Fixing the Backbone of the Energy Transition

by Monica Varman , Partner at G2 Venture Partners

This summer, California, Michigan, and Texas residents emerged from yet another season of multi-day power outages, in what has become an annual pattern. Across the U.S., households experienced major power outages at a rate of 1-2 per week over the past 3 years, with a total of 1,542 outages caused by severe weather between 2000-21. Interconnected networks of aging infrastructure buckle under the strain of severe weather, creating dangerous conditions on roads and inside frigid homes.?

In addition, physical and cyber attacks on the grid continue to rise with an attack nearly every other day in 2022, a 74% increase over the previous year. Lack of power continuity results in significant loss in economic output, and can often be a matter of life and death. These impacts are disproportionately felt by economically disadvantaged communities, who do not have the means to invest in backup power and often need to commute to work regardless of weather conditions.

Utilities face limited choices to harden the power grid in its current architecture. Undergrounding wires has its challenges, with cost estimates at over $3M per mile, and flooding or earthquakes still posing a substantial risk. PG&E’s proposal to underground 10,000 miles of wires is estimated to cost up to $40B, putting additional pressure on rates that have been rising 20% year over year.?

All this is happening as we are facing the challenge of our generation to mitigate climate change, with the “electrification of everything” and decarbonization of the grid as two critical levers. EV adoption is past the tipping point for mass adoption, and sales of heat pumps outpaced gas furnaces in 2022. How can we sustain this momentum when we are unable to deliver electrons as reliably as molecules?

Investing in the resilience of our poles and wires is critical for a just energy transition. Given the complexity of the challenge, there are several pathways to improve the reliability of the grid:

• Proactively identify and manage at-risk resources: Asset owners can identify lines and equipment most vulnerable to disasters using satellite imagery and sensor technology, and use that intelligence to balance grid capacity and reliability. AiDash helps utilities forecast damages, identify system risks, and prioritize interventions such as vegetation management. LineVision’s lidar technology monitors transmission lines to help operators balance safety (e.g., during high-wind events) and line capacity.

• Deploy and unlock the potential of Distributed Energy Resources (DERs): Batteries, whether embedded (e.g., in electric vehicles and appliances) or standalone, demand response, and behind the meter generation (e.g, rooftop solar) can all be powerful tools to improve grid flexibility. These resources bring supply closer to demand, reducing the need for centralized generation and transmission resources. They can also rebalance demand and supply by staggering charging windows for EVs in a territory, proactively adjusting temperatures to reduce HVAC load, or deploying Virtual Power Plants (VPPs) in response to a demand surge. FERC Order 2222 enables these DERs to also directly participate in wholesale markets, increasing the size of the profit pools available to them. Companies like Leap, Voltus, and Weavegrid help DER owners unlock this value by simplifying the user experience of participating in grid services.

• Localize the grid: Microgrids, with localized generation resources (e.g., community solar, batteries), and controls (e.g., distribution-level grid orchestration), reduce the risk of single points of failure for vast networks. Companies like Scale Microgrids and Camus Energy are building and orchestrating local resources.

Like many problems in the climate space, solving the grid resilience challenge requires innovation across policy, products, and business models. Policy enables market design for integrating flexible resources and upgrading existing infrastructure. Great products with strong business models drive the adoption of technologies for distribution generation, load shifting, and grid optimization.

Last summer, California avoided rolling blackouts during a monster heatwave by activating energy storage resources and mobilizing consumers to reduce demand in response to text alerts. Future-proofing the grid will require a move away from our top-down, fixed network paradigm to a more inclusive, engaged, and decentralized system – a future we all have a stake in building.?

*This article was originally published on Substack