Neighborhoods with Underground Wiring are More Valuable

It's interesting when the physical world manifests itself and big-time bloggers notice:

Do underground power lines cost more? My wife tells me that the Russians are laughing at the power blackout in Virginia, they commonly have underground power lines, as do many parts of Europe. Common opinion is that underground lines are more costly, one estimate says $1 million per mile. Some commentators charge that underground lines are better for our health. If I read this advisor to terrorists correctly, underground lines may be less vulnerable to sabotage as well. I am not willing to endorse this idea, but the prospect of two weeks without power in my home naturally leads me to look for alternatives.

One thing to consider on the plus side of the cost/benefeit analysis is that neighborhoods with underground wiring are more valuable. I don't have the hard data to prove it but I know that my house would be more valuable (greater than my share of the undergrounding) if our street did not have ugly overhead power poles.

Why then, you ask, has my block not undergrounded? Good question. The answer lies in transaction costs to organize neighbors to form an Local Improvement District (LID) to pay for it, and part of those transaction costs include governmental resistance to LIDs.

From the other perspective is that there is no incentive for the utility to initate the undergrounding as it cannot capture any of the increase in value and, counter-intuitive as it may seem, utility company employees have told me that the utility actually prefers power-on-poles because of lower maintenance costs.

Comments

[Allan Connery]

A friend in the electric power business told me years ago that underground lines are less susceptible to damage, but hellishly expensive to fix when something does go wrong. (We're talking here about major lines that carry huge quantities of power over long distances).

What's involved in fixing an undergound high-voltage line? There's an entertaining, not-too-technical account of one such job here.

Local power distribution lines aren't as expensive to put underground, and in my home town (Calgary, Canada) they're a selling point for new communities.

[Dave]

Power lines?

Let's spend a few words about them...

Electric power transmission, a process in the delivery of electricity to consumers, is the bulk transfer of electrical power. Typically, power transmission is between the power plant and a substation near a populated area. Electricity distribution is the delivery from the substation to the consumers. Electric power transmission allows distant energy sources (such as hydroelectric power plants) to be connected to consumers in population centers, and may allow exploitation of low-grade fuel resources that would otherwise be too costly to transport to generating facilities.

Due to the large amount of power involved, transmission normally takes place at high voltage (110 kV or above). Electricity is usually transmitted over long distance through overhead power transmission lines. Underground power transmission is used only in densely populated areas due to its high cost of installation and maintenance, and because the high reactive power produces large charging currents and difficulties in voltage management.

A power transmission system is sometimes referred to colloquially as a "grid"; however, for reasons of economy, the network is not a mathematical grid.

Redundant paths and lines are provided so that power can be routed from any power plant to any load center, through a variety of routes, based on the economics of the transmission path and the cost of power.

Much analysis is done by transmission companies to determine the maximum reliable capacity of each line, which, due to system stability considerations, may be less than the physical or thermal limit of the line.

Deregulation of electricity companies in many countries has led to renewed interest in reliable economic design of transmission networks.

However, in some places the gaming of a deregulated energy system has led to disaster, such as that which occurred during the California electricity crisis of 2000 and 2001.