Transition Uncertainties - ORIGINAL CONTENT

The current US Administration has set a goal to achieve Net Zero by 2050. However, this goal relies solely on Executive Branch initiatives rather than being established in law. Therefore, the goal is subject to adjustment or abandonment with a change of Administration or even a change of Administration focus. This situation creates major uncertainties for those who must invest in and manage the transition and its multi-trillion-dollar costs.

There is no plan in place for the transition, largely because many of the elements essential to the transition do not currently exist and their future availability is uncertain. While government can fund research and development focused on these elements, it cannot assure success nor schedule the timing of commercial availability. The key elements currently unavailable for the electric sector include long-duration storage and Dispatchable Emission-Free Resources (DEFRs). The key elements currently unavailable for the direct fossil fuel end use transition include numerous industrial processes, such as steelmaking and cement production.

The electric industry is faced with a potential tripling of demand and consumption resulting from the transition to “all-electric everything” in existing markets. It is also faced with rapid increases in demand resulting from the growth of data centers and artificial intelligence facilities, some of which are projected to impose approximately one gigawatt of demand on a continuous basis.

The absence of a plan leaves the pace of the “all-electric everything” transition uncertain, as does the growing resistance to key elements of that transition, including renewable generation installations, electric vehicles and heat pumps. Robert Bryce has documented more than 700 renewable installations which have been blocked by local resistance efforts. This issue has caused states including Illinois, New York, Connecticut, Rhode Island and California to take siting decisions out of the hands of local governments. Consumers are also resisting purchase of electric vehicles and the replacement of natural gas, propane and oil furnaces, boilers and water heaters with electric heat pumps.

Renewable generation facilities cannot be sited unless they have access to the grid, but grid operators cannot afford to extend the grid to the locations of facilities which might not be built. Data centers and AI centers require access to large quantities of reliable power, but many grids do not currently have the capacity to support their demands and are unwilling to add generating capacity without assurance that the large data centers and AI centers will actually be built. Both of these situations have contributed to reconsideration of “take or pay” contacts with grid operators prior to grid and generation expansion. They have also caused grid operators to consider ownership of renewable generation and data center developers to consider ownership of dedicated generation resources.

Generation capacity expansions must lead load growth to assure grid reliability. However, FERC, NERC and many grid operators are already concerned about declining capacity reserve margins, closures of coal and natural gas generators and the long lead times necessary to add generation and transmission capacity. There is also the growing realization that current electricity storage capacity is inadequate to support the current intermittent renewable generation fleet as conventional generation assets are retired; and, that the cost of adding the necessary storage capacity is enormous.

These uncertainties add to the cost and complexity of funding the required expansion of the electric grid.