As the Energy Ecosystem Evolves, U.S. Electric Sector Navigates Headwinds, Opportunities

As the U.S. energy ecosystem continues evolving, megatrends compounding challenges of an already complex electric sector are stoking an urgent call for changes.

As more and more companies and communities pursue clean energy and transportation solutions to serve their near-term decarbonization goals, the need is growing for practical, tactical plans with intensifying scope and ambitions. Renewable energy – largely from the sun, wind and hydro – continues to proliferate, pressing electric utilities to accommodate it onto an aging grid. Electric vehicle (EV) adoption is accelerating, raising legitimate questions about whether this aging grid system will meet the rising demand. And cyber threats that exploit vulnerabilities aren’t abating.

What does it all mean? In the interest of electric system resilience and reliability, it may be merely the fact that the industry is at an inflection point with an infrastructure in need of upgrades if not reinvention.

In many ways, grid modernization – “grid mod,” in industry parlance – is an imperative. It ensures the nation’s sprawling electrical transmission and distribution network will be up to the task of handling ever-increasing renewable energy, the volatility of floods, droughts and wildfires fueled by climate change, and the EV segment’s growing appetite for electrons, among other things.

Black & Veatch’s 2023 Electric Report encapsulates this sector’s world of headwinds and opportunities, drawing upon expert analyses of survey results of more than 650 U.S. energy industry stakeholders to detail the complexities.

In many ways, modernizing is a matter of money, with utilities searching out the most cost-effective ways to decarbonize their energy portfolios. Federal legislation signed into law in recent years is meant to ease the burden, devoting a generational influx of billions of dollars in available funding and tax credits to upgrade the grid. Only now is that infusion for such things as climate mitigation, clean energy projects and other zero-emissions technologies beginning to flow.

As survey responses make clear, modernizing the grid – whether in small or sweeping ways – gets more doable when many things align. And for now, issues with things such as supply chains, workforce availability and regulatory lags simply aren’t cooperating.

Renewables and the Grid

As the industry knows, renewable energy is on a march.

In March, the federal government’s chief keeper of energy stats – the U.S. Energy Information Administration – reported that U.S. electricity from renewable sources, largely from the wind, sun and hydro, surpassed coal-fired generation for the first time.

Renewables again outranked nuclear power generation in 2022 for the second consecutive year as energy from coal continued its slide, from 23 percent in 2021 to 20 percent last year as more coal-fired power plants were retired and those that remained got less use. By 2050, the EIA forecasts solar and wind power will account for 40 to 69 percent of U.S. electricity generation.

Fanning the growth of renewable energy in recent years has been the sizable drop in the cost of producing wind and solar power – including the sharp decline in the price of solar photovoltaic cells – as well as customer decarbonization goals. That growth is despite the downside that solar and wind power is prone to intermittency – the lack of energy produced when the sun isn’t shining, and the wind isn’t blowing – and must be paired with batteries or other energy storage types.

Yet it’s of little surprise that the survey shows an industry grappling with the growing wave of green energy.

One-third of respondents cited integrating renewable energy and distributed energy resources onto the grid as their enterprise’s foremost challenge, edging aging infrastructure by 6 percentage points. It’s an especially notable outcome, given that aging infrastructure had ruled the roost of the list of top industry headaches for years before renewable integration suddenly tied it last year.

Resilience and Reliability: The Need for Grid Mod

The U.S. electric grid is an engineering marvel, with thousands of electricity-generating units and its web of hundreds of thousands of miles of transmission and distribution lines, powering millions of homes and businesses.

This breadth involves complexity, which invites questions about the aging grid’s resilience and reliability – wonders amplified by rising concerns about outage-causing extreme climate events, greater load demands for a rapidly expanding EV segment, and the proliferation of such things as energy-intensive cloud computing and data centers. Of course, that’s in addition to questions about the grid’s ability to accommodate more renewables in a decarbonizing world.

All of it has fueled a growing sense of urgency to modernize the grid, and the U.S. electric sector hears it. The issue now is choosing the path forward.

When it comes to the industry’s biggest concerns for developing the grid in the short term – three to five years – survey respondents cited as their largest concern (47 percent) the issue of their generation mix, with fewer traditional base load units and more utility-scale renewable sources. That narrowly edged the frustrations of procuring what’s needed for much-needed grid modernization in a bottlenecked supply chain; in a separate question, seven in 10 respondents said their organization’s resilience and reliability projects are impacted by the availability of components for transmission and distribution improvements.

Hydrogen: Alluring, Evolving

Given the undeniable migration by U.S. electric utilities to cleaner sources of power, the role of hydrogen in the equation is drawing mixed perspectives as the technology evolves, with survey respondents still curious about hydrogen’s technical and economic viability.

There’s little question that hydrogen is advantageous in efforts to lower carbon footprints through greener energy portfolios. Respondents who were asked what trends most interest them, long-duration energy storage in the form of hydrogen placed third (41 percent), behind small modular reactors (SMRs) at 50 percent, and around-the-clock dispatchable power from renewable resources and battery energy storage.

When asked how they view hydrogen and their electrification strategy, roughly four in 10 respondents said they are researching hydrogen, while more than one-quarter (27 percent) view hydrogen and their electrification road map as complementary. In a separate question, 44 percent see hydrogen as very or somewhat viable as a long-duration energy storage option, perhaps reflecting cautious optimism about the technology even as some utilities are beginning to realize just how expensive and long-horizon – mid-2030s or later – those projects might be before coming online.

Some ambitious projects are looking for solutions. Last year, Mitsubishi Power Americas and Magnum Development — co-developers of what will be among the world’s largest industrial “green” hydrogen production and storage facilities — announced its selection of Black & Veatch for engineering, procurement, and construction (EPC) services for the Advanced Clean Energy Storage (ACES) Delta Hydrogen Hub in Delta, Utah. That project will be next to the Intermountain Power Agency’s IPP Renewed Project and support an 840-megwatt, hydrogen-capable gas turbine combined cycle power plant expected to be powered entirely by hydrogen by 2045 after using a blend of hydrogen and natural gas.

In the Canadian province of Nova Scotia, EverWind Fuels Company announced last December its selection of Black & Veatch to provide front-end engineering design (FEED) services for its green hydrogen and ammonia production and storage facility in Point Tupper, with initial commercial operations planned for 2025. EverWind is a private developer of green hydrogen and ammonia production and storage sites.

As this report makes clear, there is a prevailing need for economical solutions to decarbonize the U.S. power system. These solutions are needed now, regardless of the technology, funding source or infrastructure challenge.