As recent anger and debate over the cost of electricity in Connecticut rage on, a glaring truth has surfaced. To meet our grid expansion, modernization, and climate goals, significant investments must be made to the tune of $3-7 billion over the next decade.
The old mindset about how to pay for it all must be completely reimagined, for this decades-old business model no longer works, as evidenced by our energy costs skyrocketing. That model never anticipated the massive upgrades needed to prepare for the 21st century of renewable power, energy storage, electric cars, heat pumps and AI.
We must build up substations, transmission lines, and distribution-level, three-phase power lines. This is more challenging than people realize, as a substation on average costs about $55-60 million apiece to build and takes 3.5 to five years to complete. Three phase power lines cost approximately $1 million dollars per mile.
Historically speaking, any upgrades to our grid were paid for by a cost recovery mechanism. The utilities would build necessary infrastructure projects and petition the Public Utilities Regulatory Authority for the money back in the form of rate hikes. PURA is now doing its best to keep the rate hikes under control, and the politics of this model has become quite nasty in Hartford. Energy is a boring complex subject, yet now everyone from homeowners to businesses is now paying attention.
This outdated approach is under extreme pressure, because if we switch to all the new non-fossil fuel sources, these areas must be able to accommodate electric cars, charging stations, heat pumps, wind and solar. Even if we decide to deploy small scale nuclear reactors, the current grid cannot manage that either.
It will be difficult to deploy these innovative, cost-saving technologies because there is not enough infrastructure to interconnect it all. The efforts to electrify our state will be hamstrung until we have a long-term grand plan on how to achieve this ambitious goal. Not having a plan will make our state economically uncompetitive.
Do we have the political will to make this investment and transition? There is constant fear in Hartford about electric rates going up even higher, and rightly so, given the public outrage over expensive power bills over the last few months.
It is too easy for our current elected representatives to shoot down ideas simply with an excuse of it is going to hurt the ratepayers. This is true, we cannot work inside that old business model any longer, and that is exactly what will happen if it’s just tacked onto electric bills.
We must find new ways to pay these ongoing investment costs. As the size and scope of these types of projects or plans affect many areas of the state’s economy, so denying we need to upgrade the grid on a statewide basis is not an option. We simply cannot put it all on to electrical bills, and it is a complete waste of time to argue to try and make that work.
The state and all related stakeholders need to stop arguing and collaborate and put their heads together to find out new ways of funding this necessary statewide investment. Just because its electricity does not mean we only have one source of revenue to pay for it. Let go of that old paradigm altogether.
Please do not allow this to drift into a partisan issue either, for people who are struggling to pay these bills really don’t want to hear that. When my house is on fire, I really do not want to see the firefighters arguing over who gets to hold the hose.
If we use the highway system as an example, some of the money comes from the federal government, other money came from tolls, gasoline taxes, and portions of it come from DMV fees. Some of it comes from other non-related areas of the state budget. It is important to note that it changed over time as well. Connecticut once had tolls, then it switched to gasoline taxes over the years. There is always room to modify and adjust over time. Best not to make the perfect the enemy of the good.
We should view our energy transition from this lens. It is illogical to believe that we are going to pay $3- $7 seven billion over the next decade to implement plans to move us toward our energy future simply through electricity rates. The state and utilities keep trying to reshuffle the deck chairs, yet this is all within this old way of thinking. All parties involved should think about how to create various sources of long-term revenue that can pay for all of this.
We have hit the proverbial wall. We do not have enough power generated in-state. Other sources of electrical generation cannot be deployed because the grid is at its limit. To those in the energy business, this problem of our grid has been widely known by most, yet the can kept being kicked down the road, and now we have our backs to the wall.
Noel Lafayette is President of SHR Energy Management LLC.