Grid modernization: Digital solutions to legacy energy infrastructure

The electric grid across North America is facing a period of significant stress and change, with a variety of constraints and pressures. For utilities looking to address these challenges, an “all of the above” approach is necessary: increasing capacity through new infrastructure for all types of energy, updating existing infrastructure, and modernizing the grid with emerging technology solutions.

North America led the world in power digitalization projects in 2023, and midyear data from 2024 showed that trend continued. Intelligent devices and systems in combination will enable utilities to do more with their existing infrastructure and maximize returns on investments in new infrastructure as they grow to meet customer needs.

Drivers behind grid stress

The North American power grid will experience tremendous growth over the coming years and decades, with U.S. demand forecast to grow 25% by 2030 and 50% by 2050, according to research from ICF and the National Electrical Manufacturers Association. Demand in some regions such as the mid-Atlantic and Texas is expected to grow even more, driven by a boom in data centers powering the artificial intelligence arms race and cryptocurrency mining, new industrial facilities, and electric vehicle demand. Canada sees similar growth drivers and is expected to grow even faster than the United States (on a percentage basis) through 2050, with estimates ranging from 55% to 117% growth, according to the Canada Energy Regulator.

Constraining this growth, however, are multiple challenges, such as:

• Aging grid infrastructure. Seventy percent of U.S. transmission lines are over 25 years old, according to the U.S. Department of Energy. Many are over 50 years old, nearing the end of their lifespan. Combined with capacity limitations in some areas, new transmission/distribution lines are needed to serve the growing electricity load and locations needing (or providing) power.
• Supply chain limitations. There are constraints on new equipment across the power sector, complicating grid maintenance and growth. New natural gas plants face a three-to-five-year backlog, and the transformers and switchgear needed to connect new power plants, data centers and industrial facilities can have a backlog of one to two years. Supply chain challenges will only grow, as the U.S. transmission system’s capacity needs to at least double by 2050, and the demand for distribution transformers may grow by 160% to 260% over the same period, according to a 2024 study from the National Renewable Energy Laboratory.
• Project delays and economic shifts. Due to factors ranging from supply chain challenges to lengthy permitting and interconnection queues, new grid-related projects are taking three years longer than in the past. Combine that with higher interest rates and costs, and these projects carry more risk to developers and therefore a higher barrier to entry.
   

Key modernization technologies

Utilities must consider multiple simultaneous solutions to grow their grid capacity and resilience. While much of the focus is on connecting new power generation and new transmission/distribution lines, growth in distributed energy resources and grid modernization technologies such as the ones below must play a key role too. (Most notably, projects related to grid control led the charge of all grid digitalization projects in 2023, representing approximately 33% of all projects, according to BloombergNEF.)

• Virtual power plants. Utilities can deploy a technology platform that coordinates thousands of small energy sources (e.g., home batteries, solar panels) and flexible demand response sources (e.g. smart thermostats, cryptocurrency mining) to bring additional power onto and/or reduce load from the grid during periods of limited capacity.
• Dynamic line rating. Using real-time sensors and weather information, utilities can upgrade from static power line capacity ratings to solutions that consider current conditions, possibly boosting capacity by 20% or more while enhancing safety. Multiple pilot projects have already been completed to prove the technology’s effectiveness.
• Distributed energy resources management systems. These systems can intelligently coordinate local power supply and demand within a home or neighborhood—across solar panels, batteries, electric vehicles, heating/cooling systems and other sources—to shift the energy load from grid equipment during peak times. These systems reduce the utilities’ need to invest in extra grid capacity, saving tens to hundreds of millions of dollars in some deployments.
   

Implementation challenges and success factors

Making the case for and implementing grid modernization technologies will have its own set of challenges that utilities must plan for and manage, especially:

• Business and rate justification. While digital grid solutions are not new, they are still not as familiar as legacy systems to executives, public utilities commissions and regulators, meaning organizations may need to educate and collaborate more to justify the expense. Early engagement with stakeholders and using frameworks like those from the Lawrence Berkeley National Laboratory can help build consensus and justification for these investments. Fortunately, federal funding or other rate incentives may be available to make the case easier.
• Infrastructure and cybersecurity readiness. Utilities must integrate their legacy systems and infrastructure with these modern grid platforms and sensors, some of which are cloud native, and cybersecurity integration will be required early in the solution design. While this shift in infrastructure and cybersecurity approach will take planning and coordination between utilities and regulators, the goal is achievable and will bring net benefits for utilities when it comes to their adaptability and resilience.
• Workforce readiness. These new solutions will require upskilling existing workers and attracting new workers whose skill sets align with these technologies at a time when the industry faces a brain drain of retirees and competition for employees in other industries.
   

Looking ahead

North American utilities must consider adopting various grid modernization solutions as part of the “all of the above” approach needed across the industry to meet growing grid demand, using technology to maximize the use of existing infrastructure.

Middle market and municipal utilities often take longer than larger utilities to adopt new technology and are more constrained in capital and resources. Yet, they have similar customer expectations and continue to receive requests for new loads from the likes of new data centers, factories and electric vehicles. For these utilities focused on doing more with less, grid modernization solutions are a rational next step toward future success.