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After Texas Crisis, Biden’s Climate Plan Hangs On Fragile Power Grid

Preventing the next energy nightmare and curbing America’s carbon emissions will require spending billions to remake the nation’s grids. After Texas Crisis, Biden’s Climate Plan Hangs On Fragile Power Grid

The millions of people who struggled to keep warm in Texas, with blackouts crippling life inside a dominant energy hub, have laid bare the desperate state of U.S. electricity grids. To fix nationwide vulnerabilities, President Joe Biden will have to completely reimagine the American way of producing and transmitting electricity.

Biden wants to overhaul the nation’s grids so they derive all electricity from carbon-free sources by 2035—a major step toward zeroing out net emissions of greenhouse gases by mid-century. Realizing that goal will require building billions of dollars worth of new transmission lines, a challenge that might prove just as difficult as getting his climate agenda through Congress.

The existing network just isn’t sufficient to achieve the scale of wind and solar power that Biden needs, says Jesse Jenkins, an assistant professor at Princeton University. Getting to a fully green grid “would require a new nation-building mode like we haven’t seen since probably the post-war period, when we built the highways and did rural electrification.”

He estimates that the U.S. needs to expand its transmission grid by as much as 60% for wind and solar to make up half of U.S. electricity capacity by 2030.

Switching to renewables and electrifying vehicles will require rethinking many of the assumptions that underpin the existing grid system. For much of its industrial life, the U.S. relied on power plants in or near the communities they served.

If more power was needed, monopolistic utilities were ready to add it by burning more coal or natural gas. A clean grid will probably be more decentralized, powered in part by smaller renewables facilities including rooftop solar as well as batteries. It will also have to be smarter and more flexible.

While Texas built new transmission lines that support renewable energy, its continued reliance on fossil fuels failed the state this month. The cold snap triggered shutdowns at some plants fired by coal and gas that weren’t designed to withstand such extreme temperatures.

Some wind turbines also stopped spinning. The state’s grid is largely isolated from the rest of the U.S., in part for political reasons, and operators unable to call on neighbors for help were forced to implement blackouts.

Biden’s push for more resilient grids equipped to handle clean energy could help in extreme weather, though choosing to rely heavily on the intermittent power produced by solar and wind farms would bring its own complications.

Some of the most robust solar and wind resources are trapped in corners of the desert or the Plains, or located offshore, far from the cities. To connect those projects to the grids, the country will need new transmission lines—complicated projects that have proven to be bureaucratic nightmares and far more tedious to develop than clean-power plants.

There’s already a large backlog of proposed wind and solar projects waiting to be hooked up to grids. More than 230 gigawatts of wind capacity was seeking transmission interconnection at the end of 2018, according to the Energy Department’s Office of Energy Efficiency & Renewable Energy.

Solar panels and wind turbines only generate electricity when the sun shines and the wind blows. Excess power can be stored in batteries. While batteries are becoming cheaper as demand grows, they’re still expensive and haven’t been tested on a large scale on the grid.

“The grid wasn’t built for 100% renewable energy,” says Michael Skelly, a senior adviser at Lazard Ltd. who spent much of the last decade running a company focused on developing long-distance power lines. The work is painstaking, and builders have come to expect federal, regional or local snags, especially for projects that cross state lines.

“It’s not a secret that this is difficult,” Skelly says, though he thinks the task may be easier today. “The world is even more partisan, but on the other hand there’s a greater understanding of the need to do it.”

Upgrading transmission architecture is a task facing many economies that have set net-zero goals. Germany’s green-power “autobahn”—four high-voltage power lines connecting wind and solar projects in the north with industrial centers in the south—has been beset by severe delays and climbing costs, with a plan late last year estimating it will cost 95 billion euros ($115 billion).

China last year completed a 22.6 billion yuan ($3.5 billion) ultra-high voltage line that will carry only clean energy.

Europe has developed some of the best transmission infrastructure in the world, successfully connecting grids in different countries to provide energy security and boost renewable power use. Spare wind power from Denmark can feed into Sweden and excess nuclear power from Belgium can go to the U.K.

“When you’re thinking about renewables, there is an inherent benefit for the grid to be linked across a very wide geographic area,” says Andreas Gandolfo, head of European power transition at clean energy research group BloombergNEF.

Grid improvements needed in the U.S. to accommodate a cleaner future could cost as much as $90 billion by 2030, according to a 2019 study commissioned by WIRES, a trade group that advocates for more construction of high-voltage transmission. The full price tag by 2050 could reach $690 billion.

A recent study by the University of California, Berkeley’s Goldman School of Public Policy, meanwhile, found that reaching 90% carbon-free electricity by 2035 could be feasible and economic by significantly increasing solar, wind and batteries.

Before the Texas electricity fiasco, a heat wave across California last year caused a spike in energy demand as residents cranked up air conditioners, which contributed to rolling blackouts. Both events showed the fragility of U.S. grids in the face of climate change and extreme weather, and ignited debate over the reliability of wind and solar compared to fossil fuels.

