The Seven Benefits That Will Change How You Evaluate Projects

Reliability isn't enough anymore—here are the 6 other criteria you must consider under FERC Order 1920

When American Electric Power's transmission planners began their first project evaluation under FERC Order 1920's new benefit criteria, they discovered that a $400 million transmission line they had rejected based purely on reliability metrics suddenly became economically justified when they included production cost savings, capacity benefits, and state policy support. The total quantified benefits exceeded costs by 2.3:1—transforming a "no-build" decision into a priority project.

This isn't an accounting trick or creative engineering economics. It's the fundamental shift that Order 1920 requires: moving from single-purpose reliability projects to multi-benefit infrastructure investments that must be evaluated across seven distinct value categories. For transmission planners and project development engineers, this represents the biggest change in project evaluation methodology since cost-benefit analysis was first introduced to the utility industry.

Yesterday we covered the foundational requirements of FERC Order 1920. Today, let's dive deep into each of the seven benefit categories, examine their engineering implications, and explore the calculation methods that are reshaping how we justify transmission investments.

The End of Reliability-Only Planning

Traditional Transmission Planning: For decades, transmission projects were justified primarily on reliability criteria:

• N-1 Contingency: System performance during single equipment outages

• Load Serving Capability: Ability to serve projected peak demand

• Voltage Support: Maintaining acceptable voltage levels under contingencies

• Economic Evaluation: Simple comparison of project costs vs. outage costs

Order 1920's Multi-Benefit Requirement: Every transmission project must now be evaluated across seven benefit categories:

1. Reliability Benefits

2. Adjusted Production Cost Benefits

3. Capacity Benefits

4. Decreased Transmission Losses

5. Increased Competition

6. Extreme Weather and Natural Disaster Recovery

7. State and Federal Policy Goals

This shift requires new analytical tools, expanded data collection, and fundamentally different approaches to project economics.

Benefit Category 1: Reliability Benefits

Traditional Approach:

• Deterministic Analysis: Pass/fail criteria for N-1 contingencies

• Planning Standards: Compliance with NERC reliability standards

• Simple Metrics: Load at risk during contingency conditions

Order 1920 Enhancement:

• Probabilistic Assessment: Risk-based reliability evaluation

• Customer Impact Analysis: Economic consequences of outages by customer class

• Cascading Analysis: Sequential failure scenario modeling

• Climate Resilience: Enhanced reliability under extreme weather conditions

Engineering Implementation

Value of Lost Load (VOLL) Analysis:

Reliability Benefit = Σ (ΔLoad at Risk × VOLL × Outage Duration × Probability)

Customer Class Values:

• Residential: $3-15/kWh depending on outage duration

• Commercial: $15-50/kWh for most business types

• Industrial: $50-500/kWh for process industries

• Data Centers: $1,000-10,000/kWh for hyperscale facilities

Calculation Example: A transmission upgrade reduces load at risk by 500 MW with an annual outage probability of 0.1% and average duration of 4 hours: