There’s an ‘alarming’ grid capacity constraint

Electricity demand is growing, grid capacity is constrained, and reserve margins are shrinking.

According to Patty Cook, senior vice president in charge of distributed energy resources flexibility services at ICF and co-author of a new report about the country’s demand growth, the picture of the U.S. power grid is not a pretty one. 

By 2028, electricity demand and peak demand are predicted to increase by an average of 9% and 5%, respectively; by 2033, each will increase further, to 18% for electricity demand and to 11% for peak demand. Growth is expected in every region, but it will be particularly intense in the mid-Atlantic area: 68% by 2050, compared to a 57% U.S. average.  

Additionally, the report found that what utilities pay for electricity could increase by an average of 19% by 2028, a cost that would be partly passed onto customers who have already been experiencing steep electricity price increases. 

The surge, prompted in part by the power hunger of artificial intelligence, is particularly dizzying as it comes after two decades of relatively flat demand. Stakeholders have been trying to quantify the expected growth for months. Grid Strategies, for instance, is anticipating about 38 gigawatts in new demand over five years, or a 4.7% increase. 

“That is alarming in and of itself,” Cook told Latitude Media. “But we also saw that the ability of the transmission system to accommodate additional transmission and to deliver new capacity… is also constrained. So the traditional tools in our toolbox are limited and constrained.” 

The average grid interconnection timeline for new-generation projects is now five-plus years, and developers struggle to find places to build new energy infrastructure. Accordingly, around 80% of projects never make it to construction.

An additional problem: “Most regional electric grids aren’t built to meet a surge in demand,” the report found. “Regardless of how many new power plants are built, the electricity won’t get very far if grid infrastructure isn’t improved to accept an injection of more electricity.”

Withdrawal capacity — the grid’s ability to deliver electricity to customers — is also likely to be strained by a surge in demand. As a result, Cook said, reserve margins (i.e. the percentage of surplus electricity available beyond peak demand) are “really tightening.  

“And that's when we start to get concerned about the reliability of the grid overall,” she added. 

Integrated system planning

In order to handle the demand surge, Cook said it’s key that utilities create a more sophisticated and integrated system planning. When utilities do resource and investment planning, they often don’t take into consideration all necessary aspects at the same time, such as transmission and distribution, resource planning, and demand-side programs. 

“What we're suggesting is an integrated view that allows utilities to look at the efficacy and the affordability of all those things over a longer time frame and at the ability of those things to manifest in time to achieve a net-zero goal,” she said. “In other words, to what extent can demand-side resources, distributed energy resources, and VPPs at the edge, mitigate or offset the need for some [transmission and distribution] investments?” 

Demand-side resources in particular are the timely and affordable option to create new capacity, according to Cook, given how smart, targeted, and predictable they can be thanks to artificial intelligence’s analytical powers. 

“We need to make the clean energy transition affordable for customers, largely by 2045,” she said. “Demand side management, VPPs, and customer programs are a timely and affordable option for creating capacity. Demand is the new supply.”