The modern electric grid is an engineering marvel in the U.S. It connects to 7 300 major power plants through nearly 160 000 miles of high voltage transmission lines and millions of miles of low voltage lines coordinating with about 3 000 different utility companies to bring power to over 150 million customers. But as impressive as that is, it’s an outdated system.
If Thomas Edison woke up today and looked at the electric grid, he would still recognize it. Basically, our grid was made for a world that runs on fossil fuels, a world of giant energy producers, and the consumers depending on them. Power has been designed to flow from the big power plants down to our houses, and that one-way direction has really limited our transition to more renewables and more storage.
A greener world demands a different kind of electric grid, a more distributed grid where individuals or companies can generate, store and sell electricity through the solar on their roofs or the batteries in their electric vehicles, a grid that can adjust to the variable weather-dependent nature of solar and wind by managing consumer demand, smoothing out the peaks and electricity usage by automating appliances to run at the most efficient times.
Eventually, a grid with renewable energy can completely replace fossil fuel power plants. Distributed generation requires distributed intelligence, and that intelligence doesn’t exist today in the way it needs to exist to move this forward.
We need internet-connected smart meters and sensors that can provide detailed usage analytics and appliances that can be controlled by our smartphones and utility companies.
We need software that can tie all the moving parts together, analyzing reams of data to ensure that supply and demand are balanced. The good news is we know how to do that, we don’t have to really invent new things. These are chips and software, and switches and network equipment that we already have. The hard part is integrating those technologies together to get the benefits.
Coordinating thousands of risk-averse utility companies across 50 states to get all this tech installed and operating efficiently, is a challenge, and moving to 100% renewable power through a massive build-out of solar wind and storage facilities will be extremely expensive.
Given our current technologies, full decarbonization of the power grid has been estimated to cost about 4.5 trillion dollars over a 10 to 20 year period. But if we’re going to reach 100% clean electricity by 2035 as president Biden has pledged to do, modernizing our grid so it can handle that renewable build-out is a must.
That goal cannot happen without big investments in the network that is going to support all that clean energy generation and energy efficiency. We cannot meet our climate goals if we aren’t making parallel investments in a modern grid.
The United States power grid began to take shape in the 1880s when Thomas Edison opened the country’s first central power plant – Manhattan’s Pearl Street station. While it initially served just 85 customers and powered 400 lamps, it expanded rapidly, and Edison’s company went on to build similar electric grids in neighboring states.
Competition sprung up, and by 1914 about 30 percent of all manufacturing activity relied on electricity, and 43 states had implemented regulatory commissions to oversee utility companies, which were fast becoming monopolies. By 1929 about 70% of manufacturing activity relied on electricity, and in 1935 the industry became federally regulated.
As demand for electricity grew, utilities connected their transmission systems allowing them to transport power across regional and state lines. Today, the lower 48 states are actually divided into three grids: Eastern, Western, and Texas interconnections. But while the system has gotten more integrated, the fundamental technology has remained largely unchanged.
Our current grid is essentially a one-way dumb system where electrons are simply moved from points of generation, whether it’s a coal plant, hydro, nuclear or solar, generally sent long distances across high voltage lines to nodes that are the interface between the inter and intrastate transmission system. And then, the distribution grid that steps down the voltage from the high voltage to the lower efficiency but easier to manage voltage that we send to our homes and businesses.
About 38% of utility-scale electricity in the U.S comes from natural gas, 23% from coal, 20% from nuclear, and about 18% from renewables.
While the renewable share is growing, today’s grid just wasn’t designed with wind and solar in mind, and it definitely wasn’t designed for the significant amount of distributed generation we see with solar panels today.
Millions of people with solar on their roofs are now producing excess power when it’s sunny out. Many are selling that energy back to the grid, but it does require some hardware upgrades. Now, we need transformers that can actually accommodate that electricity flowing backward because the grid was not designed to go that way. The circuit breakers and transformers try to stop the flow of electricity from your house back to the grid.
Another problem is that we’re almost never using as much power as the grid is capable of providing. Transmission and distribution infrastructure is generally built for the peak hour of utilization.
Basically, we have to ensure that if everyone turns on their lights or appliances at the same time, there’s enough electricity to go around. That often means firing up a peaker plant and a fossil fuel asset only used during peak hours. You’re paying for keeping an expensive power plant in reserve ready to come online at any time.
