The Grid Is In Trouble

I’m writing my next book about The Moment. I’m exploring the forces shaping The Moment and what it means for you, the oil and gas leader. The Moment is giving us the most important opportunity in our lifetimes to play a positive leadership role in the energy future—and we need to seize it.

Our industry is reading The Moment one of two ways:

1. As forces lay bare how difficult it will be to implement economy-wide decarbonization, our industry has the opportunity—and the obligation—to step in and lead. (This is my read, of course.) Or:
2. The Moment secures the place of traditional fuels, including oil and gas, without our having to do anything differently.

Regardless of how we view the moment, we all agree: We need more energy for power—and the grid is straining to deliver it. So today I first review the six facts about our troubled grid that all of us can agree on.

Then I lay out why the looming grid crisis is an opportunity for oil and gas to engage with those who will solve the problem. The looming crisis is not another reason for us to double down on status quo politics, fight for the place of traditional fuels in the power mix, or disparage intermittent renewable resources. How we intend to respond to the grid crisis (and engage with those who will have to solve it) reveals how we will respond to The Moment—and, in my view, why that response will succeed or fail.

All of These Things Are True: The Six Facts About Grid Unreliability We Agree on

Whether you look at the United States, North America, or the entire world, the song remains the same: We need more energy for power. And we need this energy for power in places where many electrical grids are already strained—or, in some cases, entirely inadequate. To narrow our focus for today’s analysis, I focus on grid reliability in the United States. (Future editions will take on the need for more energy for power generation around the world.) There’s a lot to be worried about regarding grid reliability that we can agree on:

The grid is already strained. In the United States, our starting point is an electricity generation and transmission system that is increasingly unable to deliver consistent and affordable energy. American households in 2020 experienced over double the blackout hours they did in 2015, according to the U.S. Energy Information Administration. A report from the  North American Electric Reliability Corporation (NERC) has declared the majority of regions in the United States at elevated risk for long-term transmission reliability issues. The Midwest (MISO) and Southeast (SERC-Central) regions are at high risk for capacity shortfall, and the MISO region is also at risk for winter generator and fuel shortages in the next few years.

We are going to need a lot more power. For the first time in decades, the United States is expected to need more generation for electric power. According to NERC, U.S. peak demand in the summer is projected to grow by 38 gigawatts nationwide in the next five years, nearly the equivalent of another California. Power demand for data centers will double by 2032, to 40 gigawatts, and the gas consumption will grow by 4.2 billion cubic feet per day by 2035. And we haven’t even gotten to electrifying everything, notably all the things buildings now use natural gas for.

And a lot more transmission. More power requires more transmission, of course—but we’re talking about a lot more. How much? Well, the Department of Energy (DOE) has studied the transmission required to meet renewable energy and electrification required by enacted climate legislation. DOE forecasts that, under high-load and high-clean-energy scenarios, in line with the capacity enabled by current enacted climate laws, the United States will by 2040 require a doubling of today’s transmission system (between 100,000 and 185,000 gigawatt-miles).

Extreme weather is not helping. Extreme weather events exacerbate the grid’s vulnerabilities and often result in blackouts, as seen in the Texas blackouts in winter 2021, which cost the state $200 million and left millions without power. The July 2022 heat wave in New York City caused a surge of electricity demand, leaving over 4,000 residents without power on that wave’s peak heat day.

Renewable energy is not enough. The grid is at its most vulnerable during peak demand events, with its vulnerability often exacerbated by its dependence on renewable energy. The worst of the Texas blackouts in winter 2021 combined gas-plant failure with a “wind drought” of low wind speeds and power outages across the Southern and Midwest regions, with integrated wind output often lagging when integrated load is the highest.

Utilities need on-demand power. The U.S. transmission system was built around readily available thermal and nuclear power and will continue to need reliable energy sources. Utilities in Georgia, North Carolina, South Carolina, and Virginia are proposing to build dozens of gas-fired power plants in the next 15 years to meet spiking demand. Kansas postponed the retirement of a coal plant to help power, among other things, an EV-battery factory. Renewable energy provides essential low-carbon electricity to feed the growing energy demand, but it needs the help of on-demand power sources, such as natural gas.

Now that we’ve agreed on so much, what should be our next steps heading into The Moment? That’s where so many of us disagree—and that will be the subject of my next Both True.

Two Reads on What to Do with These Facts

Without an updated and expanded grid, the United States will have more blackouts and energy price spikes. How should we as an industry respond? Our answer to this question is a microcosm of how we’ll respond to The Moment at large.

In order to explore that question, we need to explore two other ones to clarify our target audiences and what they’ll need from us:

Question 1: Who is charged with solving looming grid unreliability? Nobody and everybody. In each state or region, there’s a loose network of legislators, appointed policy officials, career regulators, and employees of regulated utilities who will ultimately determine whether and how grid unreliability gets addressed. Our audience will be an array of political leaders and policymakers who answer to others—stakeholders such as legislators, voters, and customers, all of whom are transmitting climate-centric mandates up the policy food chain.

Question 2: How will the problem be solved? Because of the myriad stakeholders driving a diffuse network of decision-makers, the problem will be solved (if it’s solved at all) by not just brave leaders but also middle-tier policymakers and bureaucrats. Both must find a way to tell their bosses the truth about the energy transition (i.e., it won’t be easy or simple) while also still being responsive to the climate-centric mandates those bosses are imposing.

Which leads me to my theory of The Moment. Our target audience (the problem-solvers) requires solutions that acknowledge the expectation of many stakeholders for easy energy transition answers. These solutions must also address the impending crises of today’s grid. And these solutions must be grounded the Three Ts of a realistic energy future: Timeframe, Trade-offs, and Telling the Truth. (More on the Three Ts in an upcoming Both True.) To reach these solutions, the problem-solvers will need to use our information, borrow our courage, and lean on us as thought partners. Therefore, the central mandate of The Moment for oil and gas leaders: Position ourselves as partners.

What will make you a credible partner in The Moment? Saying the sky is falling while arguing for the status quo? That’s definitively uncompelling, especially to stakeholders who are charged with driving the energy future. Oil and gas leaders instead need to be relentlessly future-focused, offering solutions that are cleaner, more efficient, and more affordable. Sharing a future-focused vision while offering pragmatic measures will allow for creating solutions with leaders and policymakers that embody all Three Ts.

This edition has unearthed the need for me to dig more into the audiences of The Moment, their needs, and the Three Ts before we return to our crystal ball assessment of the forces. More in upcoming editions.

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To the opportunity in trouble,

Tisha