The changing shape of US grid investments

The changing shape of US grid investments

As the United States ponders the implications of a new Trump Administration on energy and climate policy, the US Energy Information Administration (EIA) has released a snapshot of grid investments over the past two decades.

The data, based on EIA analysis of financial reporting to the Federal Energy Regulatory Commission (FERC), highlights that major energy companies are now spending more annually on delivery of power to homes and businesses than on production of electricity, consistent with a shift to more renewables and the energy transition.

Overall annual spending in the US by energy companies increased by 12 per cent from USD287 billion ($441 billion) in 2003 to USD320 billion in 2023 ($492 billion in real 2023 dollars). Capital investment in infrastructure was a key driver, more than doubling in the two decades.

The capital spend by sector is shown in figure 1 below.

Figure 1: Annual US capital additions by sector 2003-2023

Spending over the period analysed was on:

• Older generation plants and delivery infrastructure that was replaced or upgraded.
• New gas-fired plants, wind and solar farms and, more recently, battery storage.
• New transmission lines to renewable resources.
• New technology, including smart meters, sensors and automated system controls.

Spending on electricity delivery includes the money spent to build, operate, and maintain the electric wires, poles, towers, and meters that make up the transmission and distribution system.

In a 2020 review of investments the EIA found that after adjusting for inflation, major utilities spent 2.6 cents per kilowatt-hour (kWh) on electricity delivery in 2010 (2020 dollars).  Spending on delivery was 65 per cent higher in 2020 at 4.3 cents/kWh. Utility spending on generation decreased from 6.8 cents/kWh in 2010 (2020 dollars) to 4.6 cents/kWh in 2020.

According to the latest assessment spending on electricity production fell 24 per cent over the period from 2003 to 2023 driven by lower fuel costs as well as the retirement of older, costlier-to-maintain fossil fuel plants (although it did increase between 2022 and 2023 which is discussed below).

Clearly renewables have played a role. According to Scientific American (based on EIA data) 2023 was a boon year particularly for solar.  And the Solar Energy Industries Association (SEIA) and Wood Mackenzie Power & Utilities reported the capacity of utility-scale solar in the US grew by 22.5GW in 2023, a new record. The previous record was set in 2021 when 17GW of large-scale solar capacity was built. The cumulative total installed capacity of all solar capacity in the US now sits at 177GW.

In 2023, net generation of electricity from utility-scale generators in the US was about 4,178 billion kilowatthours (kWh) (or about 4.18 trillion kWh). EIA estimates that an additional 73.62 billion kWh (or about 0.07 trillion kWh) were generated with small-scale solar photovoltaic (PV) systems.

In 2023, about 60 per cent of US utility-scale electricity generation came from fossil fuels with gas the dominant source, accounting for 43.1 per cent of electricity generated.  Coal accounted for another 16.2 per cent, while about 19 per cent of electricity was from nuclear plants, and around 21 per cent was from renewable sources.

Figure 2: US Generation by Type

Source: EIA

 Production Costs

In its latest assessment, the EIA notes that in the 12 months to 2023 production costs increased 23 per cent to USD4.7 billion ($7.2 billion) with most of increase resulting from costs for the building of the Vogtle nuclear power station in Georgia. The fourth and last unit at the plant come into commercial operation in April this year.

Power production includes spending to build, operate, fuel, and maintain power plants, as well as the cost to purchase power where the utility does not own generation or does not generate enough to meet customer needs.  Spending on electricity production includes the cost of fuels, capital, labour, and building materials for various plant types.

Transmission

Transmission spending saw a significant increase, nearly tripling over the two decades to USD 27.7 billion ($42.6 billion) in 2023. Capital investment in the high voltage power lines increased 11 per cent (or USD2.7 billion, $4.2 billion) in 2023. The spend included USD1 billion ($1.5 billion) on substations, USD1.1 billion ($1.7 billion) on towers and USD400 million on computer systems.

Capital investment in electricity distribution systems has also surged, reflecting a growing focus on modernising infrastructure to address renewable energy integration, extreme weather resilience, and aging equipment. Total spending increased by 160 per cent over the two decades, reaching USD50.9 billion ($78.3 billion) in 2023, with a notable USD6.5 billion ($10 billion) jump between 2022 and 2023 alone.

The largest share of this investment has been in overhead infrastructure, which accounted for USD17.4 billion ($26.8 billion) in 2023—an 11 per cent rise from the previous year and a 220 per cent increase since 2003. Underground lines have also seen substantial growth, more than doubling over 20 years to USD11.8 billion ($18.1 billion), as utilities prioritise storm resilience and improved neighbourhood aesthetics.

Investment in critical components like line transformers and substation equipment has climbed as well, with 2023 spending hitting USD7.5 billion ($11.5 billion) (up 23 per cent from 2022) and USD6.1 billion ($9.4 billion) (up 15 per cent from 2022), respectively. These upgrades aim to better manage voltage fluctuations, improve system reliability, and adapt to the intermittent nature of renewable energy.

On the customer side, spending on meters, rooftop solar, and other localised infrastructure reached USD5.1 billion ($7.8 billion), a 25 per cent increase from 2022. Meanwhile, energy storage—though still a smaller portion of the overall budget—has seen exponential growth, with investment soaring from USD97 million ($149 million) in 2022 to USD723 million ($1.11 billion) in 2023. This reflects a heightened emphasis on backup power and supporting renewables reliability at both substations and at households and businesses.

These shifts underscore a broader transformation in energy distribution investment, as utilities adapt to the demands of grid with more renewables and that is increasingly decentralised.