TODAY’S STUDY: A Grid To Electrify The Economy

The Coming Electrification of the North American Economy; Why We Need a Robust Transmission Grid

Jürgen Weiss J. Michael Hagerty María Castañer, March 2019 (The Brattle Group)

Executive Summary

Over the coming decades, Western economies will become more highly driven by electric power than they are today. As public policies and consumer choices reflect concerns about fossil fuel consumption, and low-carbon technologies continue to develop, a growing share of the economy will rely on low-carbon electricity to fuel cars, to heat homes and businesses, and to provide process heat at industrial facilities. In fact, the energy industry is already changing rapidly in this direction. In the electric sector, technological progress and public policies are driving a shift towards cost-competitive renewable generation. One example is that Xcel Energy is reducing its emissions by 80% by 2030 and fully decarbonizing its fleet by 2050. A second one is the announcement by Florida Power & Light that it plans to install 30 million solar panels by 2030 in a state without renewable energy standard or carbon emissions goals.

In the broader economy, electrification of sectors currently “powered” by fossil fuels is becoming more prevalent. For example, there are now one million electric vehicles on the road in the United States and the Edison Electric Institute (EEI) forecasts 7 million by 2025. Vehicle manufacturers have announced over 60 new electric light-duty models, released several electric commercial vans, begun to develop electric pickup trucks and semi-trucks that may be available in the early 2020s, and in some cases announced plans to phase out the production of all internal combustion engine vehicles. Electric heat pumps, which are already common in moderate climates, are becoming cheaper and more efficient in colder climates. And advances in technology could even make electrifying industrial processes increasingly possible.

Electrification of these sectors could significantly increase electricity demand. To meet this rising demand, additional low-carbon electricity generation resources will need to be built and supported by adequate and robust transmission and distribution infrastructure.

These developments pose sizeable challenges to the existing patchwork of power systems primarily built to provide reliable electricity at the local or sub-regional level and require a broader view of the role of the bulk power system. This study seeks to provide insights into whether the electric grid will be able to support the transition to a low-carbon future and the extent to which additional and forward-looking investment in electric infrastructure will be necessary.

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The report finds that $30–90 billion dollars of incremental transmission investments will be necessary in the U.S. by 2030 to meet the changing needs of the system due to electrification, with an additional $200–600 billion needed from 2030 to 2050. These investments will be in addition to the investments needed to maintain the existing transmission system and to integrate renewable generation built to meet existing load. Figure ES-1 shows that this level of investment is equivalent to $3–$7 billion per year on average through 2030, a 20–50% increase over annual average spending on transmission during the past 10 years; and $7–$25 billion per year on average between 2030 and 2050, a 50–170% annual increase in transmission investment.

Two primary factors drive the need for more transmission infrastructure in an electrified future: (1) connecting additional renewable generation resources to serve the total energy demand; and (2) ensuring that the electricity system remains reliable with increasing peak demands. Both drivers depend on the pace and scale of the adoption of electrification across the economy.

By 2030, electrification could increase nationwide annual energy demand by 5% to 15% (200 to 600 TWh) and by 25% to 85% (1,100 to 3,700 TWh) by 2050, as shown below in Figure ES-2. 2 For these projections to materialize by 2030, the current momentum towards EVs continues to accelerate and heat pumps become a competitive space heating technology in certain markets. Between 2030 and 2050 electric transportation becomes the dominant transportation technology and heat pumps penetrate a significant portion of the housing stock. The high electrification case assumes that electrification “powers” all transportation and space and water heating needs by 2050.

The mix of new generation resources serving electrification-related demand will differ by region due to differences in resource availability, technology costs, and policy objectives, as shown in Figure ES-3. Overall, 70 GW to 200 GW of additional new power generation will be necessary by 2030 to meet the additional electrification related demand, assuming a 75% share of renewable resources and a 25% share of natural gas-fired resources. A high share of renewables is consistent with a recent trend towards utilities, states, and consumers increasingly choosing low-cost renewable generation to meet rising load, to reduce costs, or to replace emitting resources like coal and gas fired generation. This trend will likely be more pronounced in certain regions such as the Pacific West and Northeast. Assuming that the share of renewable generation further increases to 90% by 2050, an additional 200 GW to 800 GW of generation resources need to be built between 2030 and 2050 to meet the anticipated incremental electrification demand. These generation additions are incremental to the new resources that will replace generation from existing power plants or to meet the load growth of traditional electricity end-uses.

