New Grids Now
New Grids Now
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America’s gas and electricity networks, most of which were originally constructed during the nation’s ambitious post-World War II building boom, are extraordinary feats of engineering.¹ These systems have mostly served us well over the last half-century and have done what they were originally intended to do.
But times have changed. It’s time to kill our old network paradigm and create a new one, to better serve the innovation and customer demands, large and small, of the 21st century.
The engineers and builders in the late 1940s and early 1950s could not possibly have foreseen the level of demand being placed on our networks today, driven in large part by evolving consumer behavior and expectations. Similar to other services they receive, consumers want more choice, better reliability, fast and seamless delivery and high-quality power – and they want it all to be more affordable.
Beyond consumer needs, several other factors are driving the need for modernization. America has been on a path to improve energy efficiency since the 1973 oil crisis brought a severe wake-up call, a path we are still on today. Despite these efforts, approximately 57% of the energy consumed across the U.S. is lost each year to heat loss, leaks, and friction, putting us at the bottom of the world’s energy utilization rankings, just as we trail in energy efficiency.
By cutting in half the energy wasted by 2030, we would be able to reinvest $327 billion into the U.S. economy and create as many as 1.3 million new jobs.²
Climate change and extreme weather trends factor in heavily as well. We’ve all seen the kind of damage severe storms can do to our infrastructure. Superstorm Sandy caused 8.5 million outages across the eastern seaboard. And extreme weather looks like it’s here to stay.
A September 2013 report confirmed that extreme weather events fueled by climate change are on the rise.³ A separate study found that between 1980 and 2011, the frequency of weather-related, energy system-threatening events rose by nearly 500% in North America, a faster increase than anywhere else in the world.4
Another reason to act now is the positive state of our natural gas production, which has been increasing at a staggering rate over the last decade.5 This has led to a drop in overall energy prices, which is forecast to continue for the next few years.6 In fact, new technologies may help the U.S. become a net exporter of natural gas in the coming decade.
This presents us with a historic opportunity for economic growth, energy security and independence, and reduced greenhouse gas emissions.
We hear about the promise of transforming America’s energy infrastructure every day. But if we’re truly going to capitalize on that promise, we need to reverse the trend of underinvestment in these networks over the past 20 years.7 Greater overall resiliency, reliability and innovation, after all, come with a sizeable price tag.
In fact, it’s estimated that our energy infrastructure needs $2.5 trillion in new investment by 2035.8 If we don’t meet this challenge, the growing limitations of our current system threaten to derail progress toward our long-term energy sustainability and security goals.
Doing our part
The U.S. needs to set new expectations for its electric and gas utilities. These companies are the stewards of today’s energy delivery infrastructure, and we have an obligation to work with our partners and stakeholders to drive greater investment and innovation in our network.
Companies such as National Grid have a significant opportunity to advance America’s economic and environmental health, and we can do this by taking several steps:
- Driving economic growth:As we invest in our networks, we should do so in ways that enhance state and local economies and encourage innovation, while simultaneously reducing the stress currently being exerted on our environment and public health. As noted, hitting efficiency targets alone will add 1.3 million jobs over the next decade.
- Promoting cleaner energy:
The industry must find new ways to deliver cleaner energy, and more importantly encourage consumers to use energy more efficiently. Done right, we could double energy productivity by 2030.9 We already are making progress on cleaner sources of energy, such as natural gas. The amount of energy generated by natural gas in the U.S. is expected to double between 1990 and 2040, making natural gas the leading fuel for electricity generation (see graph below).
- Advancing innovative technologies:
We also have an opportunity to harness existing technologies to put energy information and usage control in the hands of customers, which would help drive improvements in our consumption behaviors. Additionally, we can and should leverage technology to build smarter, more resilient electric and natural gas networks that can better stand up to the extreme weather that we know is here to stay.
It’s a full agenda, to be sure. But a coordinated, collaborative strategy will bring our 20th century systems into the 21st century – and do it in a cost-efficient manner to boot. This will require a new approach to planning, designing, operating and regulating our infrastructure – a new approach that at National Grid we call “Connect21.”
This effort is essentially a framework that links customer needs and policy goals with technology and market solutions. As the figure below shows, the framework has three primary functions:
Let’s examine these in greater detail.
We need to:
1. Build a resilient backbone for our energy system that can provide reliable, flexible electric and gas service to all customers and integrate clean energy wherever it is located on the grid.
