Power grids are facing more demand than ever. Policy needs to catch up.

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For the first time in decades, power demand is growing rapidly across nearly every part of the country due to a host of factors — data centers, reshoring of manufacturing, growing electrification and the rapidly growing power demands of artificial intelligence are all important contributors.

The exact shape that this demand takes over the coming decades may still be uncertain. But what is clear is that the policy approaches of today are not sufficient to meet the challenges our grid is facing.

A mixture of economic conditions and state and federal policies is pushing dispatchable energy resources like natural gas into rapid premature retirement, while adding significant uncertainty to investment decisions in new resources. This uncertainty is making those decisions increasingly difficult, no matter how much the grid needs them to support weather-dependent resources like wind and solar.

Meanwhile, the vast pipeline of renewable resources set to replace these plants is facing its own set of challenges, from arcane permitting requirements and skyrocketing costs to growing community opposition and years-long wait times to connect to grids.

The enormous challenges that a once-celebrated buildout of offshore wind has faced in the Northeast has made it clear: under current policies, new energy resources cannot be built fast enough, in enough places or cheaply enough to provide the vast amount of reliable, affordable power that the country requires today, let alone what it will require in the decades to come in light of growing energy demand.

Grid operators and regulators sound like broken records as they repeatedly warn of reliability risks. As Rich Dewey, CEO of New York grid operator NYISO, explained at the Electric Power Supply Association’s Competitive Power Summit in March, the state has gone from having a healthy reserve margin to barely meeting its targets as a result of premature retirements. “I have grave concerns about the winters of 2030, 2031 and 2032,” he said.

Year after year, engineers have done their jobs and found creative fixes again and again, but we can’t continue to rely on one-off solutions indefinitely when poor policy is the root of the problem.

There is a gap between operational realities and aspirational policies. That gap is growing, and not shrinking as it must. As these challenges grow, that gap will increasingly translate directly into dollars out of American families’ pockets each month, into economic damage done, and into lives lost when the lights go out due to reliability failures.

A small, but loud chorus of critics blames power markets themselves, despite the fact that since market restructuring began, competitive markets have consistently facilitated new investment, consumer choice and cost-effective outcomes, while also delivering reliability without captive customer obligations to pick up the tab.

It is time for a reality check. The “energy transition” is a misnomer. The U.S. requires an energy expansion that incorporates every tool we have at our disposal to deliver more power at lower emissions, both reliably and cost effectively.

This shift in perspective needs to happen now. States are seeing power demand growth that has not been seen for 40 years and policymakers want more. Failure to respond to the situation as it exists can only lead to bad outcomes.

The advocates of load growth include those aggressively pushing for electrification of cars, homes and industry to curb emissions, right alongside those pushing AI as an essential part of keeping our economy competitive for the future. President Biden has made bringing manufacturing back to American shores a cornerstone of his economic promises and states are rushing to be a part of that story.

But none of that can happen without reliable, affordable power. The system by which we incentivize investment, permit and approve projects, and pay them for their service to the grid is already pushed to its limit. The clock is ticking. Projects that once took a few years to permit and build are now taking closer to a decade.

Without a major rethinking, this system will not be able to accommodate this demand.

As the Senate Committee on Energy and Natural Resources begins the confirmation hearings for President Biden’s three nominees to the Federal Energy Regulatory Commission, it has been encouraging to see reliability take center stage, but rhetoric alone will not be enough. It was good to see all of the nominees express that reliability is job one and that all-of-the-above is the best approach to achieve it, but the proof will be in the orders that are issued from FERC.

If we want the U.S. to be a leader in all these areas — and we do — policymakers need to be clear-eyed about the challenges we face and the solutions available today, not those that remain possible in a hypothetical future.

We need policies that encourage more of everything, including conventional resources like natural gas. We need stronger market signals that prioritize reliability and ensure that the investments that provide it are profitable. Finally, we need policies that actually acknowledge the necessity of resilient energy infrastructure and the enormous costs that inaction will have for American families.

Source: Utilitydive.com

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