Perfect Storm for the Grid: Convergence of Energy Growth and Policy

There are numerous articles and studies warning of the fragile nature of America’s electric grid. The vulnerabilities will only become more apparent as we continue to undergo a fundamental shift in how energy is generated and how it is consumed by artificial intelligence (AI) and other high-demand technologies.

As outlined in an article in Joule in October 2023, if current trends continue, AI alone will consume more energy annually than many small countries. In addition to AI, the push to increase the use of electric vehicles (EVs), while at the same time encouraging or even mandating renewable energy generation, is furthering a fundamental and unsupportable strain on the U.S. electric grid. This pressure must be relieved by policies that provide flexibility in the shift to renewable sources and remove barriers to upgrading transmission infrastructure.

Grid Currently Ill-Equipped to Handle Growth

The electrical grid—the millions of miles of transmission and distribution lines that ensure electricity is delivered to our homes and businesses when we demand it—is not equipped to handle a shift from concentrated power plant generation to distributed renewable energy generation. Assuming moderate load growth and high clean energy growth, the U.S. Department of Energy’s (DOE’s) “National Transmission Needs Study” estimates that 54,500 GW-miles of new transmission will be needed nationwide by 2035, a 64% increase from today’s transmission system.

COMMENTARY

However, assessments based on moderate load growth are likely underestimating future energy consumption. Some data indicates time is not on our side, and more substantial changes need to be made sooner. For example, if AI use continues growing exponentially, Morgan Stanley estimates its demand can equal that of the entire country of Spain by 2027.

Additionally, estimates suggest that EVs could reach 40% to 50% of the total passenger car sales in the U.S. by 2030, and that if all cars were EVs, the U.S. would consume 20% to 50% more electricity. While policy makers are often pointing a guilty finger at utilities for the environmental impact of generating electricity, they are simultaneously encouraging mass adoption of EVs and other electricity-reliant technologies that significantly grow energy demand. Utilities must increase electricity generation to support this technological growth, despite policies constraining the source of that generation to renewables, putting even more pressure on the electric grid.

Problems Go Beyond Adding Assets

Why don’t we simply invest what needs to be invested to make the necessary changes to the electric grid? The short answer—no matter how much money is invested, it won’t be enough. To be fair, the DOE plans to invest billions of dollars in modernizing and expanding the grid. Funding is hugely important, but it will not solve the problem, which lies in the significant roadblocks to licensing new transmission lines. We currently have processes in place that require the cooperation, if not agreement, of all stakeholders—electric utility; federal, state, and local regulators; landowners; and public interest groups—in a situation where their interests diverge greatly.

While all projects and jurisdictions differ, new transmission line projects, for example, can take 10 years or more to put into service. Utilities must consider potential and existing renewable energy goals and mandates when planning electrical generation projects. They also must evaluate the timing of those projects relative to the ability to connect to the grid.

Once planned, licensing hurdles can come from all angles. Local governments often require land use, environmental, and/or right-of-way approvals. State governments may require environmental approvals as well as a state body that considers the need and cost-recovery for the project.

Projects that cross jurisdictional lines often face conflicting goals and requirements. Federal agencies likewise often review environmental impacts through the National Environmental Policy Act, better known as NEPA, or otherwise. Unfortunately, by the time a generation or transmission project is approved, the regulations influencing the planning of the project—for example, relative to renewable energy goals or clean air regulations that are currently in flux— often change.

Improving the Situation

Licensing timeframes can sometimes be shortened through careful evaluation of potential impacts to the environment, particularly wetlands and listed species; the amount and type of third-party property ownership affected; and impacts to disadvantaged communities. Absent removal of barriers to licensing new transmission infrastructure, however, no amount of due diligence will overcome the pressures of converting the electric generation system too quickly away from fossil fuels while new technologies increase consumption.

Given the substantial current and future demands on our energy generation and transmission systems, policies must be put into place that provide flexibility in the transition to renewable generation, shorten licensing timeframes, and encourage jurisdictional cooperation. Failure to do so will result in power outages in some parts of the U.S. Without all the key players working for a solution to this problem, it will likely be electric utilities that are left to carry the blame.

—Brooke Humphrey is a partner at Florida-based Berger Singerman and manager of the firm’s Government and Regulatory Team.