In 2000, the National Academy of Engineering declared electrification – including the establishment of widespread power grids across the United States – as the greatest engineering achievement of the 20th century. But as the 21st century settles into its adolescence, the US power grid is in some areas becoming woefully out of date, with more than half of grid inventory installed prior to 1970.
Even with widespread support for the idea of system modernisation, pursuing the US Department of Energy's vision of the “grid of the future” – as is noted in the first installment of the Quadrennial Energy Review (QER), a Federal report released on April 20 which focuses on contemporary trends and challenges affecting transmission, storage and distribution (TS&D) assets in the US – is replete with challenges.
Comprised of approximately 19,000 individual generators at 7,000 operational power plants – sending electricity over 642,000 miles of high-voltage transmission lines and about 6.3 million miles of distribution lines – the US power grid is colloquially known among powerheads as the world's largest machine.
Further complicating the system is the increasing popularity of renewable and distributed generation assets including solar PV, wind, and increasingly, microgrids, as well as the federal mandate to increase the share of power provided by such assets in the near- to mid-term in an effort to curb greenhouse gas emissions.
Equally complex is the regulatory framework supporting the grid. In his latest book, The Rule of Nobody, and in a recent interview with Infrastructure Investor, author and lawyer Philip K. Hoffman said that the current grid in the US, due to aging equipment, loses about 7 percent of the power that is pumped through its massive tangle of transmission and distribution lines.
While it would be difficult to find anyone who agrees that inefficient lines should remain in place, Howard noted that approval from 231 different federal, state and local agencies would be required to clear the way for a complete overhaul of the US power grid. In his opinion, there should be only one agency approval required for projects that are national in scope.
“If it's an interstate project, like an interstate power line, my recommendation is that the federal agency be in charge of the decision to approve it. That doesn't mean you ignore the state and local governments, they should have input into the siting of the lines. But I don't think you can give them vetoes; you should just give them input,” Hoffman said.
Even considering the high number of aging assets in the current power grid inventory, all is not lost, as the work required to update the system would be in line with historic magnitudes, according to the QER. But the report's analysis is in line with Hoffman's assessment, noting that “fragmented and overlapping jurisdictions threaten to impede development of the Grid of the Future”.
“The current federal-state regulatory boundary dates back to the 1930s, when the Federal Power Act substantially expanded the responsibilities of the Federal Power Commission (the predecessor to FERC) and created Federal oversight of wholesale sales of electricity and transmission of electricity. In recent decades, organised wholesale markets have spread geographically and incorporated a greater variety of products with a broader set of market participants,” said the report.
“This trend – coupled with the increased ability of end-use consumers to supply distributed generation, demand response, and other services – has and will continue to raise questions about the dividing line between state and Federal jurisdiction.”
Ed Krapels of Anbaric, a company that develops high-voltage direct current (HVDC) transmission assets and microgrid projects, said in an interview that while “modernisation” can seem like a massive and daunting task, the truth is that most modernisation work simply requires an update to existing equipment, and that the only real need for build-out of new transmission assets has arisen out of clean energy mandates.
“We don't need to rebuild everything; it's really just incremental investment that is needed,” Krapels said. “But we're looking at $20-50 billion over the next 10 years for the clean energy side.”
Despite the challenges that make a one-size-fits-all modernisation solution impossible, the QER notes that the power grid would greatly benefit from something akin to the “USB” solution that has made plug and play interactivity possible in the realm of personal electronics, urging the creation of a voluntary industry standard that would simplify interoperability across energy sources and intersecting grids.
Other recommendations in the report include addressing the need for research and development funding (valued at $3.5 billion over 10 years); the establishment of a strategy for use of storage and grid flexibility; a national review of barriers to transmission plan implementation; the provenance of state funding to encourage integration of transmission, storage and distribution infrastructure investment plans (valued at roughly $300 to $350 million over five years); the coordination of goals across jurisdictions; the evaluation of new services affecting the modern and emerging electricity environment; and the establishment of uniform methods for monitoring and verifying energy efficiency.
In order to achieve these goals, the report notes that private investors will play a critical role in providing the financing and flexibility needed. Investment in transmission assets in particular are expected to grow in coming years to replace aging infrastructure, facilitate competitive wholesale power markets, and aid regions in meeting public policy objectives.
Krapels said that as a result of this growth, the old adage that the early bird gets the worm will become increasingly true in the transmission market.
“There's an increasing number of companies like ours that provide vehicles for those kinds of investments. The most challenging part will be for investors to get in early. If you wait for it to be de-risked your returns will literally be cut in half,” Krapels said. “This new market reality calls for some changes in how pension funds and sovereign wealth funds manage their investment in infrastructure.”