AMU: Grid upgrades starting to cope with rising electricity demand

This process of increasing transmission mileage and capacity on existing lines is complicated, slow, and costly.

The US electrical grid is highly regulated and operates in many jurisdictions as a regulated monopoly. The utilities’ operating generation and transmission capacity are subject to scrutiny by individual state commissions, which dictate the utilities’ rate of return on investment that is embedded in industrial, commercial, and residential rates.

These commissions also hold sway over any interstate transmission lines that seek right-of-way through their state. Not surprisingly, the process of getting commission approval to invest capital is slow for intrastate projects and, for the interstate projects, it is excruciatingly slow.

That’s why it is nice to be able to report on a major project that has run this gauntlet, gotten approval, and is now building capacity.

Ameren launches $1.6 billion transmission upgrade in Illinois

The Illinois Commerce Commission has approved Ameren’s Central Illinois Grid Transformation Program (CIGTP). Ameren expects to start construction in late 2025 on 380 miles of new and upgraded high-voltage lines, crossing 13 counties in Illinois. The project is slated to be completed in 2029.

Why it matters

Ameren’s project is just one of many such projects in the US as the power industry gears up to address the growing demand. According to the Edison Electric Institute:

• In 2023, investor-owned electric companies spent $30 billion on transmission investment, compared to $26.7 billion in 2022 and were projected to spend $34.3 billion in 2024. 
• Investor-owned electric companies are planning to invest $158 billion in transmission construction between 2024 and 2027. 
• In 2023, investor-owned electric companies spent $56.7 billion on distribution investment, compared to $48.1 billion in 2022. 
• Since 2001, investor-owned electric companies have invested $575 billion into the US distribution system.

The Department of Energy estimates about 20,662 miles of transmission lines are under reconductoring (reconductoring = replacement of older, lower-ampacity lines with higher-ampacity lines) or new line erection.

These investments accrue demand directly for the aluminum sector as virtually 100% of high-voltage transmission lines are comprised of Aluminum-Core Steel-Reinforced (ACSR) cable.

The intensity of this demand is correlated to the ampacity of the ACSR. For example, a low-ampacity cable of 100 amps would consume about 126 pounds per mile. Very high-amperage lines approaching 1,000 amps consume 4,746 pounds per mile. The trend is for higher ampacity, so this is positive news for the producers of ACSR, such as Prysmian and Southwire.

Cable production capacity utilization for both Prysmian and Southwire remains very high at the present time and is only going to accelerate as we get deeper into this investment cycle.

This growth will mean higher demand for electrical conductor rod and preserve high-value added upcharges for this product, which today are around 25¢ per pound over Midwest P1020.

This piece was first published by SMU’s sister publication, Aluminum Market Update. To learn about AMU, visit their website or sign up for a free trial.