Utilities cut way back on infrastructure investments in the 1990s, delaying tens of billions of dollars in upgrades.
Those investments started to pick up again after the 2009 stimulus package and Superstorm Sandy in 2012. The more recent surge in utility-scale renewables, plus a range of distributed resources like batteries, rooftop solar, EVs and microgrids, has also spurred new grid modernization activity.
The latest energy industry update from energy consulting firm ScottMadden looks at new infrastructure spending as a result of the changing grid mix.
“What we’re seeing is a grid that’s being asked to do very different things,” said Cristin Lyons, partner and grid transformation practice leader at ScottMadden. “Candidly, it was not nearly as complex as it’s evolving to be.”
One instance where DERs are challenging the grid is transmission infrastructure.
“We have typically had a source-to-sink model: central station generation, big wires, to little wires, to the home. What that enabled was a pretty straightforward transmission process,” said Lyons. “As we see more and more resources show up on the distribution side of the equation, transmission owners and operators now need visibility into how these resources are aggregating into wholesale markets.”
From 2011 to 2016, spending on distribution infrastructure grew by 8.6 percent and spending on transmission infrastructure grew by 16 percent.
Prior projections from the Edison Electric Institute predicted transmission investment would peak in the 2013-2015 time frame. But it hasn't slowed. The peak could come in 2018.
Regulatory Research Associates expects spending on transmission and distribution to account for 45 percent of expenditures from utilities through 2018. “Every couple of years, we think it’s going to end a few years out,” said Lyons. “Investment in this sector has been very robust. And drivers remain.”
Often, utility-scale wind and solar are simply the cheapest options. And many utilities are planning for those resources to dominate their procurement as more coal and nuclear plants retire.
It's not just the grid that will change. Wind and solar will also need to evolve.
For example, utility-scale solar will need to become more dynamic through the use of smart inverters and, eventually, batteries -- both to provide grid services and improve the economics.
First Solar and NREL recently proved that large PV systems can perform the same grid-balancing tasks as natural gas plants through the use of smart inverters and new modeling techniques.
ScottMadden believes that utility-scale solar will move from “traditional” to “controllable” and, eventually, to "smart." A controllable PV system means providing grid services without the addition of storage. As solar-plus-storage combinations become more affordable -- along with better trackers, software and price signals -- attaining truly "smart" solar will become a reality.
“Looking more long-term, when we move to smart utility-scale solar, the key milestone there is probably when one of these resources competes and outbids a natural gas peaker plant,” said Paul Quinlan, cleantech manager at ScottMadden. “And more importantly, when it comes on-line and performs as expected.”
In the case of the proposed Puente Plant in California, analysis from the state's Independent System Operator showed storage is cost-competitive with a controversial peaking plant. The plant’s developer, NRG Energy, has now paused its application to review options.
However, as some technologies flourish, others suffer.
The ScottMadden report also outlined the "rough patch" in the nuclear industry. While some environmental groups are cheering the decline of nuclear, the report authors warn about the impact on renewables.
According to the report: “Loss of [retired or at-risk] nuclear generation, if it occurred, would wipe out more than half the gain in non-emitting generation from wind and solar.”
Georgia Power is holding out hope that its Vogtle project will finally get completed. Small modular reactors, meanwhile, are still a dream for the industry.
But the continued glut of cheap natural gas -- with demand expected to rise at a rate of 4 to 5 percent per year -- will continue to make it difficult for nuclear to compete, even if renewables are left out of the equation.
The market shift is only accelerating. And it is heavily influencing the way utilities spend money on infrastructure. “The grid is going to become capable of doing things it couldn’t do before,” said Lyons.