Smart Grids: Energizing the Future of Clean Electricity
Assignment #4: Climate Solutions Research. Written in collaboration with Vaibhav Gupta and William Hodgess.Executive Summary
Moving to clean electricity is indispensable for IEA’s Pathway to Net Zero by 2050, and transitioning to Smart Grids is an important piece of it.
Increasing adoption of Smart Grids faces two sets of challenges: First, Political roadblocks from fossil fuel lobbying, the scale of public investment required and NIMBY protests. Second, large Technological advancements that are required in innovation, standardization and security.
To tackle the Political roadblocks, we propose placing limits on financial lobbying, and popular educational campaigns. To accelerate the technological advancements, we propose continued increase in public-private investments.
Various public and private organizations are already solving different parts of the Smart Grid problem, from knowledge and R&D centers, to software companies that smartly connect electricity consumers with providers.
The Importance of Clean Electricity
Electricity is the core of improving the energy system, as 31.8% of global GHG emissions come from the electricity sector. Making it cleaner is an indispensable part of the International Energy Agency’s Pathway to Net Zero by 2050. As per the COP 28 summary, by 2030, the share of electricity over total final energy consumption needs to reach 30% from the current 20%. Moving to clean electricity comprises of two set of initiatives:
By 2040, electricity generation needs to reach net zero emissions globally, and renewables should be supplying ~50% total energy consumption. By 2050, renewables should be supplying ~90% of total energy consumption (Solar and Wind should be 70%).
Improving the energy efficiency of grids has been identified as a large potential source of emissions reduction for the power sector. According to IEA, total energy losses across global grid infrastructure led to the emission of around 1 gigaton of carbon dioxide in 2018.
The increasing public and private investments in electricity grids demonstrate the importance of making it cleaner. As per the IEA, investment in electricity grids increased around 8% in 2022. The Biden-Harris government is administering a $10.5 billion Grid Resilience and Innovation Partnerships (GRIP) Program to enhance grid flexibility, including $3 billion of smart grid grants. The market size for smart grid technology in 2021 was $36.9 billion and projected to hit $55.9 billion by 2026. We focus the rest of this document on moving to smart grids.
The Challenges of Smart Grid Adoption in the United States
The urgency of combating climate change has led us to ask a critical question: can we reimagine our energy landscape to become more sustainable, resilient, and equitable? The answer lies, in part, in smart grids. Smart grids are an electrical power distribution system that uses digital technologies to monitor and manage the flow of electricity and can revolutionize how the US generates, distributes, and consumes electricity.
However, despite the undeniable benefits of smart grid technology, widespread adoption in the US faces significant political and technological obstacles.
Untangling the Political Roadblocks to Adoption
The fossil fuel industry is a formidable force that is facing an existential threat from the rise of clean energy. Its influence can be seen most recently at COP28, the United Nations Climate Change Conference held in Dubai. There were a record-breaking 2,456 individuals associated with the fossil fuel industry who were granted access to the event. This number represents a significant increase from previous COP conferences.
Locally, the US still relies heavily on fossil fuels (See Appendix). In 2022 alone, the fossil fuel industry spent approximately $124.4 million lobbying the US government. By weakening environmental regulations, they keep the country reliant on these sources and slow the adoption of smart grid and other renewable technology.
Further compounding the challenge is the sheer scale of investment required to modernize aging infrastructure. The American Society of Civil Engineers estimates that the US needs to invest over $1 trillion in its electricity grid by 2050 to meet future demand and ensure resilience. This funding gap is exacerbated by short-term political cycles that prioritize immediate gains over long-term infrastructure projects, leaving clean energy initiatives vulnerable to budget cuts and political wrangling.