In some ways the paradigm has shifted beyond that. Many utilities have committed to reaching net-zero by 2050 with renewable energy now mainstream and as consensus grows globally that more has to be done to slow global warming.

Xcel Energy, which provides energy across eight states, said on Monday that it cut company-wide carbon emissions 12% last year from 2019 levels. But by 2023, many of the easy-to-build renewables projects near existing transmission lines could be completed. “From there, it’s off the beaten path,” says Michael Weinstein, an equity analyst at Credit Suisse Group AG.

One way the White House could speed progress on the grid overhaul is by promoting “better agency coordination” between the Energy Department and the Federal Energy Regulatory Commission, says Jon Wellinghoff, a former FERC head. The Energy Department “has significant authority” over transmission and establishing national corridors, which it could delegate to the FERC—an agency that has expertise with infrastructure, pipelines and liquefied natural gas facilities.

The FERC’s current head Richard Glick said this month that it might be more economical to look at projects more holistically — for example, building a hub-and-spoke model to gather offshore wind to central points, then dispersing it from there — than building many lines from individual projects.

The agency is also seeking to create more incentives for transmission builders to encourage them to embrace new technology and upgrade existing lines.

It will be very hard to boost renewable capacity without a major infrastructure push, says Mike Garland, chief executive officer of Pattern Energy. His company is one of the biggest American clean energy developers, and just began building the 150-mile Western Spirit Transmission line in New Mexico to carry wind power.

“We’ll need transmission to get to levels of decarbonization that they want to achieve,” he says. Today, transmission is “in a state of hibernation, or just coming out of hibernation.”


Biden’s Climate Czar On The Texas Electricity Mess, Green Energy

Gina McCarthy wants market-based signals to power America’s push to achieve its climate goals.

As the first White House National Climate Advisor, Gina McCarthy is carrying a lot of weight for Joe Biden’s administration. It’s her job to fulfill his very ambitious climate agenda, which includes a carbon-free grid by 2035 and a net-zero economy by 2050.

This past week the president returned the U.S. to the Paris climate accord, which requires countries to set their own voluntary goals for reducing greenhouses gases. McCarthy, who led the Environmental Protection Agency under President Barack Obama, has pledged “the most aggressive” carbon cut the U.S. can make ahead of a climate summit Biden is hosting with world leaders to mark Earth Day on April 22.

As part of the Aspen Institute’s Aspen Ideas: RE$ET event, Bloomberg Green recently sat down with McCarthy to talk about pressing issues from the Texas freeze to the return to Paris.

A truncated version of the conversation appears below. The full interview will air Tuesday at 12 p.m. Washington time. You can register for free here.

BLOOMBERG GREEN: You recently convened your first White House Climate Task Force meeting. As part of that, you outlined some new priorities for EPA, including regulating methane gas and autos. What are a few more of the administration’s immediate priorities?

GINA MCCARTHY: You’ve identified the things that we’ve already let everybody know with clarity how we’re going to move on. But it is also about moving away from the idea that my old agency, EPA, is the sole purveyor of the issue of climate change and how to fix it. It’s all about a whole-of-government approach so that everybody is looking at their programs and policies.

One of the most important things is our ability to procure products and services in a way that’s going to jumpstart a clean energy economy and send the kind of market-based signals where the private sector will say, “Aha, so we have lots of electric vehicles being purchased by the United States of America – thousands of them that they might buy every year.”

We are also just not manufacturing at the levels we need. We are ceding the economy of the future to China and other countries—which is why President Biden issued a Buy America policy as well.

BG: So let’s talk about the cold snap last week. It showed the weakness of America’s electric grid, but it also showed some of the politics you’re up against as the fossil fuel industry put the blame on renewables, like wind turbines.

GM: What happened in Texas was not a failure of renewable energy—just the opposite. It was the fact that they had not invested in their own systems of refineries and they did not have a grid that connected Texas with other states in a way that other states are aligned together. So it made the response much more difficult.

So we all have to think differently about electricity. Everything eventually has to be electrified. And so we need to have a grid system that actually allows that to be seamless. Renewable energy is cheaper, so it doesn’t matter if you’re in a Democratic state or a Republican state, it’s essential for a clean, healthy and productive future.

BG: What are the milestones that need to be accomplished in the next four years to move the ball toward a net-zero economy in 2050?

GM: A lot of it is about sending strong signals to our economy. Right now we are developing a Nationally Determined Contribution, which is our way of returning to the Paris Agreement and saying what we intend to achieve for greenhouse gas reductions by 2030. And we’ll be able to underpin it.

We will have actions for sectors like transportation and energy and a plan for how our investments and standards are going to push that forward. We’ll have opportunities to work with states and cities to get their take on what should happen beyond the federal government. And we’re going to stand together and make the United States a proud country again.

Updated: 6-18-2021

California And Texas Fail The Power Test Together

Both states struggle to reconfigure a 20th-century grid for 21st-century challenges.

