Grid Investments Support Local Growth, Reliability
AEP’s financial commitment to modernizing the grid supports growth and investments from commercial and industrial customers and helps us manage future maintenance costs while improving reliability. A large portion of AEP’s investments are committed to replacing or upgrading underperforming or obsolete transmission facilities. These aging transmission and distribution facilities require more frequent and costly maintenance; replacing them reduces those costs. In addition, AEP is investing in projects that enhance grid security and modernize the telecom network along the electric system.
AEP's investments in upgrading transmission infrastructure directly and indirectly support communities through increased tax base, economic activity and employment.
From 2017 through 2019, AEP is investing approximately $9 billion in transmission infrastructure. These investments will focus on replacing aging facilities and making the grid more resilient. They will also help reduce the costs associated with meeting the growth needs of our commercial and industrial customers in the future. These investments y increase reliability and resilience of the grid today while providing capacity for future load growth or reducing the cost of expanding the system in the future. When we make improvements, a net benefit is the reduction in the amount of energy lost as power flows through the lines and substations (also known as line losses).
To measure and quantify the direct and indirect economic benefits of AEP’s transmission infrastructure investments, AEP Transmission commissioned a study from The Brattle Group, an economic consulting firm. The report analyzed the transmission investments made, or planned to be made, by AEP from 2012 through 2019 in all eleven states where AEP serves retail electricity customers. The report identifies significant regional and local benefits – directly and indirectly – from AEP’s transmission investments, including new jobs, local business growth, and tax base enhancements.
The analysis recorded a total of $19.2 billion in investments, with $10.2 billion invested between 2012 and 2016, and an additional $9 billion in investments from 2017 through 2019. These transmission investments provide significant benefits directly to AEP’s customers and to the states where the company operates.
The analysis also looked at the efficiency gained by replacing aging infrastructure. The Brattle Group studied a sample of 84 transmission line reconductoring projects and analyzed them by how much line loss decrease occurred due to these investments. For the sample studied, we found that losses decreased by 55 percent, on average. Reducing transmission line losses could mean that AEP needs to produce or purchase less power to serve its load – which directly reduces the cost of serving our retail customers. The study concluded that the net present value of savings due to lower power consumption caused by lower line losses is estimated to be nearly $110 million over the lifetime of the investment.
In addition, reduced line losses during peak demand hours would also provide customer savings through reduced capacity needs. The Southwest Power Pool (SPP) has estimated the value of capacity, and, according to SPP’s assumption, customers would realize additional capacity savings of approximately $127 million (present value terms) over the lifetime of the investments in the sample study. These are significant financial and reliability benefits for our customers, as well as operational improvements for how we manage the grid.
The Brattle report found that AEP’s projected $9 billion investment in transmission infrastructure in 2017-2019 is estimated to support on average over 34,000 full-time-equivalent jobs during each of those years. According to the Brattle report, AEP’s planned investments during this timeframe “are estimated to stimulate $12.7 billion of economic activity, or about $4.2 billion per year.” When the analysis looked at all of AEP’s transmission investments between 2012 and 2019, the impact was significantly larger.