Hidden Within the December Stimulus Package: Reimagining the Utility
Author: Caroline Kenton
The December 2020 $900B Stimulus Package contained a hidden gem: the Energy Act of 2020 — an extensive funding opportunity for clean energy.
The policy included extensions of production tax credits and investment tax credits to reduce pressure for deals and projects that were delayed by the pandemic and subsequent economic sluggishness. Greentech Media’s Energy Gang podcast referred to the 5,000-page document as “the most important US energy legislation in a decade.” This emphasis on clean energy policies signifies a step in the right direction for environmentally-focused politics; but, it is only one step, and the next five years will prove critical in the transition to a cleaner future and these significant funding allocations will aid in this effort.
As you can see in the funding breakdown below, there is significant breadth in announced funding. While this bill’s scope was wide-ranging, here we highlight the grid modernization and ARPA-E initiatives for their key implications for electric and – to a lesser degree – gas utilities.
It comes as no surprise that the funding allocated – and, indeed, required – for these programs is nothing short of massive (also note that all of the numbers above are annual, from 2021 through 2025). Let’s dive into why.
Grid Modernization
Smart Grid
Developing a modern, smart grid is a central aspect of the stimulus package with the establishment of a smart grid regional demonstration and the establishment of a research and development program for modeling and visualizing the grid. Electric grid modeling, sensing, and digital visualization are all components of a push towards better understanding the capabilities and limitations of our current infrastructure to avoid blackout events and safety risks. “Digital twins” of the grid are undergoing rapid development by several AI-driven companies such as Black & Veatch.
For electric and gas utilities, this advancement is critical because it will be difficult to make decisions on how to promote electrification without a robust model for how the grid will behave under various scenarios. In this Net Zero America report published in December 2020, Princeton University describes five different future scenarios all based on varying levels of electrification; even in the most conservative of estimates, there is a clear and urgent need for increased grid capacity to address expanding electrification. Instead of maintaining current grid capabilities, an expanded grid must prioritize incorporating new digital technologies to develop a smart grid system.
Computational Tools
Aside from the smart grid, the stimulus specifically focuses on computational tools that allow for real-time awareness. Once again, the ability to continuously understand the state of the grid in real-time is key for efficient, and safe, energy distribution. Within this category, the bill highlighted underground transmission and distribution line research, including cost-lowering and wireless sensors.
ADL’s recent collaboration with PG&E on a Wildfire Ignition Prevention ProblemSpace Challenge focused on innovation in undergrounding technologies. During this months-long process, we evaluated submissions from over 130 applicants who proposed technology solutions for the prevention of wildfire ignition. One category was specifically focused on undergrounding, with technologies ranging from subsurface mapping to a vibratory plow.
(Undergrounding of wires affords an estimated 95% decreased risk for wildfires, largely because encroaching vegetation like fallen limbs no longer pose a significant risk for ignition.) With wildfires accounting for 6 gigatons of GHG emissions per year, the impact of technologies that prevent even one wildfire ignition cannot be overstated.
Renewable Energy Integration
In a push for a cleaner future, the grid modernization efforts also support research and development for integrating renewable energy into the electric grid. Specifically, within 180 days, the Secretary of Energy must establish a program for grid integration. The key components of this program include generation forecasting, the development of cost-effective long-distance transmission lines, and integration solutions for variable generation sources. Innovation in this space is critical as there are significant tradeoffs in the transition to clean sources, given the intermittency of renewables like solar and wind as well as the varying natural resources for renewables across U.S. geographies.
While establishing a program for grid integration is a great step, there are many concerns to address, including the lack of inertia support. In a recent project with PG&E on Public Safety Power Shutoffs (PSPS), ADL analyzed the grid services required to balance a single distribution circuit with high renewables penetration. (TLDR: It’s not easy. Inverter-based resources like solar and storage are great for decarbonization but do little to help with black-starting and cold load pickup are generally not load-following.)
