The North American electrical grid is a vast network of generation, transmission and distribution that had an inauspicious start in 1882 with Thomas Edison’s Pearl Street generation facility in lower Manhattan. Electric power, then a luxury, became the catalyst for transforming the lives of everyday Americans so that now electricity is essential for modern life.
Nearly a century and a half later, this giant machine consists of three separate electric grids bolstering 11,000 power plants, 3000 utilities, and more than two million miles of power lines.
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For the most part, it works. But it is also clearly ageing, inefficient, increasingly unreliable and polluting. It is also ill-prepared to support future electric vehicle (EV) demands, as well as the large number of industrial facilities projected to be built in the next decade and the rapid development of distributed, renewable generation.
Trillions of dollars of investment are needed to modernise, strengthen and decarbonise the electric grid.
Most of the grid was installed decades ago and is in serious need of modernisation. The last infrastructure review by the US Department of Energy (DOE) found that 70% of US transmission lines are well into the second half of their typical 50-year life span, while the average age of large power transformers, which handle 90% of US electricity flow, are now more than 40 years old. Electric companies often lack the financial incentives to invest in modernising the grid.
This ageing infrastructure, coupled with an increase in the frequency and severity of natural disasters and the threat of physical and cyber-attacks, has led to poor reliability. Federal data shows that significant, sustained outages have become much more common in the past two decades, while the 2021 Texas deep freeze, California wildfires, and major hurricanes have all exposed the system’s fragility.
Smart grids needed
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Most power generation comes from fossil fuels and is located near cities with higher demand, whereas new utility-scale solar and wind installations are typically found in remote areas requiring entirely new transmission infrastructure. Smart grids that allow for the bi-directional flow of energy would support decentralised power generation, as more consumers are installing solar panels on their homes and could sell excess power to the grid.
Trillions of dollars of investment are needed to modernise, strengthen and decarbonise the electric grid. Without either financial or regulatory Federal incentives, it seems unlikely that utility companies will have the political will to raise rates to pay for these upgrades. Electricity rates are a major factor in location decisions — meaning higher rates in one region may lead to a lower base load and necessitate even higher rates to pay for the required investment.
Failure to address this problem at a national level threatens to derail plans to combat climate change, while the lack of reliable and available power will continue to impact the entire economy. The DOE estimates that power outages are costing the US economy up to $169bn annually.
Rather than focusing on making repairs after every major natural disaster, it’s time the US took a proactive approach and invested in a more resilient, smarter grid.
This article first appeared in the April/May 2023 print edition of fDi Intelligence.