Why electric grid bottlenecks present new opportunities and costs.

The trusty old electric power grid is one of those things that get pushed back to the back of awareness until the power goes out or its wires obstruct a pretty picture. But it has been front and center in policy discussions, with the International Energy Agency opining we need to double the size of the grid by 2040 at an annual cost of $600 billion a year to keep pace with net zero goals. This is about double the current yearly investment and a total of about $6 trillion over a decade. 

Maybe this was timed to illuminate the meagerness of the Biden Administration’s announcement of $3.5 billion for the “largest ever investment in America’s electric grid, deploying more clean energy, lowering costs, and creating union jobs.” It's actually a bit more than that when you allow this will also “leverage more than $8 billion in federal and private investments to deliver affordable, clean energy to all Americans. 

If you live outside of California or Texas, you might not be concerned about the long power outages that are growing in frequency. But grid backlogs are already having a real impact in slowing the onboarding of clean energy sources and creating new competition between energy-hungry data centers and housing for the workers who will presumably run them in London. 

Then, there are the long wait times for connecting newer energy sources to the grid. In the UK, some new projects that take three-to-five years to build are being quoted wait times of up to 15 years to get connected. 

Powering up new opportunities

It is also worth observing that despite promises of ‘affordable’ electricity, someone is going to have to pay for the essential doubling in grid infrastructure investments. With $6 trillion in additional overhead, it's hard to imagine power companies not discovering creative ways to pass the buck along. 

The flip side is that building out the grid also presents massive business opportunities for enterprises that discover innovations in grid management, batteries, and so-called smart grids. For example, 

• Tesla’s auto bidder platform has already made over $330 million in trading profits to early storage investors.
• LineVision is developing new lidar-based digital twins to significantly increase transmission capacity at a fraction of the cost of traditional physical upgrades. 
• AIDash is using satellite-informed digital twins to lower grid vegetation management costs by 20%.
• Vermont Power is seeking permission to amortize in-home batteries as part of its grid resilience strategy. 
• The Linux Foundation is spearheading work to enable decentralized microgrids that operate like an electrical Internet.  

The policy dilemma

Whiz-bang new technology will only solve part of the grid problem, though. Other issues relate to the existing business and contractual structures, regulatory requirements, investment frameworks and even the meaning of the term ‘grid.’ For example, should investments in new technologies for offloading surging power demand to batteries or automated demand management receive the same consideration as building new power lines? What about investments in technologies that allow operators to safely run more power over the same lines without replacing them?

Andrew Wade recently wrote a deep dive into the grid construction queue in the UK for The Engineer. He quotes National Grid’s Rosin Quinn, who attributes the backlog to the market structure, the nature of existing contracts, and how the power system is designed. For one, only about 20% of projects in the queue go forward. It can also cost companies more to relinquish their position in the queue, even if the actual build falls behind. Also, existing network designs lead to short-term thinking and suboptimal development in overall grid design. 

Meanwhile, Bristol University Professor Phil Taylor, who leads the Supergen Energy Networks Hub, points to other factors. One is the reluctance of UK regulators to approve risky strategic investments ahead of need. One big challenge is that 20% of power bills currently go towards building and managing the grid, and regulators may be reluctant to increase these during a cost-of-living crisis. However, not building enough capacity to bring on new and potentially cheaper net-zero sources could also increase costs as well. Taylor also points to fragmentation across different government agencies, making it difficult to sync up data and policies.

Taylor suggests that more practical grid decarbonization approaches may need to focus on the grid in its entirety rather than just the power lines. For example, to look at how investments, regulations, and technologies around smart grids, energy storage, and multi-vector alternatives could complement shortfalls in the power grid. A multi-vector approach might mean transforming some electricity into hydrogen and then distributing it over existing gas pipelines, where it could be converted into electricity or heat closer to the point of use.  

A separate team of UK researchers recently reported in Nature that zero-carbon energy could come to dominate global electricity markets without any further climate policies. However, uncertainties remain about grid stability, finance policies, supply chains, and political resistance. They based this on an energy-technology-economy simulation model that considered the faster pace of learning in building a lot of smaller modular technologies than larger power plants. They also opine that better forecasting needs to use simulations to consider the interplay between cost reductions and technology diffusion.

My take

The fundamental problem in addressing grid shortcomings is that it is a rat’s nest of interlocking technology, policy, and investment decisions. Take the grid alone. Just keeping the power running requires the delicate balance of electrical waves at precise frequencies, phases, levels, and long distances. Even if you have the surplus network capacity to add a new solar panel or wind turbine, you risk catastrophe without specialized power conditioning gear. It's like trying to get a million people all singing in unison across a large region. 

And then there are all the bright ideas that sound good on paper until the scientists, economists, and engineers do the math, which can take years. For example, the UK’s 2017 Heat for Homes was launched to research replacing the natural gas used to heat homes with hydrogen, and later regulations suggested new boilers should be hydrogen-ready. It took seven years for the National Infrastructure Commission to suggest that may work about as well as running your petrol car on diesel only last week.