The electric grid is an amazing integrated system of machines
spanning an entire continent. The National Academy of Engineering
has called it one of the
greatest engineering achievements of the 20th century.
But it is also expensive. By my analysis, the current
(depreciated) value of the U.S. electric grid, comprising power
plants, wires, transformers and poles, is roughly US$1.5 to $2
trillion. To replace it would cost almost $5 trillion.
That means the U.S. electric infrastructure, which already
contains trillions of dollars of sunk capital, will soon need
significant ongoing investment just to keep things the way they are.
A power plant built during the rapid expansion of the power sector
in the decades after World War II is now 40 years old or older, long
paid off, and likely needs to be replaced. In fact, the American
Society of Civil Engineers just gave the entire energy
infrastructure a
barely passing grade of D+.
The current administration has vowed to invest heavily in
infrastructure, which raises a number of questions with regard to
the electric system: What should the energy grid of the future look
like? How do we achieve a low-carbon energy supply? What will it
cost?
Infrastructure seems to be an issue that can gather support from
both sides of the aisle. But to make good decisions on spending,
we need first to understand the value of the existing grid.
Current state of transition
The electric grid is intended to last decades, yet few people
realize the entire system must finely balance supply and demand
across timescales as brief as a second. Every watt of electric power
for lighting homes, operating laptops or running air conditioners is
generated at the same time in different locations, mostly by burning
fuels that spin magnets in generators. There is essentially no
storage of electricity on the grid; instead most energy is stored in
fuels – coal, natural gas, nuclear products and water behind dams,
waiting for the command to be converted to electricity in real time.
In recent years, where we get our power has changed dramatically.
The oldest generators are large power plants, with many located in
the eastern part of the U.S. Most recent additions have been smaller
and more spread out – think rooftop solar panels or wind farms. Some
experts have even said that this model of more distributed
generation closer to where power is consumed – along the edge of the
network, rather than central power plants – is the
new norm.
Going forward, we can either build the grid back the same way
we’ve done before or we can invest in new technologies that can
bring the same service but at a
lower cost.
And how could we make it cleaner? Some people think the grid can
run completely on renewable energy sources. Others say the best
way to “decarbonize,” or reduce carbon emissions, for the energy
system as a whole is
widespread electrification of the
industrial and transportation sectors.
But to answer what such transitions would cost, we need to know:
What does the current grid cost? How much is all the concrete,
steel, silicon, etc. that we have already installed in the ground
currently worth? To help inform policymakers and planners grappling
with their vision of the future, I set about to answer that
question.
What makes up the grid?
For this exercise, I’ve limited “the grid” to the following
parts:
- Power plants
- High and low-voltage transmission lines, which transport
power over long distances
- Distribution lines, which bring power directly to buildings
or other end points
- Substations for routing power on the transmission grid
- Substations on the distribution grid
- Transformers that change voltages on the distribution grid
This calculation leaves out additional and necessary components
of the grid, such as the electric wire inside your home, meters at
the electrical panels on homes and buildings and end-use devices
that consume the electricity.
Combing through a variety of public reports and using updated
estimates for new construction and standard approaches for
estimating depreciation, we quantified the value of the nation’s
assets for power generation, transmission and distribution.
The total capacity of these power plants is about 1.15 terawatts.
That’s the generating capacity of about 1,000 nuclear power reactors
(the U.S. currently has about 100). As you can imagine, that would
be costly to replace. For power plants alone, the replacement value
is nearly $2.7 trillion, and the depreciated value, or the rough
current value, is nearly $1 trillion. Overall, the breakdown of the
value is about 56 percent power plant, 9 percent transmission system
and 35 percent distribution system.
What path forward?
If we want to have a cleaner energy future, there are multiple
pathways to get there. However, I hypothesize that the cheapest and
likeliest pathway will be the one that best leverages, not
duplicates, the infrastructure we already have. One of the most
“plug and play” pathways (and what we are seeing today) is a
conversion from coal to gas-fired generation at power plants that
can use existing wires, poles and water infrastructure.
At the other end of the spectrum, a hydrogen economy would
require massive new investments in new kinds of technology, so it
would leverage less of what we currently have. For instance, we’d
need to build places to generate and store hydrogen. On the other
hand, it has the potential to be more resilient and sustainable.
One area that does look promising for infrastructure investment
is upgrading the bulk power transmission network. These upgrades
could allow power to flow between regions of the U.S. and would be
similar to how the interstate highway system drove down business
costs across the country by
greatly reducing
the time it took to transport goods and services across our vast
country.
There are areas of the U.S. where power is produced cheaper and
with
fewer environmental impacts than in other areas. Expanding
transmission lines to areas of the country that have good wind and
solar resources can bring very low-cost power to users. The problem
is that these areas are not always where the people are, so to bring
this power to the people, we need a strong transmission network.
Distribution networks – the part of the grid that delivers power
directly to buildings – can also integrate more solar without much
added cost to the grid’s operation. But once solar capacity reaches
a certain percentage of power demand on the local network, which
varies by location, then
more costs are incurred.
In the end, consumers, or taxpayers, always end up paying for
these upgrade projects, but the benefits can outweigh costs. Texas’
expansion of its electric grid has allowed for
much
more wind power to reach load centers which, along with a drop
in natural gas prices, has driven down the wholesale electricity
market costs. Those lower costs are then
passed along to ratepayers.
There is no path that does not require investment – even just
maintaining what we have will cost hundreds of billions, if not
trillions, of dollars over the next decade. The bigger question is:
As we continue to replace and rebuild this amazing grid, what
technologies should we focus on?