Americans are experiencing the impacts of climate change on an increasingly acute level every day. The February storms across the nation that resulted in rolling blackouts across Texas and several other nearby states underscored the crisis and raised questions about whether the American electricity grid can withstand the negative effects of climate change, such as extreme temperatures, more frequent and intense storms, floods, wildfires, droughts, and more.
Since 2011, the United States has sustained $135 billion in damages from extreme weather and climate disasters, with more than seventy extreme climate events affecting the Midwest.[i] One recent study showed that investor-owned utilities face a $500 billion resilience investment gap.[ii]
The stark human and economic costs of climate change beg several questions. First, what are we doing to make the grid more resilient? And how can we better prepare for upcoming disasters, and who pays for those efforts?
Distribution system planning
Grid resilience is a complex subject that requires a multifaceted approach from the federal government, state governments, and regulators. Distribution system planning is one critical tool available to those entities to boost grid resilience.[iii] Distribution planning for the system that delivers electricity to end-use retail customers has historically taken place at the state level, and utilities often work through public utility commissions to submit distribution plans for approval.[iv] Recent distribution plans have facilitated other public policy goals, including grid modernization and hardening.[v]
For example, California’s distribution planning process focuses on integrating distributed energy resources (DERs) such as energy storage, energy efficiency, and electric vehicles.[vi] In 2015, California utilities submitted filings with the California Public Utilities Commission (CPUC) that assessed using DERs to meet reliability and safety standards.[vii] And last year, three investor-owned utilities in California submitted plans to the CPUC to invest billions in the grid.[viii] The state’s largest utility, PG&E, committed to spending $9.5 billion from 2020 to 2022 on wildfire mitigation.[ix] PG&E has sustained heavy losses from cutting off power to prevent wildfires, and DERs can help mitigate those issues.[x]
The Maryland Public Service Commission uses distribution planning to better understand the methodologies utilities use to justify their investments,[xi] while Washington’s Utilities and Transportation Commission created a framework requiring utilities to identify distribution system hotspots that have reliability challenges and aging infrastructure that require system upgrades.[xii] Hawaii provides guidance to utilities to craft a grid modernization strategy addressing infrastructure status, grid architecture and interoperability, costs and benefits, flexibility and resilience, and other considerations.[xiii]
As those examples show, there is no uniform approach to distribution system planning. Only five states (New York, California, Hawaii, Massachusetts, and Michigan) conduct five- to ten-year planning.[xiv] The planning process nonetheless can and should be leveraged for a variety of public policy goals. In addition to grid resilience and modernization, the plans can address reliability, DER integration and locational benefits, transmission planning, promotion of new technologies, affordability, and more.
If every major utility engaged in comprehensive planning that accounts for the impacts of climate change and focuses on resiliency, states and utilities would be better positioned to tackle existing grid resilience challenges and prepare for upcoming disasters.
Costs to consumers
Grid hardening is a massive undertaking, and because utility companies recover these costs from ratepayers, those efforts will likely take place on the backs of consumers.[xv] Experts estimate that Texas customers will pay billions of dollars over decades to cover the recent energy crisis alone.[xvi]
Here in Illinois, ComEd has spent billions upgrading and modernizing the grid over the last decade; ComEd’s delivery rates have increased more than 35 percent during that time.[xvii] And in California in 2019, Governor Newsom signed legislation requiring customers to pay investor-owned utilities $10.5 billion to cover equipment damage from wildfires.[xviii]
Federal funding for grid hardening would ease the financial burden on states and consumers. President Biden has pledged to strengthen the grid and make it more resilient.[xix] U.S. Energy Secretary Jennifer Granholm has said she supports reviving a $40 billion Department of Energy loan program that the Trump Administration did not utilize; it could offer significant funding for grid improvements.[xx]
In any event, it is critical that regulators and the public closely scrutinize spending on grid modernization. Ensuring that ratemaking processes are transparent, incentivizing utilities to protect consumers from skyrocketing utility bills, and maximizing federal funding will be key to protecting consumers.
The author is a Policy Advisor in Illinois Governor J.B. Pritzker’s office, where she covers energy and environmental policy. This post does not reflect the views of Governor Pritzker or his administration.
