3 Steps for Utility Companies to Get Started with Undergrounding

The U.S. electric grid is under more strain than ever to support exponential electricity demand due to artificial intelligence (AI), data centers, electric vehicles, and hotter temperatures. Its infrastructure is made up of 180 million power poles spread out over 5.5 million miles that are frequently bombarded with increasingly severe storms and weather.

Worsening SAIDI (System Average Interruption Duration Index) and SAIFI (System Average Interruption Frequency Index) values—commonly used by utilities to measure performance—show our electric grid is in need of hardening. Replacing or reconductoring existing overhead power lines still makes them susceptible to severe weather conditions. Undergrounding, on the other hand, provides a promising option to help utility and electric providers improve power resiliency and reliability for their customers. With careful planning and consideration, utilities can help offset the upfront investment by reducing risks, repairs, and maintenance over the long run. In this article, I outline considerations to help utility companies determine the optimal time and location for undergrounding, assess the value of the investment, and identify funding opportunities.

Step 1: Identify Where and When to Underground

An essential step for utility providers in developing short- and long-range plans is to identify, categorize, and prioritize which service areas make the most sense for their undergrounding projects by evaluating the following:

• Highest Potential. Areas that serve a large number of customers and are prone to recurring or increasing storm damage, long power restoration times, heightened fire risk, etc.
• Medium Potential. Areas where undergrounding could be considered economically competitive. Undergrounding in these areas is driven by more qualitative factors like aesthetics, customer satisfaction, reputation, etc.
• Low or No Potential. Areas of low customer density and at lower risk of repeat extreme weather or fire events.

The highest potential segments are often the best place to begin undergrounding projects. It’s important to weigh avoided costs and risks, along with additional benefits such as:

• Improved Environmental, Social, and Governance (ESG) Performance. Undergrounding power lines can enhance a utility’s ESG performance by reducing environmental impacts and demonstrating a commitment to sustainable practices.
• Reduced Risk for Utility Crews and the Public. Burying power lines reduces the risk of accidents, injuries, and fires caused by downed or damaged lines, making it safer for utility workers and the community.
• Improved Streetscape Aesthetics. Without the clutter of overhead wires and poles, streets and neighborhoods look cleaner and more attractive.
• Improved Customer Service. Undergrounding power lines leads to fewer outages and faster restoration times, resulting in more reliable service and happier customers.
• Improved Reputation. Taking a proactive approach to modernize infrastructure and increase reliability by investing in undergrounding projects can enhance a utility’s public image.

Utilities need to consider additional factors like street permitting, digging up or around property, and geographic constraints. Utility companies may find it easiest to initiate digging along roads, railroad tracks, or other routes where they typically have right-of-way. The approval process can vary greatly between areas, so utility companies will need to work with their local or regional authority to ensure they have the necessary approvals and permits to begin digging.

Based on their region, timing is a key factor for utilities to consider in determining when they will begin undergrounding work. Commencing work during summer or winter when increased heating and especially air conditioning can strain electricity loads can be challenging. Lower loads in the spring and fall often reduce pressure on utilities to deliver more power.

The start date could also be impacted by factors such as seasonal weather patterns, permitting and approval timelines, and funding availability. Many utility companies opt to install undergrounding infrastructure in phases to avoid or minimize service interruptions.

Step 2: Calculate the Payback Point

Utilities are owned and operated in a variety of ways, including an IOU (investor-owned utility), cooperative, or municipality. Regardless of the structure, many stakeholders will want to understand how much undergrounding will cost. Utilities can help educate customers about the initial cost of undergrounding compared to installing overhead lines. Explaining the approach and value, as well as the anticipated length of the payback period, will help stakeholders understand the lower operating costs, improved reliability and capacity, and long-term financial benefits that help justify the initial investment.

