Benefit-Cost Analysis for Utility-Facing Grid Modernization Investments: Trends, Challenges, and Considerations

In recent years, many electric utilities have submitted grid modernization plans for review by state public utility commissions. A central objective of these plans is to demonstrate that grid modernization investments will provide net benefits to customers, be reasonable and be in the public interest. The plans typically include some form of benefit-cost analysis, but the assumptions, methodologies and frameworks vary considerably between utilities.

This report:

• Describes utility-facing technologies and projects for modernizing distribution systems, including interdependencies of grid components
• Highlights benefit-cost considerations related to grid modernization
• Summarizes recent trends in benefit-cost analysis for grid modernization based on a review of 21 plans by U.S. electric utilities
• Discusses challenges state public utility commissions face in reviewing utility plans and provides options for addressing challenges