If the DOE manages this program effectively, it will combine research into technologies such as long-distance transmission or energy storage with the communication and controls technology that will allow Distributed Energy Resources (DERs) to be deployed at scale.
Integration of Electric Vehicles
Increasing renewables penetration is not the only source of strain placed on the grid; the integration of electric vehicle (EV) charging stations requires an immense amount of planning, modeling, and support resources. The stimulus package requires that within one year, the Secretary of Energy must submit a comprehensive report to the Committee on Science, Space, and Technology of the House of Representatives and the Committee on Energy and Natural Resources of the Senate on the needs of the grid for integrating EVs. It states explicitly that this is a process that will require consultation with electric utilities (so electric utilities, take note and get ahead of this!). While a trend to “electrify everything” may cement the central role of utilities in a clean energy future, the increased load from unpredictable and high-capacity electricity draws a major integration challenge.
While there are innovations in this space, like FreeWire and Veloce who are integrating batteries with EV chargers to reduce demand charges and simplify integration, the biggest nut to crack in grid integration is vehicle-to-grid (V2G). EV manufacturers aren’t always ready to play their part in leveraging their vehicles for grid services. The Teslas of the world cannot risk any negative customer experiences from leveraging those large EV batteries for grid services and will void warranties for customers who try to do so. Perhaps the desire to sell more Powerwalls could be a factor there as well…
Anyway, utilities must stay ahead of the challenges that can arise with increased electrification and diverging motivations. In the near term, electric fleets and hybrid systems can offer a smoother transition without relying entirely on the grid. Companies like XL Fleet, which retrofits standard trucks and vans into EVs, can play a productive role in the transition for fleets suffering from range anxiety.
ARPA-E
Another significant portion of the stimulus package was guidance on ARPA-E. ARPA-E was launched in 2009 with an initial budget of $400 million. The stimulus package now allocates $2.9 billion dollars from 2021 through 2025 specifically for ARPA-E initiatives. Quite a funding bump! This money will be used for enhancing economic and energy security by reducing energy imports, reducing energy-related emissions, improving energy efficiency, providing solutions for the management of nuclear waste, and improving the resilience of energy infrastructure.
Since its founding, ARPA-E has funded 975 research projects. This massive amount of funding allocated for use between 2021 and 2025 represents a promising pool of enabling resources for energy innovation in the coming years. ARPA-E’s emphasis on improving the resilience of the energy infrastructure is well aligned with the Grid Modernization initiatives laid out in the December stimulus.
For utilities, this means increased funding and focus on grid stability to accommodate an increase in electrification. This connection between ARPA-E and grid modernization is well exemplified by the Packetized Energy project on scalable grid flexibility funded by ARPA-E. From the significant focus in the stimulus package, it is clear that identifying similar grid-flexibility technologies that can increase the resiliency of the grid and overall infrastructure will be critical for developing a more stable grid (which resonates with many of us after the devastating events in Texas last week!).
Final Considerations
Grid experts are already opining that our current grid is outdated and unable to support increased clean electrification at the scale necessary to hit the Biden administration’s target of a 100% clean electricity sector by 2035. This legislation confirms the focus on modernizing our grid to allow for more stable and resilient energy use. Funding alone can not solve this issue, but the innovation it produces could accelerate the United States towards our goals one well-funded project at a time. As utilities face many proverbial winds from the Energy Act of 2020, it is imperative that their business plans align with the legislation’s goals to enable an efficient and – dare we say – seamless transition to a smarter grid.
Better yet, utilities should take this opportunity to influence the legislation likely to emerge in the wake of this stimulus bill. For those with ideas not yet funded by this package, we recommend that you submit your ideas to the newly-released CLEEN database to be part of future legislative funding. Indeed, ADL would be happy to discuss strategies for working with DOE to direct these funding mechanisms to address the most critical gaps facing well-intentioned utilities looking to cost-effectively decarbonize the electricity sector without putting reliability at risk.
We’d love to hear from you.