The integration of a modernized, smart grid also faces a localized, but widespread adversary: NIMBYism. NIMBY (Not In My Backyard) protests against power lines, substations, and other grid components, have led to costly delays and even project abandonment. Take the case of migrating birds - a seemingly noble cause derailed a critical transmission line, delaying renewable integration and inflating costs through legal battles and redesigns. The financial burdens of NIMBYism don't stop there; stalled projects translate to higher electricity bills for everyone. NIMBYism's resistance creates a tangled grid, one that threatens to slow the nation's progress toward a sustainable energy future.
Scaling the Technological Wall: Innovation, Standardization, and Security
While the political landscape surrounding smart grids may ebb and flow, the technological challenges they face are consistent. Switching from traditional to smart grids requires advancement across key areas: sensor technology and battery storage to reliable communication networks and cybersecurity solutions. While renewable energy is key, its inherent variability has long been an obstacle to grid stability. Investments in scalable energy storage and rapid innovation in battery technology are crucial to a clean energy future.
A 2023 report by the International Energy Agency forecasts a tenfold increase in global battery storage capacity by 2030, reaching an astounding 3.5 terawatt-hours. The cost is predicted to go down as well. The National Renewable Energy Laboratory's 2023 study suggests that the cost of 4-hour battery storage could plummet by 47% by 2030. Developments in sodium-ion battery technology can also make smart grid deployment more achievable.
Data analytics and sophisticated algorithms are the grid's neural network, enabling it to anticipate energy demand, optimize energy flow, and navigate disruptions in real-time. McKinsey & Company's 2023 study estimates that smart grid analytics could unlock a staggering $1.3 trillion in global energy savings by 2035.
In the interconnected world of smart grids, cybersecurity is paramount. Data encryption and advanced intrusion detection systems guard against cyberattacks and ensure the unwavering reliability of the grid.
While smart grids offer options for efficiency and resilience, their environmental footprint warrants scrutiny. The materials that enable these advancements often carry a hidden environmental cost. Responsible management, encompassing life cycle assessment, material recovery strategies, and recycling infrastructure, is essential for a future powered by smart grids.
Solutions
Political 1. Cap Campaign Financing from Fossil Fuel Lobbyists.
One study in 2014 suggests that special interest lobbying enhanced the power of elite groups and was a factor shifting the nation's political structure toward an oligarchy in which average citizens have "little or no independent influence". Lobbying is present at every level of US government and provides the fossil fuel industry significant influence on the US’ energy systems through attacking and blocking progress on the clean energy transition.
Following the Supreme Court's 2014 decision in McCutcheon v. FEC, there is no longer an aggregate limit on how much an individual can give in total to all candidates, PACs and party committees combined. Wall Street spent a record $2 billion trying to influence the 2016 United States presidential election, $900m of which was from the Koch Brothers - the US power center for fossil fuels.
Through reintroducing a reasonable limit aimed at disempowering any special interests (including fossil fuels) during state and federal election cycles, this will ‘level the playing field’, giving more of a voice to the people and returning the process to one of democracy vs. oligarchy.
Measuring Impact: Most payments can be tracked, therefore a simple overview of money donated by individuals, companies and lobbyists attached to the fossil fuel industry should illustrate a marked decline. The impact of this should be measured in progress made through clean energy projects being green lit.
Political 2. Bipartisan Clean-Energy Education Campaigns
America as a country feels more divided now than ever and every message from any arm of government is subject to partisan attack, regardless of scientific fact. Unfortunately this means the age of the public service announcement is dead.
If there is one thing that still transcends political divide in the US, it is culture. Therefore an educational campaign on the importance of clean energy and smart grids led by sports and music stars will engage a mass audience and change the tone around the energy debate.
Measuring Impact: Changing attitudes towards clean energy can be measured through surveys before and after the campaign runs. The main metric will of course be how many more clean energy projects go ahead.
Technical 1. Further Government Investment In Clean Energy
The Inflationary Reduction Act allocates an estimated $369 billion to grant and loan programs, along with other incentives, intended to drive clean energy and climate action to save families money on their energy bills.
