability Council of Texas; ISO New England; New York ISO; the PJM Interconnection, serving mid-Atlantic and Midwestern states; the Southwest Power Pool serving all or parts of 15 states mainly north of Texas; and the Midcontinent ISO, covering an area from Louisiana to Manitoba, Canada.
For these six grid operators, 2022 congestion costs totaled $12 billion, triple what they were in 2020.
“Congestion costs are incurred on the U.S. electric transmission grid when there is inadequate capacity to deliver the lowest-cost generation to load,” the Grid Strategies report said. “Higher cost generation is dispatched instead, raising prices that are then charged to consumers.”
In addition to the inability to get low-cost renewable generation on the grid, several other factors play a role in the congestion costs.
Fuel prices for natural gas and coal increased in every RTO market as thermal generation was depended upon when renewables were not available. The average cost of wholesale natural gas in the U.S. was the highest it had been since 2008, with a 51 percent increase between 2022 and 2021.
The Southwest Power Pool, New York ISO, and the Texas grid all cited transmission outages due to scheduled maintenance or upgrades as a major contributor to high congestion in 2022.
Extreme weather events, notably Winter Storm Elliott in December of 2022, also drove up costs. The Midcontinent ISO’s market monitor estimated that Winter Storm Elliott led to more than $350 million in congestion costs within just two days.
Finally, increased electricity demand was also a factor. The Texas grid’s market monitor, for example, reported that the system broke the all-time peak demand record 11 times in the summer of 2022
A draft of the U.S. Department of Energy’s National Transmission Needs study said that to meet demand growth, almost all regions of the country will need to increase transmission capacity.
“Some regions, such as New England, may have relatively little internal congestion but there is significant congestion between New England with their neighbors, such as at the New York-New England interface,” the report said.
A study by the Lawrence Berkeley National Laboratory found that regional and interregional transmission links reduce congestion and that interregional links have even greater value than regional links, with almost twice the savings per megawatt-hour.
Greater transfer capability could have alleviated price spikes in electricity and saved lives during Winter Storm Uri in February 2021, Grid Strategies said, with large potential savings per gigawatt of transmission capacity between regions.
Power transfers from the Midcontinent ISO to the Southwest Power Pool, for example, could have resulted in $232 million in savings, the analysis estimated.
“The importance of the ability to transfer electricity between regions will only continue to grow as electricity demand, colder and hotter than normal seasonal temperatures continue to raise issues for grid infrastructure, and as the occurrence of extreme weather events continue to rise,” Grid Strategies said.
