Why Grid Modernization Promises a Stronger Electrical, Environmental and Economic Future

Few of us understand (or appreciate) the sheer amount of time, money, and energy needed to deliver electricity. But the moment you lose power, you realize just how critical electricity is to modern life: everything powered with a plug is suddenly worthless. Healthcare, manufacturing, agriculture — entire industries are crippled if electricity is unreliable.

As it stands, electricity will fail us more frequently, with far more catastrophic consequences. The sprawling electric grid that generates, distributes and supplies electricity in the U.S. is facing a range of existential threats — including that of climate change, decaying infrastructure, and security risks. Undoubtedly, a vulnerable and defective electric grid constitutes major issues, where costs and emissions surge while improved technology cannot be incorporated. Yet, it also presents an opportunity: appropriately modernizing the grid can help us achieve the collective vision of “resilient, reliable, flexible, secure, sustainable, and affordable electricity”. Beyond electrical durability, grid modernization also offers a chance at a radically improved environmental and economic future.

Modernizing the U.S. grid in a way that achieves these goals for a better electricity system, begins with understanding where we stand today. Valued at close to $2 trillion, the national electric grid encompasses the power plants that generate electricity, the substations that act as intermediaries, and the wires that distribute electricity to the final destinations. The engineering marvel was born in 1882, when Thomas Edison began supplying electricity to just fifty-nine customers. Driven by both innovation and need, the grid virtually covers every corner of the U.S., now serving more than 150 million loads

From the start, the grid was centralized: generating mass electric power at central locations to then be dispatched great distances across the nation. Today, electricity is primarily generated by close to 10,000 power plants, which often rely on the burning of nonrenewable fossil fuels. Electricity is then sent across 700,000 miles of transmission lines to substations all over the country, from where it is finally distributed (through millions of miles of wires) to power residential, commercial, and industrial infrastructure. Utilities that generate or distribute electricity are the primary electricity operators, which are often closely monitored by state legislatures, public utility commissions (state agencies that regulate the utility), and federal agencies, due to the multi-jurisdictional nature of the grid and the complexity of the electricity market.

Why the grid is a major electric, environmental and economic problem

Unfortunately (yet unsurprisingly) our grid is an “old, dirty, creaky” relic that is in dire need of destiny-changing investment. The American Society of Civil Engineers’ (ASCE) 2017 Infrastructure Report Card rated U.S. energy infrastructure as ‘D+’, noting that 640,000 miles of transmission lines are already operating at full capacity. “Sixty percent of U.S. distribution lines have surpassed their 50-year life expectancy,” having been mostly built in the 1950’s and 1960’s. Deteriorating infrastructure means more power outages with broader scope; 37 million Americans were impacted by outages in 2017, as compared with 13 million in 2009. The ASCE also predicts that investment in the grid will be short of what is necessary in the coming years, marking a financing deficiency that will result in unreliable electricity supply.

The grid’s vulnerabilities additionally jeopardize our environmental prospects. Weather conditions not only prey on the grid’s fragility — causing nearly half of the major outages since 2002 — but are increasing in severity and frequency due to climate change. Much more alarmingly, electricity generation makes up a staggering 27% of total U.S. greenhouse gas emissions — one of the leading forces driving climate change. When burned, coal, natural gas (which together source 62% of electricity generation) and oil (which accounts for 81% of total U.S. transportation emissions) release carbon dioxide and other heat-trapping gases into the atmosphere. This accelerates the detrimental impacts of global warming: extreme weather, habitat destruction, wildlife extinction, pollution, and resource shortages. Swiftly replacing these emissions-heavy energy sources with more renewable options — solar, wind, hydro — is fundamental to protecting our environmental future.

Power inadequacies and excessive emissions go hand-in-hand with lost economic value. The Department of Energy (DOE) estimates that “power outages are costing American businesses around $150 billion per year.” But the economic losses attributable to emissions are even more appalling: one study predicts more than $360 billion lost annually, from extreme weather and the associated health impacts. The grid’s deterioration is also a security concern, as it exposes our critical infrastructure to a potentially destabilizing cyberattack — with one model predicting $1 trillion in losses. A former director of the National Security Agency testified to Congress in 2014 that “China and a few other countries likely had the capability to shut down the U.S. power grid” — a capability that, if acted on, would have catastrophic political and economic consequences.

What grid modernization could look like

Simply preserving an outdated grid is ignorant of the benefits promised by recently developed (and increasingly cheaper) technologies. Exciting innovations in renewable energy, distributed resources, and information and communication technology can be harnessed to maximize electrical, environmental and economic outcomes. Electrification, decentralization, and digitization possibilities point to grid evolution, rather than grid maintenance. Robust technological improvements can thus improve grid reliability, replace the unhealthy consumption of fossil fuels, and stimulate economic growth. Indeed, a 2011 report by the Electric Power Research Institute (EPRI) estimated that implementing a fully functional smart grid could result in benefits between $1.3 trillion and $2 trillion, up to six times the estimated costs! Three key smart technologies are the most promising: electric vehicles, distributed energy resources, and advanced digital infrastructure. Their interconnected development, aided by the necessary regulatory reforms, will transform our electric grid for the better.

