By Nathan Scuderi, MBA ’25
This article was written in response to a seminar given by Brian Janous, Former VP of Energy, Microsoft, in an EDGE Seminar at Duke University’s Fuqua School of Business in Fall 2023. This article voices one student’s perspective and does not necessarily represent the views of either Duke University or the seminar speaker.
In early September, former Vice President, Energy at Microsoft Brian Janous reflected on his time building Microsoft’s sustainability efforts over the past decade in an insightful presentation to our EDGE seminar class. His excitement about the pace of energy transition and corporate adoption of governance around sustainability was palpable. However, he acknowledged that the U.S. may not yet be prepared for the “electrification of everything.” As an MBA student seeking to expand my own sustainability toolkit to prepare for a greener future, I delved in to find out why that is.
In 2022, U.S. electricity consumption recorded a record 4.05 trillion kWh, the highest amount on record and 14 times more than the electricity consumption in 1950.1 This may not feel like a revelation to many Americans, given the pervasiveness of consumer products powered by electricity like electric vehicles, electric ranges, and central air conditioning systems. However, they may be surprised to learn that much of the domestic U.S. electrical infrastructure is antiquated, especially when viewed from the lens of seemingly unending pace of technological advancements today.
Upgrading infrastructure faces delays and high costs
The domestic transmission system that carries high voltage electricity from power generation sources over large geographic regions and the distribution systems that link end consumers of low voltage electricity to the transmission system dates back to the 1950s.2 This aging infrastructure makes it challenging for new sources of renewable power to tie into the system. Indeed, a 2023 Berkeley Lab study concluded that the connection queue of solar and wind projects waiting to integrate into the grid totals incremental capacity of 1,250 GW, equal to the current capacity of U.S. power plants.3 Indeed, queues for wind and solar power generation facilities to connect with the U.S. transmission system are backlogged, taking years to move from application to final agreements with power authorities.
Delays aren’t the only interconnection issue. North Carolina-based Pine Gate Renewables witnessed a budgeted $5 million connection fee (which helps fund necessary infrastructure to bring power from a new generating source to the transmission system) balloon to over $30 million, making the firm’s proposed solar project in the state economically unfeasible.4 What good are investments in promising new, clean sources of electricity if the projects ultimately can’t connect to end users?
Government can help speed interconnection
One potential solution to resolving the interconnection backlog and getting more green energy capacity flowing is through government action. Given that the electric system is highly regulated at the federal, state, and regional levels, the government has significant embedded capabilities to implement reforms necessary to shorten the duration between interconnection application to in-service date. In fact, federal regulators have already started introducing reforms aimed at improving process timelines. In July, Federal Energy Regulatory Commission (FERC), an agency within the Department of Energy vested with powers to regulate interstate electrical, gas, and oil activity, implemented the following changes: (i) fully permitted projects with requisite land rights to be prioritized over speculative projects, (ii) per diem financial penalties for projects that miss milestones to incentivize developers themselves to move through the queue as fast as possible, and (iii) permit feasibility studies to be performed in clusters rather than on a one-on-one basis.5 6
It’s encouraging that government action is occurring. Physical upgrades to the aging grid infrastructure are unavoidable. However, these upgrades are costly. The U.S. Department of Energy estimates that the U.S. will need to expand the transmission system by 60% by 2030.7 This is an aspirational target given the high capital and land use requirements to build new transmissions lines—particularly when one considers that green energy projects are typically located in less populated areas farther away from existing infrastructure.
While not directly pertaining to new transmission development, California’s PG&E $7 billion federal loan request earlier this year is illustrative of how capital intensive these projects are; the Oakland-based utility company requested the funds to help cover costs of burying transmission lines in forest fire-prone areas and fund grid upgrades to the firm’s existing transmission system footprint.8 While it remains to be seen if the loan request will ultimately be approved, bold federal action and expansive federal funding are emerging as the tip of the spear in advancing critically important changes to the domestic U.S. electric system.
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Footnotes:
- U.S. Energy Information Administration. “Electricity explained”. April 2023. ↩︎
- The Wall Street Journal. “America’s Power Grid Is Increasingly Unreliable”. February 2022. ↩︎
- Berkeley Lab. “Grid connection requests grow by 40% in 2022 as clean energy surges, despite backlogs and uncertainty”. April 2023. ↩︎
- CNBC. “Wind and solar power generators wait in yearslong lines to put clean electricity on the grid, then face huge interconnection fees they can’t afford”. April 2023. ↩︎
- Federal Register. “Federal Energy Regulatory Commission”. n.d. ↩︎
- Reuters. “US moves to link more wind and solar projects to electric grid”. July 2023. ↩︎
- U.S. Department of Energy. “Queued Up… But in Need of Transmission”. April 2022. ↩︎
- The Wall Street Journal. “PG&E Seeks Roughly $7 Billion Federal Loan to Reduce California Wildfire Risk”. June 2023. ↩︎
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