TODAY’S STUDY: The 21ST Century Grid

Grid Vision: The Electric Highway to a 21st Century Economy

Michael Goggin, May 2019 (Grid Strategies/American Wind Energy Association)

Executive Summary

Background:

Electricity is the lifeblood of the modern U.S. economy, yet much of America’s electric grid is outdated and in dire need of investment and expansion to bring it into the 21st Century. The American Society of Civil Engineers recently gave America’s electricity infrastructure a mark of “D+,” and grid congestion and power outages cost American businesses billions of dollars each year.

To better understand the best way to update and invest in the grid, and any associated consumer benefits, the American Wind Energy Association (AWEA) undertook a literature review that examines building out the country’s transmission infrastructure. This paper finds investing in upgrading and expanding America’s transmission system will improve electric reliability and resiliency, reduce electricity costs for consumers, bolster national security, reduce environmental impacts, and create jobs and economic development. Dozens of studies confirm that an investment in transmission will pay for itself many times over.

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Key Findings

• Expanding the current transmission system network could save consumers as much as $47 billion annually – a roughly 10% reduction in electric bills.1

• Upgraded transmission networks have been proven to reduce consumers’ bills through reduced congestion costs. By expanding transmission, the New England grid operator reduced congestion costs from $600 million per year under $100 million annually following upgrades.2

• Regional power providers have found transmission investments provide benefits 2-4 times greater than their costs.3

• Strengthening the grid by adding network paths significantly increases the system’s resilience to damage and prevents power outages.4

• Kansas utility Westar has seen a 40% reduction in transmission-related customer outages as it expanded its grid.5

• A more robust grid helps protect against and recover from all types of unexpected events, including deliberate attacks on our infrastructure, while a weak and congested grid makes the system vulnerable to disruption.6

• Infrastructure redundancy and regional diversity, both key benefits of transmission expansion, limit the threat posed by cyberattacks.7

• Transmission expansion is even more essential with the growth of technologies such as distributed solar, energy storage, and electric vehicles.

o Significantly increasing our use of solar power, whether utility-scale or distributed, requires a strong transmission system.

o Battery storage, demand response, and other new technologies are valuable complements to transmission, but cannot substitute for transmission’s ability to move large amounts of power long distances.

o Electrification of transportation and building and water heating is also increasing the demand for a strong transmission system.

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Policy Recommendations

Centered around the “Three Ps” of Planning, Paying and Permitting, this paper outlines the policies needed to realize the benefits of an expanded, improved and interconnected transmission system. These initiatives should enjoy support from consumer, pro-market, environmental, national security, and economic development advocates across the country.

• Planning – Transmission planning should look further into the future, proactively incorporate expected future generation additions, and simultaneously account for the multiple benefits of transmission. Planners should work together across states and regions to evaluate interregional transmission solutions, coupled with effective means to pay for those upgrades.

• Paying – The most important policy solution is broad transmission cost allocation to reflect the broadly distributed benefits of transmission, particularly for high-capacity and interregional transmission.

• Permitting – Simplifying the siting of interstate transmission lines. Policies should incentivize states to work together on siting and deploy federal authority where necessary for projects that serve the national interest.

The electric grid underlies nearly all of our modern economy and underpins every aspect of day-to-day American life. We’ve neglected it for far too long, and a 21st Century update will benefit all American families and businesses.

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Introduction

The National Academy of Engineering has concluded that the most important engineering accomplishment of the 20th century was widespread access to electricity through large interconnected power systems. The key factor enabling consumers’ access to low-cost, reliable electricity was the aggregation of electricity supply and demand across wide areas. This was chiefly made possible by the innovations of George Westinghouse and Nikola Tesla, who developed the Alternating Current (AC) power transformers and high-voltage electric transmission necessary to efficiently move energy long distances. Our large, aggregated grid provides two critical benefits:

-Economies of scale allow electricity to be cost-effectively generated at large facilities located in favorable locations with low-cost access to fuel.

-Fluctuations in electricity supply and demand from individual power plants and customers are mostly canceled out by opposite changes elsewhere on the network.

