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Why the U.S. Urgently Needs to Invest in a Modern Energy System

In a speech commemorating the thirty-fifth anniversary of the International Energy Agency (IEA) in 2009, former U.S. secretary of state, Henry Kissinger recalled how the energy crisis of 1970s awakened the world “to a new challenge that would require both creative thinking and international cooperation.” He explained that as “global demand continues to grow, investment cycles, technologies, and supporting infrastructure will be critical.” As a top U.S. diplomat in the 1970s, Kissinger is credited with promoting energy security as a third pillar of the international order through a trifecta of initiatives to bolster incentives to energy producers to increase their supplies, encourage rational and prudent consumption of existing supplies, and improve development of alternative energy sources. These efforts contributed to the establishment of the IEA in 1974 as a principal institutional mechanism for enhancing global energy cooperation among industrialized nations.

Forty years after the IEA’s founding, the relationship between energy and international cooperation endures, but changes in the energy landscape triggered by a revolution in how we produce, distribute, and consume various forms of energy is affecting the IEA’s fans. The agency interestingly examines the role of sustainable energy options and considers institutional change as often eclipsing conventional supply issues in shaping our energy future. For example, the challenges facing the electric power industry today include the need for diversification of generation, optimal deployment of expensive assets, carbon emissions reduction, and investment in decoupling strategies and demand response. Two key policy imperatives characterize these challenges, notably: the need to adopt policies that combat climate change, and the need for greater energy security due to concerns associated with supply-demand imbalances. Once again, we are at a moment of institutional and industry-wide transformation that calls for strategic investment and partnership to replace, protect, expand, and modernize our energy infrastructure. It is easy to slip into thinking of the nation’s energy landscape as a static challenge. It is not. The boundaries, business models, policies, strategies, and technical solutions have been a function of the incentives and objectives provided by policy.

The U.S. power grid is one of the most advanced energy systems globally, but its growth has been an evolving patchwork of disparate systems, functions, and components. Because of years of inadequate investment, the electric grid is now aging, outmoded, and unreliable to take full advantage of new domestic energy sources and emerging technologies and business models in the sector. In climate, energy, and economic terms, these issues are defined by whether the next wave of energy infrastructure will further the status quo of the path of least resistance and principally continue relying on conventional fossil energy sources or transition to efficient technologies and a clean energy future. In the first-ever Quadrennial Energy Review (QER) of the U.S. energy infrastructure released in April 2015, modernizing the nation’s energy infrastructure, to foster economic competitiveness, create a domestic clean energy economy, improve energy security, and promote environmental integrity, are identified as central policy concerns facing the country in a time of rapid change. President Obama ordered the review when he unveiled his Clean Power Plan in early January 2014.

Here are six key policy recommendations of the QER report.

Improve the capacity of states and localities to identify and respond to potential energy disruptions: The review identifies severe weather events as the major cause of electric grid disturbances. From 2003 to 2012, severe weather caused an estimated 679 widespread power outages in the U.S. costing the economy between $18 billion and $33 billion annually. Low-probability/high-consequence events also caused various types of electric grid disturbances in energy transmission, storage, and distribution infrastructure, including natural gas transmission infrastructure systems such as pipeline and storage leading to safety concerns. These threats and vulnerabilities vary substantially by region with Gulf Coast region being more susceptible to hurricanes, thus requiring regional solutions. The report recommends investing in new technologies like smart meters and automated switching devices to ensure much quicker recovery times from disruptions. It also recommends establishing a multi-year program by the U.S. Department of Energy to support the updating and expansion of state energy assurance plans.

Increase investments in electric grid modernization through expansion of different business models, utility structures, and innovative technologies: The review identifies increased investments in flexible operations and resilience as a more effective and economical solution for serving customer needs by enabling smart growth, in both transmission and distribution systems. Investment in transmission has been on the rise since 2000s, and is expected to grow with improved system reliability and interconnection requirements of distributed generation sources. In 2013, the report explains that investor-owned utilities spent a record high of $16.9 billion on transmission, up from $5.8 billion in 2001. The growing level of transmission investment is needed to replace the aging infrastructure, increase system reliability, and facilitate competitive wholesale power markets. The report recommends adopting new business models, utility structures, and institutions to shape the operation, management, and regulation of the grid as well as optimize and update the Strategic Petroleum Reserve to reflect modern oil markets.

Strengthen regional integration of the North American energy markets: Opportunities for increased integration of markets and policies exist in the North American neighbours: the U.S., Canada, and Mexico. To further energy, economic, and environmental goals, the report recommends developing a common energy market, shared environmental and security goals, and infrastructure that undergirds the three economies. For example, in 2013, energy trade between the U.S. and Canada was approximately $140 billion, while energy trade with Mexico exceeded $65 billion in 2012—a sign of the existing opportunities for integration.