The modern grid could instead rely on increasingly cheap renewable energy storage like lithium-ion batteries. Winter solar plus battery storage is already cheaper than most peaker plants.
And we could also change people’s behavior. We all sometimes forget to turn off our lights, heat, or AC and run appliances at sub-optimal times. But these actions could all be adjusted or even automated by smart devices. The last time major investment in the grid was in 2009 when The Recovery Act allotted 4.5 billion dollars towards modernization efforts.
Much of this went towards installing millions of smart meters across the country, providing customers and utilities with detailed energy use data. This helps customers use energy more efficiently and helps utilities better coordinate real-time supply and demand responses. But there’s still a long way to go.
The current status of the smart grid, we would say it’s very mixed. About half the u.s households have smart meters. Things like the data and analytics very low level of usage, so the meter data gets captured. It’s used for billing and customer service. In most utilities, it’s not used for much more.
So, what exactly would our ideal electric grid look like? At the highest level, fossil fuel plants would be replaced by solar and wind farms, as well as millions of smaller distributed systems. New transmission lines would transport renewable resources far and wide, and their intermittency would be balanced by controlling consumer demand and using grid-scale energy storage like pumped hydroelectric power, lithium-ion batteries, or novel battery, tech-like solid-state flow, or thermal batteries, which are all in development.
Nuclear could also prove important Biden’s plan views it as a part of the equation, but high construction costs for new plants and the radioactive waste problem gives some pause. Hydropower and pumped hydro storage will also likely play some role but considering there aren’t that many spots left to build new hydro plants, it’s unlikely to expand significantly.
Mostly, we need a major build-out of solar wind and battery storage but integrating these resources onto the grid requires two-way communications between utilities and their customers and real-time insights into supply and demand.
This is exactly what the smart grid would do, and some of the biggest companies in the world, like General Electric, Intel, IBM, Siemens, and Cisco, are working on the hardware and software that will make it possible. With market and weather conditions constantly changing, a smarter grid also means a more regionally coordinated grid.
If we had a much more integrated market, we could move that energy around the western grid much more effectively as we knew that more wind was coming online or as we knew that we were going to have a cloudy day in Arizona or California was going to be going through some heat event.
Experts are also excited by the prospect of millions of customers with rooftop solar or home storage systems selling their excess energy back to the grid, which would help to balance demand. 6% of Americans have solar on their roof, and more are buying home storage systems like Tesla’s Powerwall to save the energy that they generate, plus about 2% of vehicles sold in the U.S. are electric.
These EV customers essentially own an energy storage system as well through the battery in their car. Your electric vehicle could be an asset for the grid, so when more power is needed, your vehicle will get a message to stop charging and start discharging and give some of that battery power back. That’s not happening yet, but it could. Most states already have net metering policies allowing solar customers to sell energy back to the grid.
Many believe that the next step is letting customers sell energy from their home battery systems or their EVs, assuming that they are opt-in. With a smart algorithm, we can tell my car you always want to have the ability to drive 50 miles, so don’t sell power that gets me below that threshold. Anything beyond that sells it to the grid when the price is above a certain threshold.
The ability to make money through solar and storage is starting to broaden the market beyond just wealthy consumers hoping to reduce their carbon footprint. But so long as wealthy communities are more capable of making that upfront investment in green tech, there will be an inherent inequality in electricity prices.
Anyone who can’t switch off the grid is now paying for all those poles and wires regularly where the more wealthy communities can jump on and off as they see fit. Experts say that part of the solution involves incentivizing landlords to install smart meters solar and battery storage for their residents. At least one program like this already exists in California, and 9 states do have programs that incentivize solar adoption for low-income homeowners, but broader efforts are clearly needed.
Though not everyone has access to cleantech, all customers can save money and go green by simply using less energy during peak demand times. Today, there are many programs incentivizing them to do so or even automating this process altogether. The principle of the grid before was you always manage supply to match demand and what you can do now is manage demand to match supply.
Demand response is definitely one of the cheapest and most straightforward ways to deal with the intermittency of renewables. The idea is that consumers just use less energy when there’s less center when energy available. Many utilities already offer demand response programs as well as time-variable pricing in which power prices change throughout the day. Both can help residential commercial and industrial users save money. But as of 2018, only about 6% of electricity customers were enrolled in demand response programs.