Technologies

Electric Vehicles

What it is

Emissions originating from vehicle operation make up 28% of total U.S. greenhouse gas emissions. Electric vehicles (EVs) use rechargeable batteries to store electric energy that powers the motor. Hybrid vehicles also contain a traditional internal combustion engine, due to the currently limited driving range and public charging infrastructure for EVs. So far, EV development has primarily focused on personal-use vehicles, where Tesla’s awe-inspiring success has made it the most valuable car company in the world.

Where it stands

There were over 1.18 million EVs in the US in 2019. Further expansion of EVs requires lower prices, increased range, more available high-speed chargers, encouraging legislation, and advancing electrification of public transportation.

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    • EV prices have dropped, deriving from the 85% drop in average battery pack price between 2010 and 2018.

    What benefits it could bring

    By 2030, 7% of on-the-road cars and trucks in the US are projected to be electric, numbering almost 19 million EVs. We could be avoiding 18.2 million metric tons in emissions annually by 2025, assuming 13 million EVs receiving 25% of their electricity from renewable sources. EV benefits are not limited to emissions; a single EV could bring about $12,403 of aggregate benefits (maintenance, fuel saving, environment, health, national security, and economic development) over its lifetime. In addition, up and coming vehicle-to-grid technology (a form of demand response) will allow EVs to return electricity to the grid, enabling further cost savings and energy generation reductions.

    Distributed Energy Resources

    What it is

    Defined by their proximity to the consumer, relative isolation from the larger grid, and contribution to the efficient generation and storage of energy, distributed energy resources (DERs) offer an appealing alternative to centralized electric generation. They allow for optimization of small-scale (less than 1 MW) renewable energy sources, which see production vary substantially with sunshine or wind speed, by allowing excess energy to be stored, and reducing the demand burden on traditional sources when possible. It is especially important to note that the true possibilities of these technologies can only be unleashed when they are incorporated together.

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    • Distributed generation refers to small-scale generation units that deliver power locally. As such, they reduce the costs and emissions associated with transmitting electricity across vast distances. Individual distributed generation owners also have the ability to sell any excess electricity they produce back to the grid, in a transaction known as net metering.
    • Distributed storage refers to the small-scale storage units, including EV charging stations, that accumulate and release power locally. As such, they are able to capture the variable power of renewable sources, and release it when the system requires it.
    • Microgrids refers to localized groups of electricity sources and loads (devices that consume electric power) that normally operate synchronously with the larger electric grid, but can also operate asynchronously, allowing for greater grid flexibility and reliability. They often run on combined heat and power (CHP), which converts heat (that would otherwise be wasted) into useful thermal energy, although they are increasingly adopting renewable sources of energy.

    Where it stands

    By its broadly defined nature, the current state of DERs in the US is difficult to accurately estimate, though there are promising signs for each of the key technologies. Microgrids, distributed generation, and distributed storage are quite rare at the moment, especially with their growth potential. Significant gains are promised for the future, with five particular DER technologies estimated to more than double their capacity to 104 GW between 2016 and 2023. Mobilizing further DER growth relies on encouraging legislation, particularly at the state level.

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    What benefits it could bring

    DERs could unlock a new range of economic and environmental benefits for consumers and producers alike.

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    • Distributed generation promises a variety of benefits: integrating renewable sources, increasing electric capacity, reducing the need for high-voltage transmission lines, and more. It can help “lower costs, improve reliability, reduce emissions, and expand energy options for communities across the country.”
    • Under a scenario of achieving 35 GW of energy storage by 2025, the Energy Storage Association (ESA) estimates $4bn savings in cumulative operational cost savings, $300bn savings across customers through improved grid reliability, 80,000 more jobs in the energy storage industry, and 3.7mn metric tons emissions reductions cumulatively.
    • One study finds that operational emissions from a stand-alone microgrid (for the same load) could be 66% lower than that from the larger grid, by integrating renewable sources and minimizing the power lost over long transmission lines.

    Advanced Digital Infrastructure

      What it is

      Digitizing the grid involves using advanced information and communication technologies to better manage electricity flow. Artificial intelligence, machine learning, and the Internet of Things have further powered the advancement of intelligent technologies that will improve the grid’s situational awareness, internal communication, and automatic optimization.

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      • Phasor measurement units (PMUs, or synchrophasor technologies) refer to monitoring devices placed along transmission lines, which report voltage, current, and frequency in real-time. These provide fast and accurate situational awareness of power flow, allowing operators to make smarter electricity choices.
      • Advanced metering infrastructure (AMI) refers to systems that allow for two-way communication between the utilities and the metering endpoints (homes, building, etc.) These smart meters are able to provide and exchange granular data at almost real-time speeds, which provides the empirical basis for taking advantage of demand response programs.
      • Demand response refers to the consumer’s ability to manage their electric demand, through increased access to easy-to-use information. This takes the form of time-based pricing, where electricity prices vary with the grid’s overall demand, and direct load control programs, where appliances (think smart thermostats) can be turned off to avoid energy use during peak periods and vice versa.
      • Energy efficiency refers to any program or device that uses less energy to perform the same task. This ranges across residential, industrial, and commercial sectors, operationalized through initiatives like incentivizing more efficient appliances, upgrading industrial equipment, and ENERGY STAR evaluations of commercial buildings.