Update and improve quantification of methane emissions from natural gas systems: To enhance the ability of the nation to achieve the targeted environmental goals, the report calls for urgent need to address the direct environmental impacts and vulnerabilities of energy transmission, storage, and distribution infrastructure, more broadly, carbon sequestration infrastructure, long-distance transmission to enable distributed generation and utilization of renewable resources, and smart grid technologies to support energy efficiency. The QER recommends updating greenhouse gas inventory estimates of methane emissions from natural gas systems, increased funding to reduce diesel emissions under the Diesel Emissions Reduction Act, and enactment of the proposed Carbon Dioxide Investment and Sequestration Tax Credit, to support carbon capture technology and associated infrastructure.

Improve siting and permitting of energy infrastructure: The QER identifies involvement of multiple federal, state, local and tribal jurisdictions to add the time to siting, permitting, and review process of energy infrastructure projects due to overlapping and sometimes conflicting statutory responsibilities. To enhance credibility of the process, the QER recommends increased meaningful and robust public engagement with local stakeholders to speed up siting decisions, establishment of regional and state partnerships, and enactment and funding of relevant statutory authorities to improve coordination across agencies.

Strengthen shared transport infrastructures: The report calls for strengthening of waterborne, rail, and road transport to move energy commodities. It recommends establishing alternative funding mechanisms, public-private partnerships, and grants for shared energy transport systems.

The energy infrastructure challenges highlighted above can be addressed partly by investing in an assortment of technological innovations. This would repurpose energy sectors to trade energy efficiently in today’s extremely difficult managerial, regulatory, and financial environment. Investing in ‘smart’ energy offers a viable and effective long-term solution that allows the industry to shift its supply sources, build new transmission and storage systems, and increase its energy efficiency goals. Finally, these policy recommendations illustrate a key point: changes associated with modernizing our energy infrastructure and the attendant market solutions may change, interplant or even interfirm efficiency.

This article was first published by CEEP

Photo Credit: U.S. Energy Infrastructure/shutterstock

Dr. Joseph Nyangon's picture

Thank Dr. Joseph for the Post!

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Joe Schiewe's picture
Joe Schiewe on Sep 25, 2015 4:25 pm GMT

I disagree.  We should be working to install new and replacement power capacity near the demand therefore reducing long transmission line risks and expenses.  New passive safety nuclear small modular reactors (SMR) that can be installed near demand are designed to adjust their power supply to meet local demand adjustment needs.  Yes, it will likely add a little production cost but dramatically less than would be required to do the ‘investment’ you are advocating.  Also, any waste heat from the reactors can provide for nearby heating needs.  Keeping supply where the local demand is will reduce transmission losses; retain power generation economic benefits in their own communities; reduce over sizing of transmission lines; reduce large area transmission failure power disruptions; and minimize ugly expensive power transmission lines.    If you have to ‘invest’ in transmission then invest in local systems to allow flexible demand customers the ability to benefit from reducing their demand during peak hours. 

Clayton Handleman's picture
Clayton Handleman on Sep 25, 2015 9:43 pm GMT

Joseph, thank you for putting together a summary of the QER.  Texas offers a nice test case for the opportunities that infrastructure improvements can offer in diversifying power sources.  With their transmission expansion they have nearly eliminated wind curtailment while allowing for expansion of wind in highly productive regions of the state.  Some suggest that this will require adding gas to balance the production.  However, solar is highly decorrelated from wind in Texas and offers an opportunity for much of the generation balancing to come from renewables.  Electric vehicles offer an additional opporunity since the charging is typically done at the same time that wind power peaks in TX.  By providing transmission capacity ERCOT has created a situation where these syngergies can be further expanded and explored.

Bob Meinetz's picture
Bob Meinetz on Sep 26, 2015 3:31 pm GMT

Clayton, in the idealized renewables scenario the wind starts blowing after the sun goes down, and blows just hard enough to keep everyone’s favorite television programs from going dark before they go to bed.

If Texas is a nice test case of that scenario, it’s giving renewables an F. With its supposedly-abundant wind, solar, and deregulated electricity markets, the state has two and one half times the per capita carbon emissions of California:

http://www.bloomberg.com/infographics/2014-06-06/us-carbon-emissions-by-...

In fact, Texas and other plains states are among the worst carbon offenders in the country. But Texas and Oklahoma are fossil fuel stalwarts, and some suggest the idea was to promote “solutions” which weren’t solutions at all – that couldn’t possibly threaten either state’s cash cow. If so, it’s a synergy that kind of sucks.

Clayton Handleman's picture
Clayton Handleman on Sep 26, 2015 6:03 pm GMT

I think you have hit upon why they are not agressively pursuing solar.  Wind-only gives their politically powerful FF ongoing life.  Solar, which is substantially decorrelated with wind in Texas, and highly peak coincident, particularly in the summer when Texas has the largest peaks, would displace much of the FF.  Hence, even with dramatic cost reductions in PV they have been slow to adopt it.

However, since they want to keep a market for their FF, I don’t see them displacing it with nuclear any time soon either.  And, since EVs are night charging, as they adopt EVs, the increased Energy demand will correlate to available wind and not trigger substantial increased demand for additional FF.

