Electric transmission value and its drivers in United States power markets

Abstract

Electric transmission infrastructure serves a critical role during extreme weather and supply disruptions and can enable low-cost, low-carbon electricity systems. This paper contributes to a more complete understanding of transmission’s value, cost-effectiveness, and market barriers. By studying wholesale energy market prices in the United States during 2012-2022, we find that additional transfer capacity between regions was especially valuable (median of $116M/GW-year) and directionally balanced. Transmission’s market value was highly influenced by a small fraction of time: 5% of hours typically capture at least 45% of value. These peak periods were driven primarily by unforeseen changes in conditions within one day of operations. Transmission infrastructure cost estimates were less than market values for most studied locations, including all links crossing regional seams where value-to-cost ratios were frequently above 4, suggesting barriers to the development of valuable infrastructure. These results complement forward-looking modeling studies and aid efforts to improve modeling practices.