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While distributed solar photovoltaic (PV) generation may meet some of the incremental load, most of the incremental renewable generation will likely be utility-scale solar and wind generation. A recent NREL assessment indicates that even if solar panels were installed on every single appropriate building across the country, they would meet about 40% of the current electricity demand. 3 Since anything near full realization of this technical maximum potential for distributed solar PV is very unlikely to be achieved, a realistic build-out of distributed solar PV will at most displace a portion of the existing generation resources. Sources of growing demand, such as from electrification, would then need to primarily be met with utility-scale resources located further away from load centers. In addition, local resources like distributed solar PV in most cases are not substitutes for transmission and will still rely indirectly on the high-voltage transmission system due to their variable nature and the mismatch between the timing of their generation and electricity demand.4

While these incremental transmission investments are substantial relative to historic investment levels, the resulting impact on customer rates is likely very modest or even beneficial for three reasons: (1) transmission costs represent a small share of customer rates; (2) the total transmission investment will be spread over greater electricity demand with electrification; and, (3) the higher costs of transmission are likely to be offset by lower generation costs. In fact, the 20–50% increase in transmission spending projected by 2030 represents only a 1–4% increase in rates on a per kWh basis before accounting for offsetting savings in generation costs. By enabling access to lower-cost, non-local renewable energy resources, generation costs could be lower by about 2–5%. Since the cost of generation counts for the largest share in customer rates, the additional spending on transmission could result in a reduction in customer rates.5

These savings can only materialize, however, if the transmission system is built out in anticipation of the rising demand from electrification of various sectors and the associated need for renewable generation additions. This scale of transmission needs and the long lead times for transmission investments highlight several important takeaways for transmission planners and policymakers:

• It is increasingly important for policymakers that set clean energy and decarbonization goals to gain an appreciation for: (1) the transmission system investments that will be necessary to cost effectively achieve these goals and (2) the potential risks of coming up short on achieving those goals, or doing so at higher costs to the consumer, by moving too slowly on upgrading the transmission system.

• Transmission planners will need to start anticipating the impact of electrification and integrate it into their transmission planning processes.6 This is particularly important in the Pacific West and the Northeast—the regions with higher concentrations of first adopters of electric vehicles and more immediate, more ambitious policy targets.

• Transmission planners will need to adapt their analyses to account for the uncertainty in the timing, location, and scale of the adoption of electrified loads and the addition of renewable resources. Adding transmission in anticipation of load growth can be seen as an insurance policy against the alternative of being unprepared for rising demand and relying on short term and potentially much higher cost solutions that may also be unable to meet emissions mandates.

• Transmission planners should continue to expand their consideration of larger scale interregional, and even national-level, projects in their studies. Transmission upgrades that increase capacity across regions will become more important in an electrified, clean energy future as seasonal disparities in peak loads and renewable generation patterns become more significant and the diversification of load served by the renewable generation becomes a key component of integrating clean resources.

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Because charging infrastructure is such an important enabler of the electrification of transportation, existing transmission infrastructure could also facilitate the development of highway corridor and urban fast charging stations.

Direct current fast charging (DCFC) is essential to making long-distance trips via electric vehicles feasible. Because fast charging requires large amounts of power, DCFC complexes, especially along highway corridors, will likely become major sources of demand over time with each one representing 5–10 MW of peak demand or more. Connecting loads of this size to the existing distribution system can be time-consuming and require costly network upgrades. Close proximity of transmission infrastructure to convenient locations for DCFC complexes could therefore provide opportunities for cost savings and faster build-out of charging infrastructure.

Recent research suggests that 400–800 DCFC complexes would be needed to establish an initial network capable of overcoming existing hurdles related to EV adoption if spaced 35–70 miles apart along major highways. 7 As Figure ES-4 shows, there are about 400 substations with transformers of 69kV or less located less than a mile away from highway exits. These locations are potential candidates for siting a DCFC complex that is conveniently located within close proximity to highway corridors. Approximately 1,500 more are located less than two miles from such a transformer. Additional opportunities exist at existing highway rest areas. Locating fast chargers at these locations will allow the existing transmission assets to play an important role in facilitating the rapid and comprehensive build-out of the infrastructure needed to facilitate the transformation of the transportation system towards electric vehicles.

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Determining the locations best suited for developing DCFC stations along highway corridors requires a more in-depth, location-specific analysis, including whether or not particular existing transmission assets have spare capacity, existing rights of way, potential for permitting issues, or whether connecting to a local distribution network could be a lower cost alternative. Even in cases where connecting to the local distribution network is more cost effective than connecting directly to the transmission system, taking into account suitable local transmission infrastructure when choosing the location of fast charging sites may provide opportunities for lowering the cost of developing and interconnecting DCFC complexes.

Finally, existing transmission infrastructure could facilitate the development of DCFC infrastructure in urban areas. However, opportunities there likely depend more on the specific transmission infrastructure and DCFC charging requirements in each city in question.

Overall, transmission will play a critical role as the economy moves toward electrification of various end-uses. Transmission investments will be needed to connect cost-effective new renewable generation to serve the additional electrification-related demand. Further, the existing transmission infrastructure can be leveraged to more cost-effectively support the development of fast-charging infrastructure along highway corridors and perhaps in some urban settings. The analysis shows that a robust transmission infrastructure can reduce the cost and speed up the transition to an electrified transportation future.

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