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Menopausal Mother Nature

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Ten economic facts about electricity and the clean energy transition

Ten economic facts about electricity and the clean energy transition

By Lauren Bauer, Wendy Edelberg, Isabel Leigh, Noadia Steinmetz-Silber, Mareldi Ahumada Paras, Michael Mastrandrea, Michael Wara

The passage of historic climate legislation in the past year—both the Infrastructure Investment and Jobs Act (IIJA) and the Inflation Reduction Act (IRA)—could lead to a revolution in clean energy generation in the United States. These federal resources have the potential to accelerate a broad energy transition; but, that transition will only be successful if we grapple with technical challenges and infrastructure issues inherent to the current energy system.

This set of facts elevates key energy system characteristics, especially within electricity production, that will be consequential to the clean energy transition in the near term and merit policymaker attention. Electricity production is not only the focus of recent legislation but also where evolving technologies will deliver the most rapid change, and where—because of the system’s highly regulated nature—that change is likely to encounter the greatest limitations. During this rapid evolution, the electricity system must reliably meet the fundamental challenge that electricity generation and consumption must be equal at all times to keep the grid in balance.

The anticipated pace and scale of building energy infrastructure over the next two decades is much greater than anything the U.S. experienced since at least the 1970s, when modern planning and administrative processes for domestic energy infrastructure began to proliferate. We highlight key concerns regarding today’s technologies and processes that policymakers will need to monitor and address as the energy infrastructure build-out gathers momentum.

One significant challenge is that new ways of generating energy interact with infrastructure and regulatory approaches created for an era when demand for power was growing rapidly and the best way to meet that demand was through constructing very large fossil-fired power plants. The relationships between new ways of generating energy, the current and future pace of change, and legacy infrastructure create conflict and challenges. As the U.S. seeks to increase capacity, the differing characteristics of utility-scale, community-sized, and customer-sited clean energy options need to be taken into account. Furthermore, characteristics of clean energy generation itself—such as different kinds of economies of scale in production and more seasonal variation in generation—need to be considered as the U.S. seeks to increase capacity.

We argue that an overarching reality and the great challenge of the next decade of U.S. climate policymaking will be for lawmakers and regulators to remove existing barriers to clean energy infrastructure deployment. More money for investment and innovation is necessary but will not be enough. Fully realizing the promise of the clean energy transition for U.S. economic growth, jobs, and prosperity will require developing solutions that remove the choke points created by the existing infrastructure and regulatory systems and deploying both new clean energy generation and the systems required to connect these new energy sources to electricity consumers.



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