Provisions include $100 billion for electric vehicles, $65 billion for clean energy manufacturing, and $50 billion for energy efficiency. These funding provisions are intended to expedite the deployment of clean energy technologies, promote the adoption of clean vehicles, facilitate the development of clean buildings, and bolster clean manufacturing.
Because it has already been said that if a Republican candidate wins in 2024, they will dismantle the IRA, it’s crucial that a roadmap is created for further investments and this is protected by law.
Measuring Impact: Straightforward to track the amount of government investments made over the next ten year period. Success should also be measured by the uptake of the tax incentives to families.
Technical 2. Incentivize private investment
In addition to the government investment above, which will inevitably make private investment more attractive, we should consider other financial mechanisms to promote private firms joining the investment race.
For example…
Subsidies & Special Funds: to help lower the initial CapEx investments for large scale projects.
Tax Incentives: Tax breaks to reward companies who take the path that best supports the clean energy transition.
Baked into Company Sustainability KPIs: Clear language and guidance to companies about how they should incorporate the transition into their sustainability strategy and goals.
This should be a focus given the recent agreement from some 118 governments (including the US) at COP28 in which they pledged to triple the world's renewable energy capacity by 2030.
Measuring Impact: Straightforward to track the amount of provate investments made over the next ten year period. Success should also be measured by the uptake of the tax incentives to businesses.
Companies Shaping the Future of Smart Grids
Smartgrid, a subsidiary of the US Department of Energy, is a comprehensive online hub for information on federal smart grid initiatives. It offers resources like current news, research, funding opportunities, government programs, and a detailed library of reports and case studies. As an educational platform, it enhances public understanding of smart grids through easy-to-understand explanations, modules, and content for varied audiences including consumers, businesses, and policymakers. Additionally, SmartGrid.gov supports research and development, promotes collaboration for standardizing data exchange, and facilitates policy-informing dialogue. This platform continues to advance the country’s shift to a more efficient, reliable, and sustainable electricity grid.
It has a software platform, “Mycor,” that connects with a building’s Distributed Energy Resources (DERs) (e.g. smart thermostats, HVAC systems, EV charging, rooftop solar, battery storage, etc.) to optimize for energy efficiency and cost. Because it knows the real-time electricity needs of a commercial building, the company is able to source the cheapest and cleanest energy from wholesalers.
Leap is a software platform that connects DERs to wholesale energy markets, making it easy for smart energy technology owners and operators to earn revenue by reducing or shifting their electricity consumption when the grid is strained. It enables smart devices to respond to market pricing signals representing the real-time needs of the electric grid, and get paid for it. By aggregating the flexible capacity across many different energy devices, Leap and its partners can provide meaningful support to the grid and empower end customers to become active participants in their energy systems.
WeaveGrid connects utilities, OEMs, and EV drivers in the collective journey to electrify transportation and enable rapid decarbonization. By using machine learning, optimization, and predictive analytics, the WeaveGrid software solution solves several EV-grid integration challenges for utilities in a systems-oriented manner.
Appendix
Citations
Articles
Kluger, J. (2023, December). There Are More Fossil Fuel Lobbyists Than Ever at COP28 | TIME. Time Magazine
Knutson, J. (2023, July). Why the high price of modernizing the U.S. power grid is worth it. Axios.
Sayki, I., & Cloutier, J. (2023, February). Oil and gas industry spent $124.4 million on federal lobbying amid record profits in 2022. OpenSecrets.
Supply Chain Strategy. (2023, February). Sodium-ion vs Lithium-ion Battery: Which is a Better Alternative?.
Reports
Cole, Wesley and Akash Karmakar. 2023. Cost Projections for Utility-Scale Battery Storage: 2023 Update. Golden, CO: National Renewable Energy Laboratory. NREL/TP-6A40-85332.
Oumansour, C. (2020, April). Modernizing aging transmission. Marsh McLennan.
McKinsey & Company. (2023, October). Global Energy Perspective 2023.
Video
Chu, A. (2023, November). US transmission lines prove problematic. FT Energy Source - FT Channels