Panel: Grid expansion drive will require flexibility

Utility companies and policymakers should not be tempted to look too far into the future as they parcel out an unprecedented influx of funding for the upgrade of the electrical grid that is getting closer to hitting the market.

Panelists on this week’s webinar organized by the think tank Our Energy Policy cautioned that a combination of market design and developing technology would have an influence on the eventual shape of the network that will carry growing volumes of power around the country.

“There is a lot more technology available and more resources than there were in the past when the local investor-owned utility (IOU) was running the local gas power plant,” said Robert Dillon, executive director of the Energy Choice Coalition. “You can place a bet on one technology, but the market is already changing so fast that you can wind up betting on the wrong one.” The technology required to slash the electricity sector’s carbon footprint is already diverse. Attention is now turning more toward how it will be paid for and how much of the burden will be born by ratepayers.

The once-in-a-generation overhaul of the grid is about to receive a landmark push forward from Washington in the form of around $15 billion earmarked for power transmission projects as part of its renewable energy strategy.

The U.S. Department of Energy (DOE) late last month released a draft study on the nation’s transmission needs, which reinforced views that an “all of the above” strategy incorporating multiple generation sources will be required to reach goals for emissions reductions.

“The study will help identify how and where the reliability and resilience of the grid can be improved, while also ensuring DOE deploys investments to effectively provide clean, affordable, and reliable electricity to everyone, everywhere and when they need it most,” Maria Robinson, director of the DOE’s Grid Deployment Office, said in a release.

The catch, however, is that the Biden administration’s generosity is likely a one-off shot that won’t cover the need for what the DOE report said would be several trillion dollars by the middle of the century.

“We have seen the federal government double down on investing,” Dillon said. “I don’t think that can continue; I don’t think the government is going to be able to continue with this.”

Wall Street will likely pick up some of the slack, but ratepayers are also in the crosshairs of potential increases in their monthly bills to pay for the upgrades. “How much are ratepayers willing to pay?” said Nick Loris, vice president of Public Policy for C3 Solutions, a Houston energy consulting firm.

As a result, utilities and regulators will have to find the right mix of technologies, which are constantly evolving, and the level of competition within their territories that their customers can understand and support. “We are talking about a customer base that is fully educated and can make these kinds of decisions,” said Emily Sanford Fisher, executive vice president, Clean Energy, and General Counsel & Corporate Secretary, at the Edison Electric Institute (EEI). “These can be a rough thing for a residential customer to figure out; it’s asking a lot,” Fisher said.

Consumers also have an increasing interest in their local power market in terms of the ability to be more proactive with their energy supplies through home solar and battery systems, local microgrids, or electric-vehicle charging infrastructure.

“It is now a bi-directional market,” Dillon said. “People are not only consuming energy, they are generating it.”

The panel also raised the prospects of additional competition for IOUs from private-sector specialty companies such as solar aggregators and EV charging locations.

The new players in the market, however, could become a catalyst to determining the eventual shape of a regional power market sooner by providing consumers with new choices for supply and other services. “There is only one state (Texas) that has a fully competitive market and there remain barriers to entry, which vary from state to state,” Dillon said. “But competitive markets allow the consumer to drive the market rather than the policymakers,” said Dillon.

Texans were stuck with some shocking utility bills during the winter of 2021 that exposed the risk of price volatility in a competitive market with minimal regulation. The extended outages also resulted in some 245 deaths.

Some panelists said accommodating increased competition would require a possibly drastic redesign of the nation’s power markets along with the upgrades to the grid. However, Fisher said the exclusive IOU model was still relevant in these changing times. “Markets don’t solve all of your problems,” she said.

A large entity like an IOU would provide a buyer-of-scale for larger amounts of power generated outside a particular region, provided the necessary interconnections are in place.

“The more broadly we are able to interconnect to more resources, the more efficient it is,” Fisher added.

The debates on the eventual design of the nation’s grid – and likely power markets – will continue. The DOE is taking comments on the new transmission needs report and held a webinar on it this week.

The upshot of the panel discussion was that customer engagement, including those residential consumers who may not necessarily want to be engaged on the topic, will be an important factor in shaping the grid in a way that best serves customers at the same time it is eliminating carbon emissions.

Dillon was among the speakers who noted that the design of the grid will eventually have to be set in stone. “You are going to see a lot more generation being built, but if it is not integrated into the market, you aren’t necessarily building it efficiently or going where the technology is leading it,” he said. “And once we build this system, it is the system we are going to be stuck with.”