One of the biggest obstacles to America’s energy transition is its woeful power grid, says Iberdrola CEO
The U.S.'s efforts to decarbonize its economy risks being hamstrung not just by a lack of renewable energy, but a disconnected grid and a power distribution network that lags far behind Europe, says Ignacio Galán, the CEO of renewable energy giant Iberdrola.
As Galán's portrays it, the American energy grid is like a puzzle that has yet to be put together, where energy cannot be easily and quickly shifted to where it is needed. A highly interconnected grid is especially necessary to join supply and demand in systems that use a lot of renewable sources whose production fluctuates with the wind, sun and water that power them.
"[The] United States has already a lack of interconnection infrastructure, a lack of enough investment in distribution," said Galán, speaking to Fortune on the sidelines of the COP26 climate conference in Glasgow, Scotland.
The lack of interconnection also includes transmission links between the U.S. and neighboring countries: "I think it's limiting the capability of the country to achieve their decarbonization target," he said.
The climate conference in Glasgow comes as the Biden administration is in the midst of a battle to pass a series of far-reaching infrastructure bills. Last week, the House passed his $1 trillion bipartisan infrastructure bill, which covers $65 billion in funding to improve the electrical grid and make it more climate resilient. Now, the $1.75 billion section of the bill covering climate investment and social welfare is up for consideration in both houses of Congress.
Iberdrola has 10.9 GW of installed renewable energy capacity in the U.S. and another 24.8 GW renewable energy projects in the works. Galán said the Biden administration understood the challenges of building up energy infrastructure, calling it "great news—because it's really, really needed."
Many state governments were already pro-renewable power, but the change in administration now meant the message from the two levels of government was more "coherent", he said.
But Galán added that the interconnectedness of the electricity grid in Europe was already far ahead of that in the U.S.
"The reliability of the electricity grid in Europe is much, much better," he said. "Here we are already . . . moving from the automation to digitalization. In United States, they are still on the way of automizing—still far from digitalizing," the grid.
Galán pointed to the collapse of the Texas power system in February, when freakishly cold weather crippled the state's energy infrastructure, as a good example of the disconnection. The resulting shortages of gas in particular in the state were exacerbated by a lack of interconnection with neighboring states that could have supplied additional energy—a disconnect almost unthinkable in Europe, where the grid is already highly connected between countries and increasingly digitized.
A highly interconnected grid is crucial for the electrification required to decarbonize the economy: not just building renewable energy sources, but building out charging stations for electric cars, for example, and heat pumps to manage energy use in individual homes. That interconnection, experts say, also makes renewable-heavy grids more stable.
While all grids must currently grapple with the issue of intermittency—when the wind doesn't blow, and the sun doesn't shine—and the use of stable power sources to underpin those fluctuation, an interconnected grid helps balance the shifting supply and demand of a renewable-heavy grid.
That doesn't mean there is enough infrastructure in Europe, either, he said, pointing out that without distribution to stitch the continent's energy together, it risked creating a bottleneck.
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