According to Wood Mackenzie, 25 investor-owned utilities in the US have filed for $36.4 billion of investment into grid modernisation with 80% focussing on grid hardening, distribution automation and Advanced Metering Infrastructure (AMI).
This is according to an analysis of the research organisation’s Utility investment in grid modernization report, which finds that grid modernisation investment has seen a 37% compound annual growth rate since 2012.
The largest emphasis, they state, has been on achieving higher efficiencies in the operation of the grid and protecting physical infrastructure from catastrophic weather.
Infrastructure hardening and AMI leading the way
Infrastructure hardening to protect against catastrophic weather, AMI and distributed automation represent 80% of current grid modernisation investment in the country, the report finds.
Investments in Distributed Energy Resources (DER) deployment and management are only at 2.4%, but, as most requests have been filed after 2021, they have the potential to surface as emerging modernisation solutions.
“Utilities are quoting DER integration and market enablement as the primary driver for their GM investments. When we compare DER-driven GM (Grid Modernisation) investments with the level of investment in DER management solutions, however, our data suggest that utilities are designing the grid to withstand the scale and variability of DERs rather than integrating more closely with them,” said Fahimeh Kazempour, head of grid modernisation for Wood Mackenzie.
According to the analysis, DERs are the primary driver for Advanced Distribution Management System (ADMS) expenditure, at almost $1 billion, which subsequently is creating a boost for Geographic Information System (GIS) investment as ADMS’s enabling technology.
The report notes that GM investment has grown with a 37% compound annual growth rate since 2012. The rate of growth is accelerating in recent years, with a 71% jump in investment from 2022 to 2023.
This acceleration will lead to 2024 seeing the highest level of annual investment by the studied investor-owned utilities, estimated at $5.9 billion.
Additionally, the report looks at how planned utility GM investments vary based on state and geographic needs.
The southeast has focused mainly on infrastructure hardening, as the region often deals with catastrophic weather events, such as hurricanes. The northeast has demonstrated elevated levels of investment in AMI, positioning it to implement advanced rates and shape prosumer behaviour.
Said Kazempour: “These investments depend a lot on each state’s policy or regulatory environment…An increasing number of regulators are allowing utilities to address their GM needs outside their rate cases.
“And when reliability and resilience concerns justify it, some regulators support controversial investments in capital-heavy infrastructure and utility ownership of DERs. What strategy a utility will take often depends on where they are located.”
The Wood Mackenzie report on grid modernisation was released earlier this week, drawing on critical data on utility strategies, initiatives, investments, deployed technologies and cost-recovery mechanisms, they state.