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Grid Connection Costs as a Barrier to Building New Generation: Evidence and Implications for Transmission Policy

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  • Johnston, Sarah
  • Liu, Yifei
  • Yang, Chenyu

Abstract

Meeting projected growth in electricity demand and climate goals will require building new electricity generators. The grid connection process is seen as a key constraint on this development. We collect new data on grid connection costs for PJM, the largest regional grid operator in the United States. We geographically match these costs to transmission spending to study their determinants. Using regression analysis, we find that these costs, and especially the network upgrade portion, are difficult to predict: generators with similar characteristics can have very different costs. We also find that planned generators with high network upgrade costs are much more likely to be canceled. Finally, prior transmission spending by the grid operator is associated with lower network upgrade costs for connecting generators. These findings emphasize the critical role of transmission capacity in expanding electricity generation capacity.

Suggested Citation

  • Johnston, Sarah & Liu, Yifei & Yang, Chenyu, 2025. "Grid Connection Costs as a Barrier to Building New Generation: Evidence and Implications for Transmission Policy," RFF Working Paper Series 25-21, Resources for the Future.
    • Handle: RePEc:rff:dpaper:dp-25-21
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    References listed on IDEAS

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    1. Lucas W. Davis & Catherine Hausman & Nancy L. Rose, 2023. "Transmission Impossible? Prospects for Decarbonizing the US Grid," Journal of Economic Perspectives, American Economic Association, vol. 37(4), pages 155-180, Fall.
    2. Joe DeLosa III & Johannes P. Pfeifenberger & Paul Joskow, 2024. "Regulation of Access, Pricing, and Planning of High Voltage Transmission in the U.S," NBER Working Papers 32254, National Bureau of Economic Research, Inc.
    3. Robertson, Molly & Rennert, Kevin & Palmer, Karen, 2024. "Modeling Obstacles to Energy Infrastructure for Improved Policy Analysis," RFF Reports 24-16, Resources for the Future.
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