The U.S. Faces a Looming Power Shortage

As data centers and clean-tech factories multiply across the nation, utilities and regulators are scrambling for solutions to fortify an aging power grid, most of which was built in the 1960s and 1970s.

It is becoming increasingly clear that the nation's electric grid is not equipped to handle the increasing demands placed on it by population growth, urbanization, and technological advancements.

More than half of the transmission lines and power transformers were installed before 1970, Mitch Landrieu, White House Infrastructure Implementation Coordinator, told reporters last year.

″Every time you turn on a light, charge your laptop, plug in an air conditioner or put leftovers in the fridge, you rely on the electric grid, and that grid has been in need of upgrade for a very, very long period of time,” Landrieu said.

Industrial power demand is skyrocketing in Georgia, projected to reach 17 times recent levels in the next decade. The Arizona Public Service anticipates transmission capacity depletion without substantial upgrades.

In Northern Virginia, there are proposals to build several nuclear power plants to support planned and ongoing data center projects. Texas, no stranger to electricity shortages, faces similar challenges.

This surge in demand for electricity is prompting more commercial customers to seek alternative energy sources, including building their own power plants. More and more, companies are turning to solar, wind, and geothermal power to meet their energy needs

“When you look at the numbers, it is staggering. It makes you scratch your head and wonder how we ended up in this situation. How were the projections that far off? This has created a challenge like we have never seen before,” Jason Shaw, chairman of the Georgia Public Service Commission, told The Washington Post.

Despite years of talk about modernization, the world's largest economy is struggling with a vulnerable grid that does not appear prepared to deal with soaring heat, a warming climate and other disruptive events that could literally turn off the lights for millions of people.

“Right now, the U.S. electric grid is the largest connected machine in the world. It’s 5.7 million miles of transmission and distribution with about 55,000 substations,” Jennifer M. Granholm, the secretary of the U.S. Department of Energy, told reporters during a conference call in October 2023 announcing $3.46 billion in government funding to upgrade the grid. “And it needs upgrading, clearly.”

A big problem, a big price tag

The already daunting price tag for fixing the grid only gets steeper and steeper as these challenges pile up. As University of Texas at Austin grid expert Joshua Rhodes told Axios Closer's Nathan Bomey, the U.S. is "under invested by probably a few trillions of dollars."

A 2021 report by the National Conference of State Legislatures said at least $1.5 trillion would be needed through 2030 "to modernize the grid just to maintain reliability."

To get a sense of how large the problem is, consider the fact that there are more than 9,200 electric generating units that crank out more than 1 million megawatts of capacity, with 600,000+ miles of transmission lines.

Experts say the pressure on the grid will grow with widespread electric vehicle adoption, rapid artificial intelligence advancement, crypto-mining activities, and the corresponding need for more data centers. While the rapid expansion of solar and wind power has become more cost-effective as technology improves, integrating renewables requires significant investments in transmission infrastructure and energy storage solutions, adding to overall costs.

"The power sector is facing a new normal," Tim Fox, managing director of ClearView Energy, told CNBC. "Annual power demand has been flat for the past decade, but forecasts now show higher consumption and peak demand than ever before."

Crypto, AI, and Data Centers add to the surge

According to a report by power sector consulting firm Grid Strategies, the nationwide forecast for electricity demand over the next five years has risen from 2.6 percent to 4.7 percent, with data centers playing a major role in this growth.

In the U.S. alone, crypto mining accounted for 0.6%-2.3% of electricity demand last year, as reported by the Energy Information Administration. This demand is expected to rise considerably, with miners alone consuming as much electricity as the entire country of Australia in 2023.

Similarly, artificial intelligence is projected to consume substantial amounts of electricity. The Boston Consulting Group estimates that by 2030, the electricity consumption of data centers due to generative AI will triple from 2.5 percent to 7.5 percent in the US.

However, power industry experts are concerned that the US electric grid may not be prepared to handle this surge in demand. Building new power plants and updating the aging grid system can be lengthy processes, lasting several years or more.

Climate change worsens the problem

"The world is also facing a climate crisis, which further complicates matters for the power sector," Fox noted. "The Biden administration's push to decarbonize the grid, along with state mandates for decarbonization, adds another layer of complexity, especially as demand for electricity is on the rise."