These efficiencies explain why Westinghouse’s large interconnected AC system won out over Thomas Edison’s localized system in the “War of the Currents” more than a century ago. Today, large electric grid networks save consumers billions of dollars per year relative to smaller networks.1

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The value of a large electricity network can be seen by starting from the extreme case of having no network, which is the case for customers who are “off-grid.” Without a network, an individual customer must meet their electricity needs at all times with their own dedicated energy supply. The challenge is that individual residential, commercial, and industrial users’ electricity demand fluctuates widely over time depending on what appliances are being used, time of day, weather, etc.

Without aggregation, each customer needs an electricity generation source large enough to meet their personal peak electricity demand, and the vast majority of the time their generation resource would sit idle or minimally utilized. Moreover, when their generation source was down for maintenance, a customer would have to either forego using electricity, or bear the cost of owning a fully redundant backup power source at all times.

A network of many customers and sources of supply greatly reduces costs because changes in individual sources of electricity supply and demand are not perfectly correlated. For example, the odds of one neighbor running their clothes dryer at the same time as another are quite low, and when one considers an entire neighborhood of dryers, the odds of them all running at the same time drop to nearly zero. The total electricity demand is always smaller than the sum of every user’s peak demand because these fluctuations are not perfectly correlated and many cancel each other out, reducing the system’s need for supply. Similarly, the odds of several power plants experiencing an unanticipated outage at the same time are very low. When millions of customers and hundreds of power plants are aggregated on a large power system, the statistical diversity is even greater, significantly reducing the cost of building and operating the power system.

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Department of Energy (DOE) data illustrate this benefit of a large power system.2 The following map shows the individual grid operators and the three main interconnections (East, West, and the Electric Reliability Council of Texas or ERCOT) that make up the U.S. power system. At any point in time, some grid operators are experiencing more electricity demand than was forecast the day ahead (indicated by darker shades of red), while others are experiencing less demand than expected (darker shades of blue). If sufficient transmission capacity is available, grid operators are able to exchange power with their neighbors to net out those deviations, reducing the need for one operator to ramp up its power plants while another ramps down its power plants.

Due to this regional diversity, the total electricity demand forecast error for the whole U.S. power system is typically about 1/5th as large as the sum of the errors for all individual grid operators. Transmission connections among regions reduce the amount of spare power plant capacity each grid operator must hold as operating reserves to accommodate those deviations.

An even larger benefit is that not all regions experience peak electricity demand at the same time. For example, many northern regions experience peak demand in the winter, while many southern regions experience their annual peak demand in the summer. This is due to their different weather profiles and use of electricity for heating and cooling. With adequate transmission, grid operators can use imports and exports from their neighbors to help meet peak demand, saving billions of dollars per year by not having to build as many power plants. Transmission also provides this benefit within a single grid operating area. The grid operator for the Mid-Atlantic and Great Lakes region has found that coincident peak demand across its footprint is 33,000 MW less than the sum of the non-coincident peak demands of its individual utility members, and 6,000 MW less than the sum of the peaks across its larger demand zones.3

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The same principle of statistical aggregation through a market-based network is the foundation of many peer-to-peer businesses, including ride-sharing and car-sharing applications like Uber, Lyft, and car2go. Most cars sit idle the vast majority of the time, wasting expensive resources. To borrow the power system term for the amount of time a resource is utilized relative to its maximum theoretical utilization, the “capacity factor” of cars is very low. In addition, while any one car is occasionally unavailable due to planned or unplanned maintenance, a fleet of cars made available through a network will almost always have a car available. Ride-sharing and car-sharing use the Internet to create networked markets that increase the capacity factors of underutilized assets and reduce the total need for cars and parking spots, just as a networked power grid achieves a higher utilization and reduced need for power plants by netting out fluctuations in individual sources of supply and demand across large geographical areas.

The value of making power systems larger and more integrated is driven by the powerful fundamental principles of statistical aggregation and economies of scale. Efforts to work against those principles by “cutting the cord” from the network will always face an uphill battle, despite advances in technology for energy storage and microgrids. As technology changes our sources of electricity supply and demand, the value of large grids is increasing rather than decreasing… click here for more

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