[i] National Oceanic and Atmospheric Administration, Billion-dollar weather and climate disasters: events, https://www.ncdc.noaa.gov/billions/events/CCR/2011-2020 (last visited Mar. 15, 2021).
[ii] Judsen Bruzgul & Neil Weisenfeld, Resilient power: how utilities can identify and effectively prepare for increasing climate risks, ICF (Mar. 3, 2021), https://www.icf.com/insights/energy/resilient-power-utilities-prepare-climate-risks#.
[iii] AL Cooke & JS Homer, Distribution system planning – state examples by topic, Pacific Northwest National Laboratory (May 2018), https://eta-publications.lbl.gov/sites/default/files/dsp_state_examples.pdf.
[vi] Herman Trabish, How California’s biggest utilities plan to integrate distributed resources, Utility Dive (July 7, 2015), https://www.utilitydive.com/news/how-californias-biggest-utilities-plan-to-integrate-distributed-resources/401805/.
[viii] Jeff St. John, California utilities look to spend $10B reducing threat of grid-sparked fires, Green Tech Media (Feb. 10, 2020), https://www.greentechmedia.com/articles/read/california-utilities-propose-billions-of-dollars-in-wildfire-prevention-plans.
[ix] Ivan Penn, How PG&E is racing to improve safety as fire reason approaches, The New York Times (July 18, 2020), https://www.nytimes.com/2020/07/18/business/energy-environment/pge-wildfire-california-summer.html.
[x] Azi Paybarah, Citing wildfire risk, utility plans to cut power to 50,000 in California, The New York Times (Oct. 15, 2020), https://www.nytimes.com/2020/10/15/us/california-wildfires-power.html#:~:text=Pacific%20Gas%20and%20Electric%20said,lead%20to%20%E2%80%9Ccatastrophic%20wildfires.%E2%80%9D.
[xi] Cooke & Homer, supra note 3.
[xii] Herman Trabish, The best laid plans of state regulators are now aimed at building a better distribution system, Utility Dive (Jan. 30, 2018), https://www.utilitydive.com/news/the-best-laid-plans-of-state-regulators-are-now-aimed-at-building-a-better/515715/.
[xiii] Cooke & Homer, supra note 3.
[xiv] Trabish, supra note 12.
[xv] Stephanie Eyocko, Utilities need to harden the grid as they green it. Consumers aren’t ready for the cost, Utility Dive (Feb. 21, 2021), https://www.utilitydive.com/news/utilities-need-to-harden-the-grid-as-they-green-it-consumers-arent-ready/595719/.
[xvi] Mark Chediak, Naureen Malik & Josh Saul, Texans will pay for decades as crisis tacks billions onto bills, Bloomberg (Feb. 23, 2021), https://www.bloomberg.com/news/articles/2021-02-22/texans-will-pay-for-the-state-s-power-crisis-for-decades-to-come?cmpid=BBD022321_GREENDAILY&utm_medium=email&utm_source=newsletter&utm_term=210223&utm_campaign=greendaily&sref=P6xXtEaF.
[xvii] Steve Daniels, An upcoming battle will show how much juice ComEd has left in Springfield, Crain’s Chicago Business (Dec. 18, 2020), https://www.chicagobusiness.com/utilities/upcoming-battle-will-show-how-much-juice-comed-has-left-springfield.
[xviii] Taryn Luna, Utility customers will pay $10.5 billion for California wildfire costs under bill sent to Newsom, Los Angeles Times (July 11, 2019), https://www.latimes.com/politics/la-pol-ca-wildfire-fund-gavin-newsom-20190711-story.html.
[xix] Jennifer Dlouhy & Ari Natter, Biden’s plea to remake grid gets a boost on Texas power crisis, Bloomberg (Feb. 17, 2021), https://www.bloomberg.com/news/articles/2021-02-17/biden-s-plea-to-remake-grid-gets-a-boost-on-texas-power-crisis.
[xx] Timothy Puko, Biden’s new energy secretary eyes big investment to boost clean technologies, harden electric grid, The Wall Street Journal (Feb. 26, 2021), https://www.wsj.com/articles/bidens-new-energy-secretary-eyes-big-investment-to-boost-clean-technologies-harden-electric-grid-11614375407.