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Grid Instability

The health of the electrical grid has not received the attention it deserves. The growth in renewables is a challenge as the output is inconsistent and highly unpredictable. On the demand side utilities have to prepare for the transition to greater use of EVs. Moving from natural gas to heat pumps is also a factor, especially in Europe. Upgrading and optimizing the electrical grid is essential to prepare for the new normal. Without investment and maintenance, the electrical infrastructure will not keep up with demand spikes.

Failures of the grid are well documented after incidents like Texas experienced in 2021 and California fires caused by PG&E. Europe has handled the energy transition admirably considering the challenging shift from Russian natural gas, but it’s not sustainable as more renewables come online.

European leaders meet this week to discuss how to prepare for the changes ahead. According to WindEurope chief executive Giles Dickson, “Europe is not investing enough in its electricity grids. Renewables are expanding rapidly, EVs are growing and heat pump sales are taking off. But the grid is not expanding at the same pace. Europe needs to ramp up grid investments from €40bn to up to €80bn a year. Much of it will go into new lines and infrastructure. But Europe must also optimize its existing grids. The technology – and finance – is readily available.” The goal of the meeting is to prioritizing funding for investment in grid reinforcement and connection requests.

Last year the US announced $13B in financing to assist utilities in upgrading the critical transmission and distribution infrastructure. To paraphrase US Energy Secretary Jennifer Granholm, we are moving swiftly to deliver cleaner, cheaper energy to every American community by building a modern and reliable electric grid. With nearly 70% of the nation’s grid more than 25 years old, the investments will strengthen the nation’s transmission grid to drive down energy costs and help keep the lights on during extreme weather events.

Publicly traded utilities are in a tough spot. They are under pressure to maintain dividends and profitability. The path of least resistance to help the bottom line is to reduce capital investment in new projects and cut budgets for maintenance. The current interest rate environment is a newest hurdle making financing projects more expensive. Unfortunately, they don’t have the luxury of time as electrical demand will continue to grow and the grid must be prepared. #ANDnotOR

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