Renewable energies are lowering electricity costs in some parts of the country. But they're typically placed far away from demand centers, so those benefits aren't being seen by consumers everywhere. Better integrating electricity transmission networks across regions could significantly reduce generation costs, new research from Ford School professor and economist Catherine Hausman shows, at the expense of generation companies' profits.
Hausman and her colleagues Owen Kay (PhD ‘25), research economist at the Dallas Federal Reserve, and Dasom Ham, a PhD student at U-M's Department of Economics, found that improving interregional connectivity could have saved anywhere from $5.8 to $7.1 billion in electricity generation costs in 2022 and $3.4 to $5.0 billion in 2023. At the same time, investing in regional connectivity could cost some power plants over $20 million in annual net revenue, giving them financial incentives to block or delay transmission network improvements.
The study, recently published in Proceedings of the National Academy of Sciences (PNAS), gives policymakers a better understanding of why electric companies across the country may be hesitant to embrace regional integration despite associated generation cost reductions.
"Power producers in the Great Lakes and Great Plains states would see significant revenue increases from increased market integration, and those in the Northeast, Southeast, and California would see lower revenues," the researchers said. "As analysts and policymakers propose reforms, it will be important to consider the incentives of suppliers and therefore the critical role of grid governance."
Read Hausman's full paper here.
Read past Ford School stories on Hausman's research here.
