Utility Distribution System Spending Continues to Increase
According to recent statistics from the Energy Information Administration (EIA), electric utilities are continuing to increase the amount they are spending on distribution system maintenance and improvements. In fact, the increase is quite staggering when viewed over longer horizons of time.
How Much are Utilities Spending on the Distribution System?
Just in case we need to define this, electric distribution connects to the high-voltage transmission system and is the final leg of delivering electricity to customers. The distribution system encompasses assets like poles, lines, transformers, meters, towers and station equipment. In general, spending is typically geared toward expanding the system, repairing the system, modernizing the system, replacing aging equipment, and storm hardening.
In 2019, the most recent data year available, U.S. electric utilities spent $57.4 billion on the distribution system as a whole, over 6% higher than the amount spent in 2018. When adjusted for inflation, the 2019-dollar amount was a whopping 64% higher than what was spent in 2000, less than 20 years ago!
Of course, the numbers from the EIA are less straightforward then perhaps they could or should be, as not all of the spending they aggregate is directly related to physical upgrades or maintenance. Nearly 20% ($12 billion) was spent on “customer expenses” like advertising, billing and customer service.
The other 80% can be broken down as follows: $31.4 billion for capital investments (54.7% of the 80%) and $14.6 billion for O&M (25.4% of the 80%). Nearly 40% of the capital spending was for power lines (23% underground, 17% overhead). In terms of O&M, half ($7.3 billion) was spent on overhead lines. Other O&M expenses include things like vegetation management, animal protection, line testing, and storm repairs.
The burning question is, will the upward trajectory in distribution spending continue in future years? Based on the push to decarbonize, the increasing frequency and severity of weather patterns, and the changing dynamics of consumer behavior, I’ll go out on a limb here and predict that yes, distribution spending will most likely continue to increase over the next 5-10 years.
