These traffic jams (aka ‘load pockets’) and toll fees (aka ‘congestion costs’) cost consumers millions and will only worsen if nothing is done to improve the electric grid.
Imagine you’re driving a car on a busy highway. Sometimes, there are stretches where traffic slows down or even comes to a halt, like cities, while other parts of the road are clear and you can speed up, out on the highway. Similarly, in the world of energy, there are areas in the power grid where electricity demand is consistently very high, like during hot summer days when everyone is running their air conditioners, during extreme winter storms when people are huddled around heaters, or areas with considerable population growth or industrial electricity demand growth. If there aren’t enough transmission lines to connect with power generation outside of these localized areas, it creates an imbalance in supply and demand that threatens access to power when needed. These areas are called load pockets, and they act like the congested parts of the highway. A load pocket is like a traffic jam on the energy highway with not enough lanes, and its rush hour. It’s a specific area within the power grid where the electricity demand is consistently high and it can be challenging to supply that demand without building an expensive new power plant.
In Louisiana, for example, during sweltering summer days, when everyone is cranking up their AC units to beat the heat, specific neighborhoods or regions might experience a surge in electricity demand. If the infrastructure in these areas isn’t equipped to handle that increased demand, it creates a load pocket, and in worse case scenarios this can lead to blackouts, brownouts, or planned outages. Many south Louisiana electricity consumers are located within load pockets.
Load pockets impact residential consumers in multiple ways. Consumers pay for the varying cost of electricity. In load pockets, there is limited capacity to import electricity, which means consumers must pay the cost of whatever electricity is actually able to reach them in their pocket. While load pockets and congestion negatively impact consumers, they have been found to increase profits for investor-owned utilities (Grid Strategies). Utility companies can apply to their regulator to build generation within the load pocket, and when utility companies build generation, aka power plants, the utilities receive a near guaranteed return on their investment, increasing profits for shareholders. In contrast, building and expanding transmission capacity would not guarantee the same level of profit for shareholders.
Now that we are thinking about the electric grid as a highway system, imagine you’re driving from one city to another. Along the way, you hit a bunch of toll booths. Transmission congestion costs in the energy world are like toll booths, they account for strain on the electric grid and increasing costs of relying on limited power generation options during periods of high demand in a given area. When electricity travels from where it’s generated, like a power plant or wind farm, to where it’s needed, like homes and businesses, it travels through transmission lines, which are like the highways for electricity. Sometimes, these transmission lines get congested, just like highways during rush hour.
When there’s congestion on these transmission lines, it can cause physical strain on the grid and bottlenecks, much like the toll booths slowing down your drive and leading to gridlock elsewhere. And just like those toll booths cost you money, transmission congestion costs money, too. Normally electric utilities ‘hedge’ for these costs, but that doesn’t mean that these costs don’t show up in your electricity bill, because utility companies might have to pay extra fees or charges to deal with the congestion in extreme cases, and ensure that electricity gets where it needs to go smoothly – and you can bet they pass those fees onto customers.
Transmission congestion costs are basically the extra expenses that arise when there’s traffic on the electricity highways. It’s all about making sure the electricity grid runs efficiently and reliably, just like making sure your drive from one city to another is safe and smooth.
Transmission congestion costs increase nationally every year. Fortunately, states that are members of Regional Transmission Operators (RTOs) have lower congestion costs than non-regional Transmission Operator areas (National Bureau of Economic Research). Although these costs are generally lower, transmission congestion costs are on the rise in RTOs , and these congestion costs can be passed on to consumers. Transmission congestion is, first and foremost, the effect of inefficient or uneconomic access to power generation which can be remedied with additional transmission capacity.
Transmission congestion and load pockets impact consumers’ bills, but can also increase profit for investor-owned utilities. A recent National Bureau of Economic Research report found that in 2022 Entergy Louisiana and Arkansas netted $930 million in 2022 revenues because of a lack of competition among generation sources (Grid Strategies). Generation sources = power plants, renewable energy sources. Another way to think about this is that consumers could have saved a combined $930 million (in LA and AR) if the predominant investor-owned utility increased transmission capacity to reduce load pockets and transmission congestion costs.
So, now we know how load pockets and transmission congestion costs impact ratepayers, what are the solutions to reducing load pockets and congestion costs?
Congestion costs are a result of insufficient transmission capacity to access affordable energy options. Long-term regional transmission planning will help to reduce congestion costs and load pockets by expanding transmission capacity – basically creating more lanes for electricity to move efficiently. Advanced technologies like Grid Enhancing Technologies (dynamic line ratings, advanced power flow control, or topology optimization) can also be deployed to reduce demand and efficiently manage power flows. The bottom line is that increasing transmission capacity can alleviate the problem of congestion.
If we build more transmission capacity within grid footprints and build more connections with neighboring grid operator regions we can reduce energy costs and the cost impacts of load pockets. In the process we also develop a more resilient and reliable grid by expanding the grid to access more energy options. A more interconnected grid helps to create a grid that is larger than the weather. As we experience more extreme weather and climate change impacts, we must have a grid that can weather storms by balancing increased demand with access to as much available clean energy supply as possible. Having an electric grid larger than the weather means that, for example, when there is an extreme winter storm and an increase in electricity demand over a large footprint, we can access power across the Midwest, Southeast or other neighboring regions where they may not be facing the same extreme weather.
Fortunately, Louisiana is a member of a regional transmission operator that conducts long-range transmission planning (LRTP). Louisiana consumers will have an opportunity to participate in transmission planning. As regional planning engagement opportunities arise, the Alliance will let you know! It’s time that we had an electric grid that works for us.
