Transmission Grid Congestion Increases
According to a new report from Grid Strategies, titled, “Transmission Congestion Costs Rise Again in U.S. RTOs,” annual internal market congestion costs rose significantly in 2022, after nearly doubling from 2020 to 2021 across the Regional Transmission Organizations/Independent System Operators (RTOs/ISOs).
ISOs and RTOs serve around 58 percent of U.S. electricity load. Costs in RTO regions, apart from California ISO (CAISO), were $12.1 billion. Extrapolated to the rest of the U.S., including CAISO, congestion costs totaled $20.8 billion. (The report noted that CAISO has not published congestion data comparable to the other RTO regions for each year of the period analyzed in this report, and, since it has also not yet released its 2022 market monitor report, it is excluded from this Grid Strategies report.)
“Congestion costs are incurred on the U.S. electric transmission grid when there is inadequate capacity to deliver the lowest-cost generation to load (consumers),” said the report. “Higher cost generation is dispatched instead, raising prices that are then charged to consumers.”
The report added that various financial products exist that may partially or fully hedge congestion costs to individual loads (essentially providing insurance) and the associated risk. However, the cost of congestion is ultimately paid by electricity customers.
According to the report, total reported congestion costs increased by 100 percent from 2020 to 2021, and by about 56 percent from 2021 to 2022. In fact, 2022 congestion costs double the 2021 five-year average and triple the five-year averages from 2016 to 2019. “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,” said the report.
The report added that non-RTO regions do not have transparent congestion data. However, if operating within the same wholesale context as RTOs, it can be assumed that congestion outside of these transparent markets is similar to congestion within them. “The price transparency and generally more favorable transmission expansion policies in the RTO regions tend to reduce congestion in those areas relative to non-RTO regions,” said the report.
The report suggested that the best way to reduce transmission congestion is to increase transmission capacity. “However, very little of transmission spending is on new large-scale, high-voltage transmission lines,” it said. Yet, the need for new lines has only increased, largely due to (1) increased system vulnerability to the effects of extreme weather; (2) increasing electricity demand; and (3) increasing customer demand of variable and clean energy that is often located far from the customer’s location.
“In addition, few U.S. utilities have adopted dynamic line ratings, advanced power flow control, or topology optimization (together known as Grid Enhancing Technologies or GETs) to make more efficient use of existing grid infrastructure,” said the report.