Introduction
The U.S. electrical grid is being pushed to meet growing demand, driven by trends like electrification and data center expansion. This strain is worsened by the variable generation of renewable energy sources. To avoid a power shortage, it is estimated that nearly $2 trillion must be spent to modernize the U.S. grid by 2030. Initiatives include:
- Increasing supply through nuclear and renewable energy
- Modernizing the grid with smart technologies
- Reducing demand with energy-efficient practices
Without additional investment, the aging infrastructure of the grid will be unable to supply enough electricity to meet demand in a matter of years. Rolling blackouts in California are already an indication that the grid needs help.
Trends in Consumption and Generation
Starting in the 1990s with the passage of the federal Energy Policy Act and adoption of state renewable portfolio standards, fossil fuel plants (e.g., coal) became an outdated part of the electrical grid. Over decades of phasing out these power plants, the nation’s generation capacity has declined as plant closures outpaced current investments in renewables (e.g., solar, wind). Simultaneously, electrification trends (e.g., electric heat pumps, EVs) and the proliferation of data centers are straining the grid’s ability to meet demand.
The strain on the electrical grid is more prominent when considering variations in generation and consumption throughout the year and on a daily basis. During the year, demand peaks in the summer as electricity is used for cooling – solar generation is also variable and peaks in the spring and early summer. However, within a day, solar panels are only able to provide electricity during the day, creating a supply shortage during the night that could be exacerbated with the growth in data centers which have IT load that runs nearly 24/7.
Potential Grid Solutions
To prevent electricity consumption from exceeding generation and thereby forcing blackouts, there are three solutions: 1) Increase supply / generation capacity, 2) improve grid efficiency, 3) decrease demand / consumption. Supply could be increased with additional investments in nuclear power and renewables, the grid could be modernized to a “smart grid” and incorporate microgrids, and demand can be reduced through demand response programs and use of energy efficient equipment (e.g., low-energy appliances).
In 2024, many initiatives were undertaken across the three types of solutions. Notably, many data center hyperscalers (e.g., Google, Amazon, Microsoft) made partnerships with energy providers (e.g., Constellation) to invest in nuclear power while the U.S. Department of Energy announced over $2B in funding to modernize the grid.
Increasing Supply Through Nuclear And Renewable Energy
When it comes to increasing supply in the age of “green” and sustainable energy, nuclear power is capable of generating significant capacity with next to no downtime required. Renewables like solar and wind are more variable in generation (lack of wind or sun limits production) but offer lower-cost electricity than coal and natural gas while solar also enables localized generation (e.g., rooftop solar) that can address specific energy needs.
Historically, nuclear power had a negative connotation with thoughts of disasters like Chernobyl creating hesitancy to invest in new reactors. However, recent technological advancements in small modular reactors (SMRs) present an opportunity to create safe and scalable new nuclear plants that can manage large electrical loads (e.g., data centers).
See Red Chalk Group’s “Sustainable Power” white paper (here) to learn more about the future of nuclear.
Modernizing The Grid With Smart Technologies
The electrical grid has been around for 50+ years with little change, that is until recently. Now, the traditional power plant to grid to end-user flow is being revamped into modern, decentralized systems that incorporate renewables and battery energy storage and enable bidirectional power flow as end-users participate in generation. Investments in monitoring and control equipment and software could improve the allocation of supply to meet demand at localized levels (thereby preventing broad, state-wide blackouts).
Reducing Demand with Energy-Efficient Practices
The third solution to addressing the supply / demand imbalance is to reduce demand, but to do so in a way that does not lower our standard of living (reducing electricity consumption does not have to mean using candles and lanterns). Utility demand response programs allow end-users to be compensated for voluntarily reducing their consumption during peak demand periods and energy efficient equipment (e.g., LED bulbs) can allow us to maintain our current usage behaviors while using less electricity than in the past.
About Red Chalk Group
Red Chalk Group is a boutique professional services firm focusing on advising senior management on issues related to top-line growth, disruptive technology, key mega-trends, and related intellectual property. Our firm delivers strategies related to new revenue platforms, emerging and disruptive technologies, industry & competitive analysis, merger & acquisition/investment support, and IP analysis and transaction services. Red Chalk Group has helped business leaders address their greatest challenges, issues, and opportunities at the most senior levels.
Sources:
- ASCE, “Report Card for America’s Infrastructure”
- U.S. Energy Information Administration, “Annual Energy Outlook”
- Congressional Research Service, “Variable Renewable Energy”
- International Energy Agency, “Projected Costs of Generating Electricity”
- World Nuclear Association, “Nuclear Reactors in the United States of America”
- U.S. Department of Energy, “Energy Efficiency Potential”
