High Level
A peer‑reviewed study from Lawrence Berkeley National
Laboratory finds high, geographically balanced market value for additional
transmission capacity, especially across regional seams, with much of that
value concentrated in a small share of peak hours. In the same week, a ratings‑agency
analysis warns that newly expanded 50% import tariffs on steel, aluminum and
copper could increase materials costs, slow some transmission projects, and
test regulators’ willingness to allow full pass‑through to ratepayers.
Full View
Study quantifies high, concentrated market value for
interregional and cross‑interconnect transmission
• What happened: A Nature Communications paper analyzing 2012–2022
wholesale price data estimates a median energy‑market value of $116 million
per GW per year for added transfer capacity, with cross‑interconnect and
interregional links showing the highest value. The authors find that 5% of
hours account for at least 45% of value and that value‑to‑cost ratios
exceed 4 for all evaluated cross‑interconnect projects.
• Who did it: Researchers at Lawrence Berkeley National Laboratory.
• Why they did it: To ground transmission planning in observed market
outcomes and identify when and where transmission delivers the greatest
economic value.
• Stakeholder views: The authors write that “additional transfer
capacity between regions would have been especially valuable, with a median
value of $116 million per GW per year,” and that benefits are often
balanced between regions.
• What happens next: Planners and regulators may use these empirical
benchmarks to validate models, with particular focus on interregional seams
where value‑to‑cost ratios are strongest. The results also underscore the
“insurance value” of transmission during a small set of volatile hours.
Sources:
Nature Communications. “Electric transmission value and its drivers in United
States power markets.” August 28, 2025. https://www.nature.com/articles/s41467-025-63143-5
Analysts warn 50% metals tariffs could raise grid project
costs and slow some transmission development
• What happened: Morningstar DBRS reported that the 50% import
tariffs on steel, aluminum and copper may raise materials costs that make
up 20%–30% of typical transmission project budgets, complicate
procurement of transformer‑grade electrical steel, and pressure utility credit
metrics. Utility Dive summarized that “some marginal projects… may no longer
generate a positive net present value” once tariff cost increases are included.
• Who did it: Morningstar DBRS, reported by Utility Dive.
• Why they did it: To assess how expanded tariffs could affect utility
capital programs, rate recovery, and credit quality.
• Stakeholder views: Morningstar DBRS writes that the 50% tariffs “directly
threaten the ambitious agenda to upgrade and expand the U.S. power grid.”
Utility Dive notes commissions may stretch recovery periods or cap rates
to manage bill impacts.
• What happens next: Expect case‑by‑case regulatory scrutiny of
transmission cost recovery, more use of cost‑containment and alternative
delivery strategies, and potential schedule adjustments where supply chains
tighten.
Sources:
Utility Dive. “Import tariffs could slow transmission development, drive up
utility costs: Morningstar.” August 26, 2025. https://www.utilitydive.com/news/import-tariffs-transmission-development-utility-costs-morningstar/758601/
DBRS Morningstar. “The Tariff‑Era Grid: A New Cost Reality for U.S. Regulated
Utilities.” August 25, 2025. https://dbrs.morningstar.com/research/461025
Reuters. “U.S. hikes steel, aluminum tariffs on imported appliances, wind
equipment and more.” August 19, 2025. https://www.reuters.com/business/us-hikes-steel-aluminum-tariffs-imported-appliances-railcars-ev-parts-2025-08-19/
What’s the So What?
The empirical record now says the quiet part out loud:
interregional transfer capacity is worth a great deal, most of the time to both
sides of the seam, and especially in the rare hours when the system strains.
That is the kind of benefit profile—systemic, bi‑directional, insurance‑like—that
Order 1920 asks planners to surface and allocate. The Berkeley Lab study gives
commissions and RTOs an evidentiary basis to justify seams projects that
traditional production‑cost models may undervalue, and it strengthens the case
for DOE to steer NIETC designations at the most congested seams.
At the same time, a tariff‑driven cost shock cuts the other
way. If materials inflate 20%–30% of project budgets and transformer lead times
tighten, economic portfolios that easily cleared benefit‑cost thresholds last
year may now sit on the margin. Morningstar’s signal to regulators is clear:
bill impacts matter, and commissions may stretch recovery or cap rates rather
than green‑light instant pass‑throughs. That creates timing and liquidity risk
exactly when long‑lead transmission needs to move from paper to steel.
The policy task is therefore twofold. First, use Order
1920’s expanded benefits framework and the paper’s empirical metrics to capture
the concentrated, cross‑seam value that shows up in the hardest hours. Second,
actively manage cost and supply risk—standardize conductor and tower specs,
lock in framework agreements for electrical steel and transformer cores, and
stage portfolios so near‑shovel‑ready projects do not stall. Expect the
strongest cases to be interregional seams with balanced flows and documented
congestion rents; those are where benefit‑cost resilience is most likely to
survive the tariff era.
Bibliography
Nature Communications. “Electric transmission value and its
drivers in United States power markets.” August 28, 2025. https://www.nature.com/articles/s41467-025-63143-5
Utility Dive. “Import tariffs could slow transmission development, drive up
utility costs: Morningstar.” August 26, 2025. https://www.utilitydive.com/news/import-tariffs-transmission-development-utility-costs-morningstar/758601/
DBRS Morningstar. “The Tariff‑Era Grid: A New Cost Reality for U.S. Regulated
Utilities.” August 25, 2025. https://dbrs.morningstar.com/research/461025
Reuters. “U.S. hikes steel, aluminum tariffs on imported appliances, wind
equipment and more.” August 19, 2025. https://www.reuters.com/business/us-hikes-steel-aluminum-tariffs-imported-appliances-railcars-ev-parts-2025-08-19/