Obtain the data you need to make the most informed decisions by accessing our extensive portfolio of information, analytics, and expertise. Sign in to the product or service center of your choice.
Utility and transmission executives from the UK, US, and Canada
say the power grid wasn't designed to handle intermittent renewable
sources and an influx of electric vehicles.
Speaking at two separate conferences, the top officials of UK
Power Networks, American Electric Power (AEP), and Ontario Power
Generation (OPG) also acknowledged the challenge of providing safe,
reliable, and affordable power across grids that were not designed
to withstand climate-fueled events, such as sub-zero temperatures,
wildfires, flooding, or torrential downpours.
However, they all agreed the challenges can be overcome with
planning, and through better integration of energy generation and
storage to smooth out daily and seasonal variations. They added
that nuclear power can provide the baseload service that until
recently was often the domain of coal-fired power plants.
"The electrical grids were not designed to handle decentralized
sources of power," such as solar panels atop homes and businesses,
through which customers can buy from and sell power to the network,
Basil Scarsella, CEO of UK Power Networks, observed in a 26 April
conversation with AEP CEO Nick Atkins during an Edison Electric
Institute (EEI) conference, which ran 24-29 April.
UK Power Networks maintains about 119,000 kilometers of cables
and lines across London, the southeast, and east of England that
deliver electricity to about 20 million people, while AEP, as one
of the largest utilities in the US, maintains a transmission
network that stretches across 40,000 miles while delivering power
in 11 states.
Decarbonizing the grid will not be easy or cheap though,
according to Atkins.
The average age of power lines and transformers on AEP's
transmission network is about 57 years, and it takes about $3
billion just to maintain the transmission network each year, Atkins
said.
"So, we have a long way to go in terms of refurbishment of the
grid, expansion of the grid, the ability to put renewables in
place, and I see more renewables being put in place as well," said
Atkins.
EV demand will be spread out
UK Power Networks' Scarsella said he is relying on big data
analytics to predict where the power load for EVs or consumption
for heating purposes will emerge. Heating is currently supplied via
natural gas, which Scarsella said is going to change in the coming
years.
"It all will not emerge from one location," Scarsella said.
Canada, the US, and the UK have each set net-zero goals that
include boosting the share of EV sales and renewables.
In 2021, the US set a goal of having EVs make up half
of all new car and van sales by 2030, while the UK joined more than
30 countries in both the developing and developed world in calling
for an end to sales of all cars and light vans running on petroleum
products by 2030 and "to work towards all sales of new cars and
light vans being zero emission by 2040 or earlier." The UK put out
a consultation on 7 April seeking to see how it should go about
implementing its zero-emission EV (ZEV) target.
By 2026, Canada aims to have at least 20% of new light-duty
vehicle sales be ZEVs, at least 60% of sales be ZEVs by 2030, and
reach 100% by 2035.
Can the grid handle EVs?
Whether the grid can handle the surge in EVs is another matter
though.
"So, if everyone bought an EV tomorrow, would the grid work? The
short answer is no. You know, the grids have not been built,
especially in cities, for heavy adoption, so there is heavy
catching up to do," OPG CEO Ken Hartwick said during a Foreign
Policy magazine 27 April discussion on decarbonizing the
grid.
Hartwick said OPG is planning to meet Canada's EV influx through
diversifying its energy mix, which includes nuclear energy
providing baseload power and natural gas plants for peaking demand,
though it is aware that gas plants will go the way of coal-fired
generation. OPG already has 4 GW of wind and a hydro-electric
portfolio with a combined capacity of more than 7 GW, but owing to
the intermittency of wind, is relying on gas-fired and nuclear
generation to stabilize power flows.
The Canadian utility is investing C$12.8 billion ($9.9 billion)
to install a small modular reactor made by GE Hitachi Nuclear at
its Darlington nuclear plant and looking to invest another C$13
billion ($10.5 billion) to refurbish six of the eight reactors at
the Bruce Power plant.
Power sector is key
Policymakers participating in the two events said they are aware
of the challenges posed by the electrification of the economy and
decarbonization of the grid, and the key role that utilities play
in this transition.
