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Power Points

The time is right to rethink the grid

U.S. grid interconnect illustration

The grid faces twin challenges: It needs to become resilient and clean. Alone, either would be daunting. Together, with the right policy support, they might just be urgent enough to get something done. 

This week, the Biden administration announced a major infrastructure package, with clean energy and updates to the U.S. electrical grid playing a central role

The need for this transformation never has been more urgent. Today’s grid was largely built in the 1950s and 1960s with a 50-year life expectancy. America’s energy infrastructure scored a C-minus on the U.S. Society of Civil Engineers’ quadrennial report card. 

And when the grid fails, it has real implications for health and safety. In the last six months, we’ve seen two examples of how fragile the grid can be, especially with climate change making weather more unpredictable. A heatwave in western states led to rolling blackouts last summer in California, and a cold snap in the southern states led to deadly power outages in Texas

This is in the last 6 months in new earth weather pic.twitter.com/1vtDKZHm1I

— CM Guatemalan Chkn Wings🍥 (@cmrtyz) February 16, 2021

So it's the perfect time for big ideas to reimagine the U.S. grid for the 21st century. Some of the brightest minds in decarbonization are thinking about this puzzle, with suggestions about how to design a power system that is resilient, affordable, clean and ready to meet the demands of society’s increasing demands on electricity. Here are three ideas.

1. Reimagine the U.S. power system by connecting the country

The U.S. power system is primarily three separate regions that operate independently: One for the west (the Western Interconnection); one for the east (the Eastern Interconnection); and one for Texas (the Electric Reliability Council of Texas). 

According to analysis by the National Renewable Energy Lab (NREL), connecting these separate components of the power grid is critical to reaching a higher level of renewable energy. 

Strengthening the connections — known as seams — would be a meaningful addition to the process of transferring capacity for renewable energy across the country. If connected, the U.S. power system more easily could share clean energy from where it's generated to where it's needed, allowing better ability to balance the grid and account for intermittency in renewable resources. 

NREL crunched the numbers and found this also would be a darn good investment. According to NREL, for every $1 invested in interconnecting the grid, the U.S. would see $2.50 back in economic growth. 

By focusing on the economic payout, this study focuses on the payback of this investment, rather than the cost — a valuable perspective for infrastructure investments across the clean energy sector. 

2. Re-envision market design to accommodate renewable energy

The U.S. current grid was designed for a 20th-century resource mix, where generation was centralized in large power plants — such as those powered by coal, nuclear and hydro resources. Today, energy generation is increasingly distributed from intermittent sources — particularly wind and solar. That trend will only continue to grow as we move deeper into the 21st century.

Market design — the rules and regulations that govern the grid — need to catch up. With the right market design, the U.S. could decarbonize 90 percent of the power system reliably and affordably using today's technologies, according to a new analysis by the Renewable Energy Buyers Alliance (REBA).

REBA’s research, which compiles findings from dozens of other reports, offers recommendations that would put renewable energy on equal footing with incumbent energy sources. The point isn’t to give renewables a leg up as much as allow them to compete on their own value and merits. The report (which doesn’t shy away from the regulatory weeds) recommends market design that is open to distributed generation and energy markets that streamline the energy procurement process. 

3. Reevaluate the value of conventional energy resources

The falling cost of wind and solar means they are cheaper than incumbent energy resources on a levelized cost basis. We’ve known this to be true for several years. But a new report from RethinkX suggests that the value of conventional energy resources — including coal, natural gas, hydro and nuclear — is even less than we thought. 

That’s because the economic calculations of conventional power plants assume they will be able to sell the same quality of electricity from now into 2040 and beyond. According to RethinkX, this fails to take into account the competitive pressure from solar and wind, which generate electricity at essentially zero cost once built. The result is overvalued resources that could be creating a global financial bubble.

Coal capacity chart

Renewables are already eating into the economic assumptions of power plants, with electricity demands falling short of the predicted demand for a decade. The figure below shows how coal has underperformed in the U.S. since 2010 and is set to decline further. (The RethinkX report has more figures on different energy resources in different regions.)

As policymakers rethink the U.S. electric grid, we will have fresh opportunities to examine the value of incumbent energy resources — and think about which communities we want to design the future for. 

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