      Where it stands

      Concerns regarding energy data privacy/security and regulation of energy data markets have further added to the problem of high adoption costs of digital electrical infrastructure. Expanding consumer awareness is key to empowering programs that are dependent on changes in demand. However, experts do believe that digitization, and the larger grid modernization process, “will ultimately show results.”

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      • There were over 2,500 networked PMUs across North America in 2017, each providing data 100 times faster than its predecessor.
      • Around 47% of the nation’s operational 151.3mn meters were ‘smart’ in 2016, though there are wide regional disparities. This has allowed about 26% of US customers to have daily digital access to their energy usage data. Smart meters have also been credited by utilities for enabling faster response times in the aftermath of Superstorm Sandy and Hurricane Irene
      • Retail demand response programs saved almost 36 GW of potential electric consumption during peak demand periods in 2016 (up 9% from the previous year), fairly split across residential, commercial, and industrial customers. Almost 10mn customers were enrolled in retail demand response programs in 2016, with 8mn enrolled in retail time-of-use pricing schemes.
      • As per the American Council for an Energy-Efficient Economy (ACEEE), energy efficiency undertakings saved US customers and businesses about $800 billion in 2014.

      What benefits it could bring

      Since the grid will require major hardware and software replacements soon, there remains enormous potential to implement digitized technologies.

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      Benefits and barriers

      Investing will not only alleviate the grid’s decline, but will promote a robust electric, environmental and economic future. Cutting-edge technology, combined with governmental incentives and consumer demands for cleaner and cheaper energy, are powering the pursuit of an upgraded grid. Deploying smarter technologies will reduce energy use, electricity costs, and carbon emissions for all. Encouragingly, a 2017 study believes that total U.S. emissions could be cut by 80% by 2050 (with technology available today), by implementing the emissions reduction strategies that hinge on major grid improvements. Beyond reducing the emissions responsible for global climate change, revamping the grid could increase its resilience to weather-related and cyber/physical security disruptions, cut costs for producers and consumers alike, and foster the growth of jobs, products, and markets. Reports from the National Energy Technology Laboratory and the Smart Grid Consumer Collaborative unequivocally conclude that grid modernization creates substantial electric, environmental and economic benefits — that are far in excess of their associated costs.

      Despite the vast potential of grid modernization, a range of issues have stalled overall progress. The primary barrier seems to be regulatory: state legislatures, in partnership with public utility commissions and the federal government, need to deploy a combination of policies that incentivizes grid modernization. Current regulatory structures do not adequately promote long-term investment plans and often actively oppose the proliferation of decentralizing grid technologies. This stems from widespread uncertainty over the future of electricity markets, which are key to determining revenues for utilities. The uncertainty is exacerbated by technological uncertainty, since developers still need to improve the value proposition of smart devices. Increased digitization and information access also bring up cybersecurity and privacy concerns that need to be resolved before they arise. The sheer size of the investment dissuades prudent policymakers, especially since their constituents are largely uneducated and unaware of grid modernization efforts.

      Conclusion

      Grid modernization offers substantial electric, environmental and economic benefits to all parties involved. Increased reliability, energy management possibilities and financial incentives are significant gains for residential, commercial and industrial consumers of electricity. For instance, the average electric bill in 2050 would be about 350% cheaper if a smart grid is developed. For utilities, smarter technology lowers maintenance costs, increases the ease of operations, and limits strain on the infrastructure. A combination of new jobs, innovative products and transformative investment will open up more economic opportunities for businesses. Policymakers can achieve environmental mandates and address critical national security concerns, without sacrificing economically. Everybody stands to gain from upgrading the grid, though there are significant policy challenges that need to be addressed.

      What grid modernization really teaches us, however, is that there is opportunity in adversity. Instead of maintaining a creaky grid, why not comprehensively revolutionize it? Instead of lamenting the recent fissures exposed in our society by COVID-19 and racial injustice, why not implement the necessary prescriptions to make our nation more healthy and more just than ever before? A pandemic, climate change and social inequalities are currently threatening our way of life with a once-in-a-lifetime intensity — but this is also an opportunity. While repairing the economic fallout from the 2008 recession, we looked beyond to a climate-threatened future, opting to put billions into smart grid installations. Today, targeted grid modernization investments can protect our people, preserve our planet and power our production — securing a brighter electric, environmental and economic future for all.

      Featured Image: Photo Illustration by Amanda Griffiths, Climate XChange. Photo by Shane Rounce on Unsplash