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Utility Infrastructure Spending Soars to Record $122 billion

The most capital intensive sector of the U.S. economy, electricity, will set new records on infrastructure investments this year - for the seventh straight year.

Electric utilities are on course to spend $122.8 billion this year, with stepped up spending on the local distribution end of its business where the industry is putting in place new business strategies expanding its offerings to customers.

As the Trump administration works out plans to spark a $1 trillion surge in infrastructure upgrades, utilities - the most capital intensive sector of the economy - are setting the pace for others to follow, utility sector experts say.

"It's great being at the center of things," said Richard McMahon, vice president of energy supply and finance at the Edison Electric Institute, which represents investor-owned utilities serving 220 million Americans. "That's where utilities are right now. Energy, everyone recognizes, it at the core of what is driving the economy."

Utility capital expenditures will hit $122.8 billion this year, up 9 percent from 2016, according to newly released figures by EEI based on utilities' public filings. Just a year ago, EEI forecasted utility cap-ex this year would be $104.5 billion. That will surge $18.3 billion or 17.5 percent above anticipated levels.

Utility capital expenditures have been rising every year since 2010, when it stood at $74.3 billion.


Richard McMahon

The electric utility sector is undergoing change on many fronts. Automakers are putting unprecedented efforts into expanding their fleet of electric vehicles in coming years in response to initiatives mounted by some states and nations. The Rocky Mountain Institute this week reported there could be 2.9 million EVs on U.S. highways within five years, adding a demand for electricity equal to what now is required to serve New Hampshire. Converting all light-duty vehicles - which do not include heavy trucks or buses - to EVs could ramp up demand for electric power by 20 percent, equal to the energy appetite of the industrial sector.

[EDITOR'S NOTE: RMI co-founder and chief scientist, Amory Lovins, will keynote the Empowering Customers & Cities executive energy conference in Chicago November 7-8.]

Many utilities have reported flat to declining sales of electricity for a number of years as industry and consumers have focused on getting more energy efficient. McMahon said that much of the growth in demand for electricity to power EVs will be met through use of existing power generation around the clock.

Spending on generation this year will reach $35.6 billion, down from $41.9 billion in 2016, according to EEI.

But spending on the distribution grid will grow to $35.7 billion, up from $32.1 billion a year ago.

Distribution investment reflects deployment of a more resilient, three-dimensional grid that will allow for much more distributed generation, creation of microgrids and deployment of new smart cities technologies including new urban lighting programs, McMahon said.

While new players, some of them disruptive, are emerging, utilities are evolving to help speed grid transformation.

"Utilities are great implementers of new technology," McMahon said.



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