Speaking on the opening day of the EEI forum, US Special
Presidential Envoy on Climate Change John Kerry said: "If we can't
do it in the power sector, we're not going to get it done
anywhere."
Sally Benson, who serves as chief energy transition strategist
and deputy director for energy in the White House Office of Science
and Technology Policy and participated in the discussion with
Hartwick and the CEO of the Nuclear Energy Institute, agreed with
Hartwick.
Looking for that "Goldilocks sweet spot"
Benson said the grid has been designed to operate with
predictable supply (from baseload coal, gas, or nuclear units and
to a lesser extent from oil) that could be switched on when demand
increased. But it was not designed to quickly provide power from
those sources when intermittent power such as wind and solar
declined.
When wind and solar began to scale up, grid operators had to
learn, and actually became quite good at handling power flows that
were not just dependent on weather and time of the day, but also on
the season of the year, she said.
What's more, Benson said these models have revealed that the
more diverse the mix, meaning nuclear, natural gas, wind, solar
mixed with storage, the lower the cost of dispatching power. So,
the key now is to "kind of find that Goldilocks sweet spot" for
maintaining reliability and affordability.
In its 2021 Climate Impact analysis,
AEP said it plans to phase out 73% of its coal generation capacity
by 2030. It's already retired 13.5 GW and plans to retire an
additional 1,633 MW of coal generation by 2028. At the same time,
the utility plans to have 10 GW of renewable power installed by
2025 and then to add another 6 GW of renewables by 2030.
Like OPG, AEP is making significant grid investments, including
in energy storage, but also exploring new types of generation, such
as modular nuclear and research into the future use of hydrogen.
AEP said in the analysis that gas-fired and nuclear generation are
critical to any discussion about providing a "firm" baseload to
complement intermittent renewables.
With electrification of sectors of the economy such as
transportation and heating on the rise, Atkins said "we have to be
very careful about how we make up that transition."
AEP's customers, as well as investors who are driving the
business, are increasingly demanding clean energy, but they also
want to make sure the grid system is reliable and resilient, Atkins
said.
Regulatory regimes not keeping apace
However, he said, the US regulatory regimes are not moving fast
enough to keep up with consumer and investor expectations, "so we
continue to have this chasm."
The six regional transmission organizations (RTO) and
independent system operators (ISO) that manage grids in the US were
set up to review a fairly small number of coal and gas projects.
Now, there are hundreds or even thousands of applications on
file.
Earlier this year, PJM Interconnection, the ISO that coordinates
power for the District of Columbia and all or parts of 13 states in
the US Midwest and East, proposed a two-year delay on accepting any
new applications for connections, as it has a backlog of more than
2,500 requests for permits. It has a task force now studying
solutions.
The federal government is still playing catch up as well. After
a staff white paper and four technical conferences in 2021 that
explored the changing nature of power markets and their operations,
the US Federal Energy Regulatory Commission (FERC) took two major
steps on 21 April.
Proposed changes to energy planning
FERC, which regulates interstate transmission of electricity, proposed reforms to its 2011
Order No. 1000 that outlines how RTOs plan their transmission needs
and allocate costs. The proposed rule requires that RTOs write
plans that are forward-looking enough to anticipate changes in
transmission needs driven by changes in resource mix and
demand.
"The generation fleet is changing rapidly" because customers are
demanding clean energy and utilities are responding to those
requests with commitments to procure renewables, FERC said.
FERC said it is also aware that the traditional electricity
usage patterns or load profiles are changing as the needs of the
customers change, such as greater demand for electricity to power
24-7 data centers that service the Internet.
The regulator also ordered the RTOs and ISOs that it oversees to
submit detailed reports within 60 days about how they see the
energy resource needs and load profiles, or profiles of electricity
usage, changing in the next five to 10 years.
"These changes in the resource mix and demand, operational
challenges, and increasing regional integration increase the
importance of engaging in regional transmission planning and cost
allocation to meet long-term transmission needs more efficiently or
cost-effectively," FERC said.
This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.