New Transmission’s Role Amid U.S. Electricity Market Expansion

Over the past 20 years, transmission buildout in the United States has slowed significantly, largely due to a lack of load growth across the nation’s power grid. This stagnation allowed system operators to maintain reliability without investing in new transmission projects or embracing developments in grid-enhancing technologies (GETs). However, the rapid adoption of AI and the resulting construction of massive data centers has brought an end to the era of flat load growth, forcing system operators to act. In addition to building new generation resources, one of the most significant actions being undertaken is the expansion and upgrading of the aging transmission networks that form the nation’s grid.

The Three Interconnects

The U.S. operates across three separate interconnects, each acting as an independent grid. Within each interconnect, ISOs and other balancing authorities can freely transfer power between each other, making some regions power importers, such as CAISO and ISO-NE, while others become large power exporters, like PJM. This interconnectivity between zones has been crucial as renewable energy generation has boomed over the past few decades. While traditional power plants are typically situated closer to the population centers they serve, renewable projects are often located where they can generate the most energy, which rarely aligns with existing infrastructure. This isolation necessitates both local infrastructure to carry power away from renewable generation sites and larger interzonal transmission to provide major load zones with access to cheaper renewable energy generated in low-load areas.

What’s going on in ERCOT?

ERCOT provides an example of how ISOs are addressing the need for transmission network upgrades to handle the expected load growth over the next decade with its 765 kV transmission plan. This plan will connect population centers in eastern Texas with West Texas, which has experienced a surge in renewable energy development, thereby lowering the overall price of energy across ERCOT. Many ISOs struggle to execute transmission projects quickly, but ERCOT’s independence from other interconnects enables it to respond more rapidly to transmission buildout needs. Another alternative to the slow process of new transmission construction is the implementation of grid-enhancing technologies (GETs), which allow traditional ISOs to increase transmission capacity at a much faster pace. Advances such as Dynamic Line Ratings and Topology Optimization, which encompass both hardware and software solutions, can increase transmission capacity by 30–50% without the need for lengthy and costly construction.

Looking ahead, regions that typically import power, such as the Houston Load Zone, should benefit from cheaper power due to the implementation of GETs and the 765 kV transmission project. However, while the power price is cheaper compared to not building out transmission, rising loads and natural gas prices will raise prices in Houston over the next five years. In addition, the region continues to see a significant pricing spread between peak and off-peak hours. This price volatility can be particularly profitable for BESS operators during summer peak periods, when price adders are applied as reserves become low, with projected spreads reaching up to $100/MWh by 2030.

Going forward

For the first time in decades, ISOs are faced with significant load growth. While increasing generation is part of the solution, expanding transmission networks across the country is equally pivotal. Interzonal transmission projects, such as the 765 kV plan in ERCOT, will be key to delivering power to growing population centers and harnessing the recent explosion in renewable energy buildout.

For even deeper insight into the U.S. transmission landscape, register for the FactSet Energy team’s upcoming webinar. If you’re already a FactSet user, check out the full report on transmission’s role in U.S. electricity market expansion in the FactSet Workstation.

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