Power grid: It ain’t broke, but we sure need to fix it

Here’s a fun riddle that emerged from a delightfully entertaining panel discussion at the recent New Jersey Utilities Association annual convention:

What is repeatedly called out for its shortcomings, doubted for its ability to handle modern technology, certainly will require multibillions (if not trillions) of dollars to update … but is not actually broken?

The power grid — also known as the PJM interconnection grid, which serves most or all of 13 mid-Atlantic and Midwest states and Washington, D.C.

“The grid is not broken,” Jason Stanek, executive director – governmental service at PJM, said. “Like any other piece of machinery, it needs to be cared for and maintained, regularly.”

In one sense, he’s right. The grid is not broken. It’s actually very reliable.

No one doubts the lights will come on — or thinks the grid will collapse during a weather event. In fact, Stanek pointed to a recent study that found ratepayers would not be willing to pay a little more for more reliability because they are so satisfied with the status quo.

Issues, however, are coming. And coming fast.

The push for offshore wind, electric vehicles and — more than anything — data centers, requires nearly immediate action regarding grid modernization from a sector that often takes years to pivot.

Eric Miller, the executive director of the Governor’s Office of Climate Action & the Green Economy, was willing to jump on the it-ain’t-broke-but-we-need-to-fix-it bandwagon.

It’s just a matter of when.

“I think the question we should be asking is: ‘Do we want to wait 18 months? Or can we do in six months?’” he said. “And how can we change the way that we’re doing planning in New Jersey to be very proactive and say: ‘This is what we want to happen. This is how much load we expect to add to the grid. This is how we want to build out reliability and resiliency — now, utilities, go build with this in mind.’”

Thankfully (and that is written honestly), the federal government is coming in to help.

On May 13, the Federal Energy Regulatory Commission issued Order No. 1920, which aims to increase the pace of transmission grid expansion and strengthen regional transmission planning.

FERC’s landmark order represents a fundamental reshaping of the transmission planning landscape, requiring long-term transmission planning, closer coordination between generation interconnection and regional transmission planning and revisions to the local transmission planning process.

Stanek said the order not only standardizes planning across the country but, more importantly, helps determine who will pay for it.

“What the new rule does is to standardize across the country requirements that transmission planners now plan out 20 years in the future — which is a challenge, because we’ve seen new injects onto the grid,” he said. “We see data centers, and AI, that we weren’t even talking about 12-24 months ago. And we’re trying to figure out who’s going to pay for them.”

Cost, as always, is the key issue here.

FERC is allowing neighboring states to be charged for a project if they will benefit from it, Stanek said, pointing to a project in Northern Virginia in which Maryland will get a bill for 10% of the cost.

The key is to make sure these grid improvement charges go to more than just states (read: the average ratepayers) and to the companies causing the increased load on the grid (data centers are at the top of that list).

Rick Mroz, the former president of the New Jersey Board of Public Utilities, who now has a number of advisory roles and is considered a thought leader on these subjects, offered his take (making it clear that it was his take, not that of any organization he is connected to).

“There are emerging discussions now specifically on that issue of large industrial customers having to pay more, so that doesn’t get socialized to all the other investors,” he said.

“That is going to change the way we have historically looked at building out the grid. But that’s a conversation that’s happening right now. It’s happening across the country. And it’s going to have to happen here. How do you drive back costs back to the data center servers, rather than have the rest of the customers subsidize it?”

The energy needs of data centers (and other potential projects, such as charging stations for large industrial vehicles) can be enormous.

Michael Demas of Jersey Central Power & Light and Ed Grey of Public Service Electric & Gas talked about how these projects immediately become the biggest users among their customers.

The fact that data centers can go up so quickly (in months, as opposed to offshore wind projects, which take decades) adds to the need to address grid modernization quickly. Stanek said usage, which was flat or declining for decades, is now growing at 2% a year — and is projected to grow at 2% a year for years to come.

Making sure the grid can handle it grows in importance on a daily basis.

Paul Heitman, who recently joined the BPU as an expert on transportation, electrification and grid modernization, said the grid can handle what is needed … if the grid becomes more adaptive and flexible, he said.

“There is a lot that the grid can’t handle right now, but, if you put the right tools in place, and market forces and growth in the utilities systems happened in a coordinate way, it becomes ever growing, ever modernized to handle more load,” he said.

The apparent good news is that the state is looking to commit more than $540 million to modernizing the grid.

Problem solved?

Not even close, the experts said.

“$540 million is not pocket change, but it’s not a lot of money in the utility space,” Stanek said. “We’re talking billions and billions of dollars, not $540 million.”

Miller said you have to view modernization as a continual effort.

“Grid modernization is not a single project: ‘If only we have a trillion dollars, the grid would be modernized and then it would be done,’” he said. “It’s an ongoing process. I really think the way to approach it is through holistic planning lens, taking a look at what’s the money we’re going to end up spending.

“And how do we spend the money, we know we’re probably going to spend anyway, to maximize value and minimize costs. It’s not always just going to be poles and wires. And I think that’s the piece everyone is working toward, and I think where we’ll see a lot of success.”