High temperatures strain electrical infrastructure, particularly during heatwaves when demand for electricity surges as people turn on air conditioners to stay cool. Heat can cause power lines to sag, transformers to overheat, and equipment to malfunction, leading to power outages.

As temperatures rise due to climate change, the demand for electricity for cooling purposes will increase. This heightened demand can overload the grid, especially if the infrastructure is already operating near its capacity.

Climate change is contributing to more frequent and severe weather events, such as hurricanes, wildfires, and severe storms. These events can damage power lines, substations, and other infrastructure, leading to widespread power outages that may take days or even weeks to repair.

Texas revealed the problems

I was living in Dallas in February 2021 when Texas experienced an unprecedented winter storm, which brought freezing temperatures and heavy snowfall to the state. The extreme cold led to a surge in demand for electricity as people relied on heating systems to stay warm. That in turn overwhelmed

The combination of high demand for electricity and disruptions to power generation due to frozen natural gas infrastructure overwhelmed the state's grid, operated by the Electric Reliability Council of Texas.

ERCOT implemented rolling blackouts to prevent a complete collapse of the grid, leaving millions of Texans without power for days in freezing temperatures. I was one of them. I was without power in my apartment for three days.

While this event was driven by extreme cold rather than heat, it underscores the vulnerability of electrical infrastructure to weather-related stresses. In the case of Texas, a lack of sufficient winterization measures for power generation facilities and the grid infrastructure meant that the system was unable to cope.

Additionally, during the summer of 2023 in Texas, the extreme heat posed challenges for electrical generation. While the state came close to facing blackouts, there were no reports of brownouts or widespread loss of power during that period. ERCOT declared an Energy Emergency Alert 2, bringing all available generation online to prevent blackouts.

One big problem facing Texas is that its electrical grid is largely separate from the two main interstate grids that cover most of the continental U.S. And because of that, Texas is unable to import significant amounts of electricity from neighboring states to alleviate the strain on its own grid.

The lack of robust interconnections in Texas with other grid systems has been a subject of scrutiny following the 2021 winter storm, but critics charge that little has been done to fix the problem.

Grid congestion and regulatory barriers

But for Texas, the U.S. electrical grid is highly interconnected, which means that disruptions in one part of the grid can cascade and affect other regions. On the plus side, these interconnected grids allow for the exchange of electricity generation capacity and reserves between regions. This enhances flexibility in managing demand fluctuations by tapping into surplus electricity and improves efficiency by optimizing resource use.

However, growing electricity demand in urban areas and densely populated regions can lead to grid congestion, causing bottlenecks that result in higher prices, reduced reliability, and increased outage risks. Upgrading transmission infrastructure to accommodate this demand requires substantial investment and coordination, with delays or deficiencies exacerbating congestion issues.

Regulatory barriers, such as complex permitting processes, can further hinder infrastructure upgrades and impede efforts to address congestion and bottlenecks. As bottlenecks grow, large consumers face longer wait times for connections, sparking debates over who will fund new power supplies, with regulators concerned about residential rate increases.

This dilemma threatens the shift to cleaner energy as utility executives advocate delaying fossil fuel plant retirements. It also risks impeding the energy supply needed for charging electric vehicles and powering household appliances to meet climate goals.

The Biden Administration announced in October that it was putting almost $3.5 billion into improving the strength and resiliency of the country's electric grid. The money is coming from the Bipartisan Infrastructure Law of 2021 and will go to 58 projects across 44 states, per the Department of Energy.

The investments in the electric grid will get more than 35 gigawatts of clean energy onto the grid, the Department of Energy says. For some sense of perspective,?a mid-size city needs a gigawatt of electricity, Microsoft co-founder and climate investor?Bill Gates?said in his book,?“How to Avoid a Climate Disaster.”

A 2023 report by the?International Energy Agency showed that improving electricity transmission lines is not only a problem for the United States. The world has to add or replace 49.7 million miles of transmission lines by 2040 for countries to meet their climate goals and to achieve energy security priorities, the IEA said. That amount is roughly equivalent to the total number of miles of electric grid that currently exists in the world, per the IEA.

This is our lead story in this week's edition of The Rising Tide. You can have full access to read all the stories by subscribing at https://barberd.substack.com/ Subscribe now and I will give you the first month for free.