Annual spending by major utilities to produce and deliver electricity increased 12% from $287 billion in 2003 to $320 billion in 2023 as measured in real 2023 dollars, according to financial reports to the Federal Energy Regulatory Commission (FERC).
Capital investment in electric infrastructure mostly drove the increase, more than doubling over the period as:
- Aging generation and delivery infrastructure were replaced or upgraded to resist fire and storm damage.
- Utilities installed first natural gas-fired generation, then wind and solar generation, and, more recently, battery storage.
- New lines were connected to renewable resources.
- New technology, including smart meters, sensors, and automated controls, was added to the system.
Grid infrastructure investments drive increase in utility spending over last two decades
Data source: U.S. Energy Information Administration and Federal Energy Regulatory Commission (FERC) Financial Reports, as accessed by Ventyx Velocity Suite
Note: O&M=operation and maintenance
Production
Spending to produce electricity fell 24% from 2003 to 2023, mainly due to lower fuel costs and, to a lesser extent, the retirement of older, costlier-to-maintain fossil fuel plants. Fuel costs, the main operating expense, make up most of the production costs.
More recently, capital spending on electricity production increased by 23% ($4.7 billion) in 2023 compared with 2022. Most of this increase was driven by costs related to the construction of the Vogtle nuclear plant operated by Georgia Power. The fourth and final Vogtle unit entered commercial operation at the end of April 2024.
Grid infrastructure investments drive increase in utility spending over last two decades
Data source: U.S. Energy Information Administration and Federal Energy Regulatory Commission (FERC) financial reports, as accessed by Ventyx Velocity Suite
Transmission
Spending on electricity transmission systems nearly tripled from 2003 to 2023, increasing to $27.7 billion. Electricity transmission systems consist of the wires and structures required to transmit high-voltage power long distances from the generator to the neighborhood, lower-voltage distribution grid.
More recently, capital investment in the transmission of electricity increased $2.7 billion (11%) in 2023 from 2022. Most of this increase came from spending on the transmission station equipment ($1.0 billion), poles ($1.1 billion), and computer software ($0.4 billion) necessary for operating regional transmission markets.
Distribution
Capital spending on the distribution system, responsible for delivering electricity to end users, was the main driver of electricity spending increases over the last two decades. Capital investment in distribution infrastructure increased by $31.4 billion, or 160%, from 2003 to 2023.
More than one-fifth of this increase occurred between 2022 and 2023 when spending increased by $6.5 billion to a total of $50.9 billion as utilities replaced and upgraded aging equipment and installed new lines, transformers, and other equipment to help neighborhood electricity grids withstand extreme weather events and to manage the intermittency of renewable resources.
Capital spending on overhead lines, poles, and towers increased the most. Utilities spent $17.4 billion on overhead infrastructure in 2023, an 11% increase from 2022 and a 220% increase from 2003.
Investment in underground lines also increased considerably, more than doubling over the past 20 years to reach $11.8 billion in 2023. Utilities installed underground lines in new housing and commercial developments and replaced some overhead lines to mitigate power outages during storms and fires or to improve neighborhood appearance.
Capital investment in line transformers, which decrease voltage to household levels, increased 23% from 2022 to $7.5 billion in 2023—a result of supply chain and manufacturing issues.
Utilities spent $6.1 billion on distribution substation equipment in 2023—a 184% increase from 2003 and a 15% increase from 2022. Substation investment has increased to help utilities better withstand extreme weather events, manage the intermittency of renewable resources, and allow greater voltage control during emergencies.
Utilities spent $5.1 billion in 2023 on infrastructure located on or near customers’ property such as meters, leased property, and rooftop solar installations—up 84% from 2003 and up 25% from 2022.
Although energy storage remains a relatively small portion of the total budget for distribution infrastructure, spending increased from $97 million in 2022 to $723 million in 2023. Energy storage at the substation or customer site enhances power quality and provides backup power in areas where lines and transformers cannot handle additional capacity, especially as more intermittent renewable resources come online.
Grid infrastructure investments drive increase in utility spending over last two decades
Data source: U.S. Energy Information Administration and Federal Energy Regulatory Commission (FERC) financial reports, as accessed by Ventyx Velocity Suite
Other
Utilities increased spending by $8.6 billion (30%) on other electricity systems costs from 2003 to 2023. Most of these increases ($7.9 billion) were spent on intangible plant expenses (such as licenses and franchises) and general plant expenses (such as offices and storage buildings). Other electricity systems costs also consist of administrative and general expenses.