In calculating your payback point, it’s important to consider the total investment including:

• Trenching
• Excavation
• Materials like cables and transformers
• Labor
• Permitting fees
• Restoration costs of impacted infrastructure like roads
• Maintenance and repair of underground lines
• Any special equipment

Factor in the advantages of advanced technology and future cost savings as additional ways to offset the investment, which could include:

• Avoided Maintenance Impact. The reduction in regular maintenance expenses due to the lower upkeep required for underground lines compared to overhead lines. This enables crews to focus on proactive installation and service needs.
• Accelerated Recovery, Repair, and Replacement After Severe Storms. Faster and less costly recovery and repair efforts following severe weather events, as underground lines are less likely to be damaged.
• Avoidance of Frequency and Severity of Impact. Decreased frequency and severity of power outages and disruptions, leading to improved service reliability and fewer emergency repairs.

There are also indirect benefits, such as reputational value from delivering a more reliable customer experience, and flexibility and scalability to meet future growth and volume demands.

The example charts below break down how this might look in practice by calculating an average initial investment cost of $400,000 per mile for 200 miles of underground power lines for a total upfront investment of $80 million. These estimations are based on a five-year timeline to complete the work.

Figure 1 shows the estimated cost of avoided maintenance and repairs over 50 years, which is the typical estimated lifespan of high-quality underground electrical infrastructure. A return happens between years nine and 10, at which point the cumulative avoided maintenance and repairs exceed the total undergrounding investment. Figure 2 represents the cumulative repair and maintenance savings over 50 years.

Some payback models could be more complex and include rate adjustments, gross domestic product (GDP) impact from avoided outages, inflation, or reinvestment of savings as capital expenditures. Incorporating these factors can shorten the payback period and make for an even more attractive investment.

Step 3: Explore Funding Opportunities

Utility companies have a number of funding options to review that could potentially help pay for undergrounding projects. The U.S. government in recent years has allocated billions of dollars in funds and grants to support undergrounding and grid hardening initiatives. While most 2024 funds are allocated, utility providers may want to explore the following programs for fiscal year 2025, giving more time to build plans and maximize the chances of securing funding.

Infrastructure Investment and Jobs Act / “Buy America, Build America.” This law includes several provisions for undergrounding utility infrastructure through fiscal year 2026:

• $5 billion to enhance the resilience of the electric grid and undergrounding initiatives.
• Undergrounding can be included as part of disaster mitigation programs. Communities can use federal relief funds to bury utility infrastructure brought down by extreme weather or other natural disasters.
• Undergrounding is an eligible expense under the National Highway Performance Program when carried out as part of an ongoing undergrounding project.

The Department of Energy (DOE) is responsible for issuing funds under this program. Utilities can search for funding opportunities, review the submission process, and apply for funding on the DOE’s Grid Deployment Office website.

Federal Emergency Management Agency (FEMA) Hazard Mitigation Grant Program (HMGP). The HMGP provides funding to state and local governments for long-term hazard mitigation measures after major disaster declarations. FEMA made more than $190 million available to 110 congressionally directed projects for fiscal year 2024. FEMA can generally fund up to 75% of eligible project costs.

Grid Resilience State and Tribal Formula Grants Program. This new program is designed to strengthen and modernize America’s power grid against wildfires, extreme weather, and other natural disasters exacerbated by climate change. It has offered up to $2.3 billion in funding since fiscal year 2022.

Transportation Enhancements Program. Under the Transportation Equity Act for the 21st Century (TEA-21), communities can apply for funds through their state department of transportation for utility burial or relocation, as part of larger beautification projects. Refer to your state department’s website for funding opportunities.

State-Level Programs. Some states have their own programs or allow the use of state transportation funds for undergrounding projects under certain conditions. These state-level resources can complement federal programs to support undergrounding initiatives. Utilities can refer to their state department to learn more about these opportunities.

Undergrounding: Future-Proofed Power

Undergrounding is essential for a resilient and reliable power supply. While it requires careful research and planning, savings from reduced operating costs, and repairs and maintenance, as well as updated capabilities and scalable solutions, can be significant. The right technology partner can assist with the planning process and help ensure utilities have the equipment needed to provide uninterrupted power for decades to come.

—Jack Bellissimo serves as senior vice president of Product Management, Marketing, and Strategy, leading the U.S. and Latin America region portfolio of electrification solutions for ABB Installation Products, part of ABB’s Electrification Business.