Electricity and natural gas companies have always provided the country’s energy backbone. But it needs to be adapted to a changing climate that is very likely to bring more extreme and frequent weather events. The new and improved 21st century backbone needs to be nimble enough to accommodate the growing demand for both solar and wind-powered energy sources. It also must be designed and operated in a manner that optimizes multiple and varying policy objectives, and does so in the most cost-efficient way possible for all customers.
2. Inform customers about choices available to them to meet their energy needs and educate them on how to manage their use in the most cost-effective way.
Customers’ decisions on how and when energy is used are the most critical factors in improving energy productivity. With this in mind, utilities need to provide them with the right price information, technologies, and tools they need to make smart choices about their energy use. Tech-savvy customers are just beginning to experiment with in-home energy management systems that give them control over their energy use and save them money.
3. Offer customized solutions to customers who want different levels of service.
Personalization has seeped into every aspect of our lives, and we want to help bring customization to energy consumption. As an example, much of the energy used by a glass manufacturer is to heat furnaces to melt raw materials to form glass of a certain quality.10 A utility could work directly with the business customer to provide solution options such as electric boosting systems for the furnaces in order to deliver the desired power quality.
Information is critical to all three of these major functions, and utilities such as National Grid are in the best position to collect, maintain, and protect this information. Within the Connect21 framework, delivering this information to customers in a transparent, easy-to-use manner will become a responsibility second only to actually delivering the energy itself.
Call to action: Near-term priorities
Utilities clearly have a leadership role to play in making this new approach a reality. However, many other pieces need to fall in place for success, and numerous entities need to collaborate and find common ground on a wide range of key challenges.
- Expand public-private partnerships, rooted locally. Utilities cannot deliver this new approach on their own. Policymakers, regulators, technology providers, entrepreneurs, the financial community and states, cities and towns all play integral roles. Policymakers will need to provide a clear long-term vision, support for near-term actions, and a consistent set of policy objectives. Working more closely together, policymakers and utilities will better understand network capabilities and possibilities, the technical ramifications of proposed policies, and the costs and benefits affecting all stakeholders.
- Approach regulation in a new way. While utilities have always been accountable to regulators, this new approach will require a new regulatory model that broadens the mandate of utilities to be more accountable for policy outcomes, such as promoting cleaner energy, advancing innovative technologies, and driving economic growth. Utilities will also need checks and balances, as well as incentives to provide broader investment to deliver energy solutions that are in demand. New performance targets and metrics based on policy goals should be developed, and incentive structures for meeting and exceeding these targets – as well as penalties for missing them – will have to be established.
- Apply a greater focus on innovation. Utilities will also need to be open to new ideas and be more flexible in their solutions. And regulators need to put a solid process in place that incents utilities to embrace innovation and take risks – some of which, everyone should understand and accept, may not work out. Other sources of innovation should include manufacturers, technology providers, aggregators, automation and control providers, and local heating, plumbing and roofing contractors. Grassroots efforts are also crucial to this effort. In the aftermath of Superstorm Sandy in 2012, for example, many cities and towns identified the need for more resilient, mission-critical facilities closer to home, and some have begun to explore a partnership to develop local micro-grids.11
- Drive new, creative approaches to financing. Innovative approaches to financing outside of utilities will be essential as we seek to provide customers with new choices, and as market participants offer new products and services. For example, a market for energy efficiency-related loans and state and local programs that partner with private sector leaders will be necessary for success.
Bringing Connect21 to life
Anything worth having is worth working hard for – and bringing America’s energy network into the 21st century not only qualifies, it’s very doable. We believe our Connect21 vision advances America’s natural gas and electricity infrastructure beyond its 20thcentury limitations to create a more customer-centric, resilient, agile, efficient, and environmentally-sound energy network.
By embracing policy and technological innovation, this initiative will drive improved energy productivity, create jobs and strengthen local economies. That’s worth working for, and we in America’s energy community stand ready to roll up our sleeves.
2 “Energy 2030,” Alliance Commission on National Energy Efficiency Policy.
3 Intergovernmental Panel on Climate Change, September 2013.
4 Severe Weather in North America, Munich Re Group, October 2012.
5 “Key Trends Impacting Natural Gas Prices in the U.S.,” Forbes, January 2, 2014.
8 Source: International Energy Agency, World Energy Outlook 2012 (in 2012 dollars).
9 Energy productivity is the level of economic output divided by the total energy used to achieve it, and can be expressed as dollars of Gross Domestic Product (GDP) per unit of energy consumed (in British thermal units, or BTUs); Energy 2030, Alliance to Save Energy, February 7, 2013.