For more than a century, the U.S. electrical power grid has dramatically improved the health, safety, and economic productivity of hundreds of millions of people. Although this grid stands as an ingenious accomplishment, experts fear that, as the 21st century progresses, the grid’s ability to meet evolving U.S. energy needs may falter without dramatic modernization.
This U.S. power grid has grown to encompass some 5,800 major power plants and over 450,000 miles of high-voltage transmission lines delivering power to more than 144 million end-use customers. The cumulative value of the infrastructure and equipment it represents is a staggering $1 trillion, making energy the single most capital-intensive industry in the country.
However, in the face of changing user demands, manmade and natural threats, and potentially revolutionary technological solutions, there is serious reason to question if the current design of the grid will meet future demands. For example, the ability to effectively and efficiently incorporate novel technologies in a secure and optimal manner using the grid’s decentralized, locally regulated, and arguably antiquated business operating model continues to generate concern among experts. In fact, it remains an open question as to whether or not the 100-year-old system – originally designed to incentivize power companies to connect new users to a largely non-electrified country using large, heavily regulated firms – is viable in the modern era. The majority of the population is already able to reach the grid and the concern now is not connecting more users, but rather balancing total cost, security, environmental concerns, and systemic resilience. Therefore, policymakers and technical experts would be right to conclude that the entire U.S. electrical grid is due for a major overhaul.
Investments, Innovations & Vulnerabilities
According to the International Energy Agency (IEA), the electrical power sector needs up to $2.1 trillion of new investment by 2035. As the government and industry continue to invest a massive amount of resources in a significant redesign of the grid, the looming massive investment period presents the opportunity for a de facto redesign of the grid – a period during which innumerable decisions will be made about trade-offs, cost optimization, reliability, environmental impact, continuity of operations, and responsibility for paying the associated costs. Specifically, as the grid’s modernization continues, the new design, operating model, and core objectives of the power grid are all steeped in uncertainty due to: (a) emergent technologies; (b) changes to the climate and associated socially and politically mandated requirements; and (c) terrorism and other manmade threats.
Two innovations represent a particular opportunity to use targeted investment to dramatically improve the capacity of the power grid:
The “smart grid,” comprising the collection of networked sensors located at the point of consumption, which enable two-way information flows for better management of both the supply and demand needs of the grid; and
“Distributed energy” generation, which refers to rapid growth in localized power generation such as rooftop solar or wind farms. A related growing technological opportunity is that of the microgrid, which refers to a highly localized, self-contained power generation, transmission, and distribution model.
In fact, many observers agree that investments that harness the potential for near real-time monitoring and control of the power distribution network could usher in a revolution in terms of how energy is managed as well as who provides it. As Bloomberg New Energy Finance analyst Brian Warshay stated in a March/April 2015 article, this could result in “improved reliability, increased efficiency, and the seamless integration of renewable power – not to mention more stable prices and lower emissions.”
However, there is also growing concern over the risks associated with connecting the grid ever more tightly to the vulnerable and inherently at-risk internet, which is plagued by malware, cyberterrorists, and other threats. In practical terms, due to the massive scale of investment required to build and maintain the power grid, each of the issues mentioned above significantly affects the business case supporting a variety of power grid investment decisions. Because much of the power grid’s infrastructure is designed to last half a century or more, such decisions must be made very carefully. Without deliberate forethought and collective action, the resulting grid will be sub-optimal, one that fails to fully balance overall system cost, security, environmental impact, and surety of service.
Asking the Right Questions
With so much at stake, it is essential to appropriately define the parameters of the discussion about the grid’s future – for absent such deliberate effort, the future of the grid will continue to be driven forward by technological advances and regulatory imperatives that foster somewhat disorganized growth. Making sound decisions will require asking several questions, for example:
What could and should be the collective impact of such a large investment, and how will that align with the emergent policy, legal, financial, and technological changes over the coming years?
To what degree will distributed generation and other emergent opportunities such as the “smart grid” be integrated throughout the entire power system, and how does that change the fundamental business case for various key industry participants as well as end-users?
Will there be, for example, a shift from utilities focusing on growing the amount of power generated and charging per watt of electricity delivered to a more services-based model that focuses on efficiency, surety of service, and other systems-based value-added functions?
Specifically, who is ensuring that the whole system is being made resilient against significant service interruptions?
These and other important issues must be addressed in a deliberate, realistic manner in order to realize the potential benefits of the electrical grid’s ongoing modernization, which has provided economic benefits for so long.
This article is drawn from the author’s recent White Paper, “Challenges and Requirements for Tomorrow’s Electrical Power Grid,” published by the Lexington Institute and available at http://lexingtoninstitute.org/wp-content/uploads/2016/06/Tomorrows-Electrical-Power-Grid.pdf