So back to the article, through improvements in infrastructure, Texas decreased their wind curtailment while substantially increasing their energy production which displaces what?  Fossil fuels.  And they now are positioned to add substantial wind capacity, further displacing other generation sources in the state which are what?  Fossil fuels.  And, they are now well positioned to adopt solar rapidly should they decide to do it or be compelled to do it.

 

 

 

 

Bob Meinetz's picture
Bob Meinetz on Sep 27, 2015 12:17 am GMT

Clayton, I’ve been hearing the “now wind is positioned to…”, “now solar will be ready to…” B.S. for 40 years.

In 2013, Texas emissions increased 6% in one year. That’s failure. That’s an “F”, and there’s no way to sugarcoat it.

Clayton Handleman's picture
Clayton Handleman on Sep 27, 2015 11:48 am GMT

Interesting data.  Have you compared it to electricity production each of those years? 

 

Bob Meinetz's picture
Bob Meinetz on Sep 27, 2015 5:08 pm GMT

Clayton, renewables are sold along with “efficiency” as a solution to climate change. Obviously the pair is not fulfilling Mark Jacobson’s utopic vision of zero carbon emissions, because they’re getting worse. Renewables are not even keeping up with increased consumption.

How long do we need to chase that dream before we realize it’s not working?

Clayton Handleman's picture
Clayton Handleman on Sep 27, 2015 5:19 pm GMT

There was a moment of hope.  You presented some interesting data.  I offered a suggestion as to how it could be used to better understand the situation, possibly support your position possibly not.  It almost looked like a discussion.  But you are back to your usual grandiose diversionary rhetoric.  So I can only assume you have already done the comparison, didn’t like what you saw and so slipped into denial and diversion.  Invoking the name of a controversial name to steer the conversation to emotion rather than dialog. 

Normally I am happy to do data mining if something interesting presents but unfortunately my work schedule doesn’t allow for it at this time. 

 

 

Mark Heslep's picture
Mark Heslep on Sep 27, 2015 11:05 pm GMT

Even dramatic cost reductions in PV do not translate into affordable deep integration of solar into the grid, as that amount of solar theoretically reduces fuel use but does not reduce the need for FF plants. 

Clayton Handleman's picture
Clayton Handleman on Sep 28, 2015 2:51 am GMT

In TX wind and solar are particularly well matched.  Wind at night, solar during the day and AC load and utility peaks correlate well to solar availability.  I am unclear what you are basing your comment on.  I have posted data (not studies but actual array output) on other threads showing high solar output on the days that other people post low wind output as their imagined coup de grace on renewables in TX.  Would be interested if you have data showing otherwise. 

 

Hops Gegangen's picture
Hops Gegangen on Sep 28, 2015 10:59 am GMT

 

Well, Texas is a different climate than most of CA. It gets much hotter than the big population centers along the coast of CA. And Texas has no hydro power.

But anyway, as I always say, given the ever-falling cost of solar, you need to look to the foreseeable future, not the past. And as more solar gets deployed, innovaton in utility-scale batteries will continue as well.

 

Bob Meinetz's picture
Bob Meinetz on Sep 28, 2015 4:30 pm GMT

Hops, if all we did was look to the future, utility-scale hamster wheels run by utility-scale hamsters would solve all of our energy problems.

Past experience with hamsters, however, has shown us that’s going to be a disappointing return on investment. Unfortunately, past experience with solar and wind power is not subjected to the same scrutiny.

Mark Heslep's picture
Mark Heslep on Sep 29, 2015 4:38 pm GMT

I have no argument with data showing solar and wind are a good, average, match in ERCOT.  An above average match  may theoretically enable above average displacement of fossil fuel, but not a displacement of the fossil fuel plants.  Rather, a high share of wind/solar mandates dispatchable power power plants.  ERCOT’s monthly wind generation in August-September perennially drops to half that of the best months of the year, and hourly wind generation can often drop under 15-20% of capacity outside signficant sun hours (example) with load still above 90% of peak.  As others have pointed out, once the FF plant is built, made necessary by drop outs of intermittent power, then wind/solar are competing only against the kWh fuel costs of the dispatchable power plants. 

Clayton Handleman's picture
Clayton Handleman on Sep 29, 2015 10:38 pm GMT

These are good points.  The FF capacity is already there so no new needs to be built.  In a scenario with high EV penetration the charge times will occur late night creating demand for more wind power.  So the daytime floor would rise relative to what it is today.  Solar can be shifted to cover the peak with more west facing or trackers.  This would be incentivized through TOU metering.  This piece has the graphics showing the impact of tracking and how it would move the solar to cover the peak, the effectiveness of load shifting when TOU incentivizes the shift.

  The devil is in the details as to the relative percentage increase in renewables but it is substantial.  Whether it is good enough remains to be seen but I have mucked around in the data a good bit and my opinion is that it looks very promising.

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