The United States has set a bold goal to create a greenhouse gas emissions-free power sector by 2035 and a net-zero emissions economy by 2050. Massive electrification of transportation and building energy use and a proliferation of renewable energy and distributed energy resources (DERs) are central to the strategy to achieve emissions reductions.

However, the strategies to reduce greenhouse gas emissions aren’t being pursued in a vacuum. They disrupt the United States electric grid, particularly local distribution grids already being tested by increasing extreme weather (both in frequency and intensity). There’s a clear case that distribution grids nationwide need additional investment to maintain and improve the resilience and reliability of the grid in the face of the growing added stresses of electrification, intermittent renewables and DERs.

Distribution grids in the U.S. tend to share three things in common that have an outsized impact on total electric system reliability and efforts to transition to a clean energy future:

1. They are the location of most power outages.
    
2. They have been using technology from the last century. For decades, there has been an overwhelming lack of investment in distribution due to myriad reasons, such as their massive, sprawling nature and regulatory and ratepayer pressures.
    
3. Electrification, renewables and DERs are making them arguably the most critical infrastructure in the evolving electric system, and they are not ready for the job.
    

The case for improved performance

In its 2023 report “Electricity Grids and Secure Energy Transitions,” the International Energy Agency (IEA) noted that the U.S. is one of four countries in the world where more than 90% of power system interruptions originate in the distribution grid. In the most recent national report of its kind, the Lawrence Berkeley National Laboratory evaluated 2014 system average interruption duration index (SAIDI) data from U.S. utilities. It determined that 94% of system interruptions, including major events, originated on the distribution grid.

On average, Americans spent eight hours without power in 2020 and 2021 – roughly double the rates seen in any year from 2013 to 2016. Major blackout events increased by more than 60% from 2015 to 2020.

Looking at 2022 SAIDI data on California’s investor-owned utilities released by the California Public Utilities Commission, 88% average of interruptions originated in the distribution grid.

The plight of the distribution grid in California is particularly relevant to the United States as the state is well on its way to achieving ambitious renewable, DER and electrification goals. This is igniting a fierce debate on the need to invest more in distribution grid modernization to maintain reliability and build resilience in the face of increasingly frequent system disruption.

The case for more investment

According to the IEA’s “Electricity Grids and Secure Energy Transitions” report, only 23% of distribution grid infrastructure in the United States is less than 10 years old, while more than 50% is more than 20 years old – in many cases, more than 50 years old. That reality led the agency to state: “There is a growing need to modernize this aging infrastructure to enhance efficiency and reliability and accommodate new energy resources.”

Despite utilities' steady efforts to improve distribution grid planning and performance, investments in that portion of the grid appear to be falling short of what is needed nationwide.

In a recent report, the American Action Forum estimated that preparing the U.S. grid for the coming wave of distributed solar PV adoption and EVs will cost nearly $1 trillion by 2035. That means utilities may need to spend upward of $61 billion annually through 2035 to prepare their distribution grids for solar PV and EVs. According to the report, utilities have been spending closer to $30 billion per year in recent years.

Many assume that massive electric power system investments approved in the Bipartisan Infrastructure Law (BIL) and Inflation Reduction Act (IRA) will end the underinvestment in the distribution grid. While those funds do more to move the needle, they still fall short. In the BIL-funded $3.5 billion first round of Grid Resilience and Innovation Partnerships (GRIP) Program grants announced by the U.S. Department of Energy in October 2023, only 50% was allocated to distribution improvement projects, with 50% to transmission projects.

Yet, in an era in which more than 90% of U.S. power interruptions happen on the distribution grid, a 50-50 funding split of modernization funds does not correspond to the need for a more resilient electrical grid.

Distribution grid underinvestment has a significant cost to society. The IEA reports that electric grid-related outages in the United States in 2021 had a $54 billion economic impact, most of which occurred on the distribution grid.

The case for better preparedness

Extreme weather is causing more power outages in the United States. Electrification is rising through the mass adoption of electric vehicles (EVs) and electrified building appliances, such as air source heat pumps and hot water heaters. Tax incentives in the IRA are boosting an already steady increase (due to conducive cost-driving adoption over the past decade) in large-scale wind and solar and DERs such as rooftop solar and battery energy storage systems. All those factors – extreme weather, electrification, intermittent renewables and DERs – put pressure on the distribution grid. They also necessitate a shift from an electric grid designed to serve power in one direction, from large, centralized power stations to one designed for distributed power generation and multidirectional power flow with more complex and less controllable supply and demand shifts.

