Electricity Grid Needs a Massive Upgrade...
... if we want to achieve net zero transition.
For those of you, who have been reading about the energy transition, you might be familiar with the phrase ‘no transition without transmission’. This simple yet powerful idea highlights the challenges posed by the electricity transmission network, often overlooked but absolutely essential for our energy transition.
By way of background, electrification is often the most efficient solution and hence the most viable pathway to decarbonise some of the largest GHG emitting industries. A couple of examples are road transport (by way of electric vehicles replacing diesel vehicles) and buildings (by way of heat pumps replacing gas boilers). When direct electrification is not possible, alternative pathways (e.g., renewables-based green hydrogen, carbon removal technologies) are mostly power-intensive applications. Hence electricity demand is expected to increase at a meaningful scale for energy transition. In fact, the share of electricity in final energy consumption currently stands at ~20%. In a net-zero scenario, it is expected to increase to ~30% by 2030 and over 50% by 2050. The chart below is from an Economist article.
In addition to this significant increase from electrification for decarbonisation efforts, there are other secular trends on the demand side. Data centres are one of them with unprecedented growth in computing demand (mostly driven by AI) and cooling requirements that come with it. Electricity consumption of data centres is forecast to more than double from 2022 to 2026 according to IEA estimates1. All of this increase on the demand side needs to be matched by supply, i.e. electricity generation. Surely we don’t want to build new fossil fuel based power plants for that, which would be very much against decarbonisation goals given the massive differences in carbon intensity:2. Sadly, there are stories of data centres taking their power from coal power plants nearby.
Substantial cost down for solar panels and wind turbines as well as growth of battery storage technology fuelled an unprecedented era for penetration of renewables. However, share of wind and solar is still less than 15% in the US and 10-30% in Europe3.
While the bottlenecks for accelerated deployment of renewables are multi-layered across market mechanism, permits / regulations, there is one ultimate bottleneck. It is the electricity grid itself. The issues with the electricity transmission network are mostly due to the fact that the network is aged and requires large amount of investment for a major overhaul. It is unfortunately not fit for net-zero transition. Bloomberg New Energy Finance estimates the need for transmission network investments by 2050 at $21tn. Reaching national goals implies adding or refurbishing over 80 million kilometers of grid, the equivalent length of today’s existing grid globally4.
How do we measure the severity of the problem? Two relevant data points for deployment of new renewables assets on the grid are 1) amount of renewables capacity waiting to be connected to the grid and 2) the time it takes to connect to the grid. Looking at the US market, as of year-end 2023, there are 12,000 projects waiting to be connected to the grid that represent 1.6 terawatts (TW) of generator capacity and another 1 TW of energy storage. This total queue of 2.6 TW is twice the installed capacity of the entire US power generation fleet. Waiting times are increasing too. A typical project built in 2023 took nearly five years from the connection request to commercial operations, compared to three years in 2015 and less than two in 20085.
Transmission grid constraints also result in higher operating costs due to sub-optimal dispatching of generation assets6. In the energy sector, curtailment refers to the reduction of power generation due to physical and operational limitations of the grid. The issue mostly arises with renewables when transmission network capacity is not enough to transfer available renewables power from one place to another. This leads to dispatch of power plants with higher cost of production (e.g., gas-fired plants) instead of renewables. In the last four years, grid congestion costs increased significantly.
The traditional solution to address the broader insufficient transmission network problem is to build new high-voltage and extra-high-voltage lines. However, as shown on the chart below, it takes a very long time. It is becoming increasingly more difficult to secure new land and permits to expand the transmission grid.
Given the urgency and severity of the problem, the traditional way of expanding the grid (defined as new-build) is unfortunately not an option standalone. Good news is that there are other ways to increase the capacity of the transmission network, which can be grouped into two: 1) Direct capacity increase by way of advanced conductors and 2) Indirect increase by way of higher utilisation of existing capacity.
Direct capacity increase in the existing right of way (i.e. the existing network of lines / cables and towers) is possible by reconductoring the existing lines with higher-capacity conductors (advanced conductors or super conductors). Advanced conductors typically refer to electrical conductors that utilise composite and / or carbon cores instead of steel cores used in conventional conductors. Using these alternative materials allows for higher capacity and lower transmission losses, which in turn allows for larger capacity of renewables to be connected to the grid. According to a study conducted by the US Department of Energy (DOE), advanced conductor could increase transmission capacity to facilitate up to 27 GW of generation capacity annually7. In a more recent study, reconductoring enables approximately four times the transmission capacity expansion by 2035 compared to new-build alone89. And despite the fact that advanced conductors cost more on a unit length basis due to higher raw material costs, total cost of reconductoring projects is less than new-build projects as reconductoring would avoid cos of new right-of-way and new structures.
Indirect capacity increase by way of optimised use of the existing grid is another lever for the grid operators. Grid Enhancing Technologies (GETs) like Dynamic Line Ratings (DLR) or Advanced Power Flow Control (APFC) are in this category. DLR calculates operating capacity of a transmission line in real-time, which might be different from its static capacity due to physical and environmental conditions. As an example, the operating capacity of a line on a cool, cloudy and windy day could be much higher than that on a hot, sunny day10.
In a situation like this, the transmission network operator could safely increase the amount of power that can be transmitted through that line. Advanced Power Flow Control (APFC) is a technology that allows the grid operator to redirect power away from congested lines towards lines with available capacity. According to a recent study conducted by the Rocky Mountain Institute (RMI), DLR, and other GETs could enable connection of 6.6 GW of new renewables and storage capacity11.
These innovations will allow us to increase the pace of deployment of renewables and storage assets on the grid. The time for action is now.
https://www.energy.gov/eere/wind/articles/how-wind-can-help-us-breathe-easier
https://haas.berkeley.edu/wp-content/uploads/WP343.pdf