According to the Department of Energy, 70 percent of U.S. transmission lines are 25 years or older, 70 percent of power transformers are 25 years or older, and 60 percent of circuit breakers are more than 30 years old. And they are showing their age.

Strains on the United States power delivery system are beginning to show with the current system characterized by aging infrastructure, significant underinvestment and outdated technologies, according to a new Fitch Ratings report.

According to the Department of Energy (DOE), 70 percent of U.S. transmission lines are 25 years or older, 70 percent of power transformers are 25 years or older, and 60 percent of circuit breakers are more than 30 years old. Over the last decade, most transmission investment has been directed toward constructing new facilities to meet demand in lieu of maintaining the existing system and refurbishing its equipment.

And the strain on this system is beginning to show, particularly as market participants and regulators are placing new functions on the system, such as facilitating competitive regional markets for which it was not designed. Compounding these problems are the duel challenges of parts availability and obsolescence of older equipment. Electricity demand and generation has doubled over the past 30 years, and that, along with the advancement of wholesale power markets, transfers of large amounts of electricity across the network have increased significantly.

There are concerns regarding both reliability and capacity. With integrated regulated utilities as traditional owners of transmission (following a period of corporate restructuring and industry deregulation in many states coinciding with a period of financial stress for many utilities), the transmission system has been both underinvested and, as many believe, not adequately maintained.

Yet getting new transmission on the ground continues to be hindered by siting, historically the greatest hurdle to adding new transmission capacity. “Transmission developers still face a struggle before state utility commissions despite Federal enhancements to FERC,” according to Karen Anderson, director, Fitch Ratings Global Power team.

Transmission congestion occurs when actual or scheduled flows of electricity across a line or piece of equipment are restricted below desired levels — either by the physical or electrical capacity of the line or by operational restrictions created and enforced to protect the security and reliability of the grid. Simply put, congestion occurs when available low-cost energy cannot be delivered to the demand location due to transmission limitations. At these times, higher-cost power generation located closer to the load center must be dispatched to meet load requirements.

Now, due to the slowdown of merchant generation investment since the building boom of the late 1990s and a developing trend toward diversity in the generation mix, utilities and their state and federal regulators are reevaluating the role of transmission in bringing wind, coal and hydro resources onto the network, says The Energy Blog.

The level of investment in long-distance, high-voltage wires that move electricity around and between regions of the country has not been keeping pace with the growing demands imposed on the system, according to the Fitch report. According to the DOE’s National Electric Transmission Congestion Study, released in August:

Power purchasers look for the least expensive energy available to ship across the grid to the areas where it will be used (“load centers”). When a transmission constraint limits the amount of energy that can be transferred safely to a load center from the most desirable source, the grid operator must find an alternative (and more expensive) source of generation that can be delivered safely, and re-instruct the owners of generators on how they should schedule electricity production at specific power plants. Further, if a large portion of the grid is very tightly constrained — as when demands are very high and local generation is limited — grid operators may have to curtail service to consumers in some areas to protect the reliability of the grid as a whole. All of these actions have adverse impacts on electricity consumers.

The DOE report identified three classes of congestion areas — or parts of the country where it is critically important to remedy existing or growing congestion problems because the current and/or projected effects of the congestion are severe — that merit further federal attention, including: Southern California and the region stretching from metropolitan New York to northern Virginia.

The congestion areas of concern exhibit large-scale congestion problems or the potential for such issues, but more information and analysis is necessary to determine the size of the problem and how new transmission could address it. The areas of concern were New England, Phoenix-Tucson, Seattle-Portland and the San Francisco area. Meanwhile, conditional congestion areas — where transmission congestion is not presently acute but could become exacerbated if significant wind, coal or nuclear generation is built without simultaneous development of associated transmission capacity — were Montana-Wyoming, the Dakotas-Minnesota, Kansas-Oklahoma, Illinois, Indiana and Upper Appalachia, and the Southeast.

Unfortunately, there are practical limitations in the distance electricity can be transmitted. Moreover, electricity flows are monodirectional, The Energy Blognotes. Because electricity flows where it wants to and suffers some level of degradation, transmitting electricity across long distances does not occur, and, for example, there is currently no way to transmit electricity between the East and West coasts.

As customer demand increases and transmission systems experience increased power transfers, portions of these systems will be operated at or near their reliability limits more of the time. Under such conditions, coincident unavailability of generating units, transmission lines or transformers, while improbable, can degrade bulk power system reliability.

Furthermore, some portions of the grid will be unable to deliver available resources to areas to meet minimum levels for adequacy, nor will some portions be able to support all desired electricity market transactions. In the long term, reliable transmission will depend on the close coordination of generation and transmission planning and construction, as well as the adoption of longer-term planning horizons that are 10 years or more.

In an analytical Study for the Edison Electric Institute, ESAI projected that the bulk of the next $50 billion invested in the power sector will be in transmission; much of the investment will be through outside the traditional investor-owned utilities. From a credit perspective, Fitch expects that utilities will be able to finance their capital expenditures in a manner that is consistent with current ratings.

The complete report Frayed Wires: U.S. Transmission System Shows its Age (15 pages) is available here. (Registration required)