Capital expenditures for electric transmission and distribution infrastructure regarding utilities in the RRA universe are projected to reach $52.4 billion in 2019 and to remain flat in 2020 at $52.3 billion. These conclusions flow from our most recent Utility Capital Expenditures Update report for the years 2019 to 2023. The results are roughly in line with T&D capex forecasts disclosed in our comprehensive electric T&D utility capex analysis in December 2018.

Forecast T&D spending remains a major component of overall utility capex thus representing a substantial contribution toward utility earnings growth in the years ahead. By business category, T&D spending is forecast to comprise approximately half of overall utility capex between 2019 and 2021, according to our spring 2019 analysis.

Over the past decade, the nation’s electric and gas utilities have stepped up investments across the board, with increased focus recently on T&D to improve electricity reliability, replace aging power lines, and meet public policy requirements and to cater to a shift in the nation’s generation portfolio toward renewables and distributed energy resources. We expect considerable levels of T&D spending to support solid profit expansion for the foreseeable future.

We note that although our data indicates that T&D capex in the industry will drop off in 2021, and again in 2022, our observations in recent years indicate that actual investment generally continues to rise, or remain high, despite the industry’s projected spending declines.

Considerable motivations exist for transmission spending to remain elevated, including pent-up demand to replace and modernize aging infrastructure resulting from decades of under-investment in the electric transmission grid. The increase in renewable generation sources, which are often considerable distances from load centers, will continue to drive new transmission line projects. The roll-out of advanced metering infrastructure, and the expansion of distributed generation will also necessitate further investments.