Given the shifting reality, a status-quo approach to investment will leave the distribution grid unprepared for the future – prone to decreasing reliability, lacking resilience and trapping clean energy DER investments that can’t connect and contribute to the clean energy future.

The IEA reports that grids are the element of the power system that is most vulnerable to climate impacts and the leading cause of climate-driven outages in many countries. At a local level, EVs are experiencing rapid growth, yet countless local segments of the distribution grid are at risk of failure if too many EVs start plugging in before upgrades are made.

The IEA also says the electric grid has become a bottleneck for transitioning to net-zero emissions, with 3,000 GW of renewable power projects stuck in grid connection queues globally. The IEA points to an unprepared distribution grid as a major cause. “To meet national climate targets, grid investment needs to nearly double by 2030 to over $600 billion per year after over a decade of stagnation at the global level, with emphasis on digitalizing and modernizing distribution grids,” the IEA wrote.

Changing the narrative

Experts agree that investment in the distribution grid must double annually globally and in the United States. For utilities facing myriad demands and pressure from customers and regulators to limit rate increases, proposing such a steep increase in spending can seem daunting.

But doubling spending is not the only answer. Utilities, state regulators and other distribution grid stakeholders can work together to pursue a multipronged strategy to optimize grid performance, investment and preparedness to achieve a reliable, active distribution grid needed for a clean energy future.

There are several tactics all utilities should consider developing to execute a successful, multipronged distribution grid planning strategy.

• Focus on grid hardware: The recent increased focus on distribution grid investment has drawn attention to digitalization efforts, such as the increased adoption and maturing of Advanced Distribution Management Systems. While these investments are undoubtedly an important piece of the puzzle, they should not overshadow the need for investments in distribution grid hardware.

When a storm hits, software cannot keep the system online or return it to service without capable actuators in the grid. More modern devices installed on the distribution grid allow the system to survive the storm and limit economic impacts on communities. When a highway truck stop wants to install the EV charging infrastructure to enable electrified long-haul trucking, which could spike peak power demand at the site from kWs to MWs, only hardware additions can prepare the grid to serve this new kind of load.

Realizing the vision for a reliable, clean energy future will require grid hardware. Ensuring no-regret investments in grid modernization will require improved distribution grid planning practices and tools, where the capability of innovative grid hardware is accurately reflected.

• Communicate benefits: Utility customers want to be able to plug in EVs, replace gas heaters with electric heat pumps and benefit from DERs. As they do so, electricity will become more important to their lives. Utilities should implement a communications plan that clarifies the link between distribution grid investments and achieving customers’ desired future. To better communicate with regulators, utilities can update their metrics to reflect the full reality of distribution grid performance. SAIDI, excluding major events, has been a key metric used by utilities and regulators for years. It tells a story about grid performance on blue sky days, but major events such as extreme storms are the new normal. Metrics that reflect the reality of decreasing reliability in the face of extreme weather can help regulators and policymakers understand the value of distribution grid spending, especially when coupled with data showing the negative economic impacts of outages on communities.
   
• Continue to innovate: Meeting the challenges of the future requires innovative technology that will help modernize distribution grids. Fortunately, much of this technology exists today and has been repeatedly proven to improve grid resilience and reliability. Utilities must be willing to invest in these proven technologies. In addition, utilities can pursue alternative means of funding, such as federal grant programs, to limit the cost to customers and advocate with policymakers for new funding programs that would best move the needle.
   
• Advocate for a national standard on distribution grid resilience: Industry stakeholders can join by using their collective voice to push for a federal standard for resilience. The standard could be as simple as measuring SAIDI and SAIFI, including storm days. This baseline requirement would set a minimum level of resilience that must be achieved in any part of the grid and allow flexibility to address different challenges in various parts of the country. A national resilience standard would focus on enhancing the grid and spur technology investment throughout the grid and down to the grid’s edge.
   

The distribution grid can be the best supporting actor in the clean energy future

Increasing extreme weather, electrification of different sectors, intermittent renewable energy and DERs are all putting pressure on distribution grid performance, while simultaneously, the distribution grid is becoming more important to the economy (e.g. connecting clean power generation to the grid) and the average citizen’s life (e.g. electricity is critical for connectivity, comfort, safety). At this moment, when the distribution grid is being asked to enable a clean energy future, it needs help to thrive amid those disruptive changes. The case for improved performance, more investment and better preparedness is clear.

Despite the above, much discussion and action remains focused on investments in transmission and renewable energy infrastructure. Utilities and grid stakeholders know the focus should be on the distribution grid. It is time to change the narrative and take a more aggressive approach to distribution grid investments so it can be ready for its role as the best supporting actor in the future of clean energy.