The initiatives generally require people to opt-in, yet many don’t even know that they exist or understand how they work. OhmConnect is one company trying to change that it’s gamified, saving energy letting users accumulate points that they can later cash out, and has created a whole business model around paying customers to be useless.
They say: okay, we need you for the next hour to reduce your energy use by about half, and we do that for tens to hundreds of thousands of people at once. We then sell all of those savings as if it were power from a power plant to the wholesale energy market to utilities. So they’ve basically turned the reduction of energy into a supply of energy. OhmConnect essentially acts as a peaker plant except that instead of producing more energy. It reduces customer demand during peak hours, meaning the actual peaker plan never needs to be turned on.
And by aggregating all of its customer’s energy savings, the company, alongside alphabet-backed sidewalk infrastructure partners, is creating a grid-scale virtual power plant. Five hundred fifty megawatts of dispatchable reliable regular demand reduction on the grid 365 days a year – it’s a watershed moment for the industry.
For the very first time, we got large-scale infrastructure investors to pay for a distributed energy system in which there’s no actual infrastructure. OhmConnect can either control a user’s appliances through a 14 smart plug or encourage customers to reduce their usage manually through a text or email. Either way, if customers save energy during the specified time, OhmConnect pays them.
That’s basically the same way that other demand response programs work with customers who hand over control of their devices, generally saving the most. While letting a utility or third-party control your thermostat or refrigerator might make some nervous, experts say that it’s easy to design a system that ensures that users hardly even notice it.
Thankfully it seems that people are getting more comfortable with the idea, in 2018, customers enrolled in demand response programs saved a total of 12.5 gigawatts of energy.
That’s about as much power as 39 million solar panels, and that number is only projected to grow. Renewable energy is cheaper and cleaner, but if we’re going to get all the way to 100%, we need to be able to flex demand in the same way that we used to be able to flex supply.
Even though we know what it takes to design a smart grid around the transition to renewables, utility companies are still reluctant to make big changes to their business model, which has proven lucrative for so many decades. If the grid works, you don’t want to break it because then people get really, really mad.
So that’s one of the things that’s really hindering companies from being experimental with the technology because they don’t have a bunch of houses. They can just experiment on it. Of course, some U.S. utilities like NextEra Energy and Dominion Energy are making bets on utility-scale wind and solar farms, which are much cheaper than coal plants these days and often times cheaper than natural gas too.
But a lack of experience in the renewables sector combined with concerns about intermittency means that many utilities are still reluctant to replace a gas plant with wind or solar. While adding battery storage is always possible, it does make projects much costlier.
With the United States mixture of investor-owned cooperatively owned and publicly owned utilities as well as its mishmash of federal and state regulations coordinating massive grid’s upgrades will be an ongoing logistics challenge no matter how sophisticated our hardware and software gets.
There are just a ton of different utilities and co-ops and systems and different grids and regional grids and wholesale markets and overlapping jurisdictions. It’s a giant mess. Luckily, utility companies are facing increasing pressure from individuals, corporate customers, and investors alike to make the upgrades necessary for getting more renewables onto the grid.
These huge customers like Google and Apple will decide where to locate a data center based on whether there’s 100 carbon-free electricity available. Many of the nation’s largest utility companies, including Southern Company, Dominion Energy, Duke Energy, and Excel Energy, are working towards net zero emissions by 2050, but the utilities are still a long way off from president Biden’s goal. He wants to create a carbon-free electricity sector by 2035.
President Biden has committed to investing in grid-scale energy storage and retrofitting transmission and distribution systems with new technology. We’re lucky that our infrastructure is at the point where we needed to make an upgrade anyway, and likely, this upgrade is cheaper, lower cost more value than if we had to do it 10 or 15 years ago.
At this point, solar and wind are incredibly cheap battery storage, and EV prices are continuing to fall. Customers are increasingly generating and storing their own power, and demand response programs are gaining traction.
Grid modernization has lagged, but there are signs of progress. We’re very early in this transition of modernizing the grid, and it’s probably a 5 to 10-year initiative, maybe even longer. But we believe that we are on the other side of the chasm in the early part of the hockey stick.
In other words, it’s happening regardless of whether you want it to happen or not, and we think today people do see this as a revolution, and we are excited about it.