For all their contrasts, Texas and California are currently united in asking their respective populations to unplug appliances and forgo the air conditioning. Both have experienced blackouts of some form in the past year, and both have issued warnings about potential power shortages this week amid unusually hot weather. Given that it’s only June, both may yet suffer more as summer rolls on.

The proximate cause of their problems is very hot weather raising power demand to levels that may outstrip supply. The latter is constrained by various things, with California’s drought curbing hydropower and Texas facing an unusually large amount of generator outages.

Behind these lie similar structural issues, however, revolving around reconfiguring a 20th-century grid for 21st-century changes.

Weather on steroids is one of them. Episodes of extreme heat — and in Texas’ case, cold too — test the historical norms used by grid planners. Climate change is likely to make those tests more frequent.

Another is the expansion of renewable energy meant to mitigate those climate risks. Solar and wind power are different from conventional generation because they depend on weather and timing to operate and have minimal running costs (as they don’t burn fuel). This makes them an odd fit for power markets designed around the concept of switching power plants on and off as demand rises and falls, with the most expensive plants switching on last and off first.

California presents the most extreme example of this. Booming solar capacity — roughly a third of it on rooftops — has crushed demand for grid power in the middle of the day.

This squeezes the generators that typically switch on quickest when demand surges: natural-gas plants. California’s gas plants ran the least of any regional power market in 2020, at less than 40% utilization, on average; down from almost 50% just five years before 1 . With fewer hours in the day to make money, they rely on peak pricing after sundown to make the business work.

Texas faces a similar issue, albeit less pronounced today and for different reasons. High wind-power penetration has squeezed gas-fired plants there (see this). Yet solar power is expected to also proliferate under those sunny Texan skies, taking market share during peak air-conditioning hours in the afternoon.

Two states with different systems and politics. But both have high and rising renewable power capacity that, for now, relies on gas-fired plants for backup even as it eats their lunch.

This isn’t an argument against renewable power. If the market structure struggles to accommodate it, then the answer lies in changing the market structure, not forgoing cheaper, zero-emissions energy.

What both states grapple with in their own ways is how to reward reliability; that a power plant will be available when needed, in other words. In old-style, vertically integrated power markets, this is done by building spare plants and embedding the carrying cost in utility bills. Deregulation kicked off multiple experiments in other approaches.

In California, it’s done via a hybrid of price signals and regulatory mandates, such as forcing utilities to contract for extra supply and via the grid operator signing contracts with certain plants deemed critical to keep open. In Texas, it’s done purely by price signal.

Other markets use mechanisms such as capacity auctions, where plants are paid something simply to be available, on top of the money they make for the electricity actually produced. This is one important reason why California’s and Texas’ wholesale power prices are multiples of those elsewhere, as they contain that “capacity” element priced separately in other markets. They also tend to run with less of a buffer.

The debate over which system is best has raged for years and is given added impetus by events such as February’s Texas freeze.

Think of it like home insurance. You pay all those premiums over the years for a catastrophe that in all likelihood will never happen. You do sleep easier, though. Conversely, you could forgo the premiums but may end up facing an enormous bill if your house burns down.

For example, BloombergNEF calculates the “notoriously expensive” capacity market run by PJM Interconnection LLC — which runs the grid across large parts of the Midwest and Mid-Atlantic states — costs about $8 billion a year. Meanwhile, the power bill for just one week of horrendous weather in Texas in February came to $50 billion.

Texas would need a freeze like that to be just a 1-in-17 years event for the cost to match that of PJM’s capacity auction, around $140 per megawatt per day, according to Bloomberg NEF calculations 2.

The real bugbear with California and Texas, however, is less the price spike and more that, even with those prices, the danger of blackouts remains. It’s difficult to persuade generators to invest in new capacity that lasts decades with price signals that swing wildly from minute to minute and season to season. Oil producers do something like that, but they have liquid long-dated futures to hedge their exposure.

For power producers, the risk is compounded by those 21st century changes that upend the traditional trading day, shift the mix of generation and raise the probability of freak events. Regulators also haven’t kept up. In California, wildfire risks were allowed to build around the grid for years. The push for renewable energy, while necessary, is outpacing the capability to back it up, resulting in Californians paying extra to keep old, higher-emissions gas plants open.

In Texas, the energy-only market isn’t delivering enough reliability, especially given a lack of penalties for plants that don’t run when called upon. Beyond this, the touted reliability of gas-fired electricity clearly isn’t ironclad, especially as the state government remains reluctant, even now, to enforce stringent weatherization on that part of the energy system. And don’t get me started on Texas’ abhorrence of hooking its grid up to neighboring ones.

Perhaps the most glaring failure of both states concerns this week’s calls for citizens to conserve power. This is a powerful tool that almost certainly prevented more blackouts in California last summer. Yet in 2021, why is this still mostly being done as tweeted pleas for voluntary action rather than as an explicit market mechanism where households get paid to do it?

California and Texas may feel they have nothing to learn from one another. Yet they’re engaged in the same thing: groping for the right insurance premium to pay for their grids even as they’re transformed.


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