The United States has set a bold goal to create a
greenhouse gas emissions-free power sector by 2035
and a net-zero emissions economy by 2050. Massive
electrification of transportation and building energy
use and a proliferation of renewable energy and
distributed energy resources (DERs) are central to the
strategy to achieve emissions reductions.
However, the strategies to reduce greenhouse
gas emissions aren’t being pursued in a vacuum.
They have a disruptive effect on the United States
electric grid, particularly local distribution grids that
are already being tested by more extreme weather.
There’s a clear case that distribution grids around
the country need increased investment for greater
resilience and reliability with the added stresses of
electrification, intermittent renewables, and DERs.
S&C Electric Company, a leader in grid resilience,
details the scale of underinvestment in the U.S.
distribution grid and how it will limit electric
reliability and America’s pursuit of a resilient, clean
energy future. It also outlines a series of practical
steps grid stakeholders, such as utilities and state
regulators, can take to improve the distribution
grid investment gap.
The Case for Distribution Grid Investment 3
What the Distribution Grid Needs:
Improved Performance, More
Investment, Better Preparedness
Distribution grids in the United States tend to share
three things in common that have an outsized
impact on total electric system reliability and efforts
to transition to a clean energy future:
1. They are the location of the vast majority of
power outages.
2. Due to myriad reasons, such as their massive,
sprawling nature and regulatory and ratepayer
pressures, there has been an overwhelming lack
of investment in them, dating back decades.
3. Electrification, renewables, and DERs are
making them arguably the most critical piece of
infrastructure in the electric system, and they are
not ready for the job.
The Case for Improved Performance
In its 2023 report “Electricity Grids and Secure
Energy Transitions,” the International Energy
Agency (IEA) noted that the United States is one
of four countries in the world where more than
90% of power system interruptions originate in
the distribution grid. In the most recent national
report of its kind, the Lawrence Berkeley National
Laboratory evaluated 2014 system average
interruption duration index (SAIDI) data from
U.S. utilities and determined that 94% of system
interruptions, including major events, originated
on the distribution grid.
On average, Americans spent eight hours without power
in both 2020 and 2021 — roughly double the rates seen
in any year from 2013 to 2016. Major blackout events
increased by more than 60% from 2015 to 2020.
Looking at 2022 SAIDI data on California’s investorowned utilities released by the California Public Utilities
Commission, 88% of interruptions originated from the
distribution grid.
Key takeaway: SAIDI customer weighted mean transmission
outages = 6%, meaning distribution outages = 94%.
Source: Lawrence Berkeley National Laboratory
The Case for Distribution Grid Investment 4
The plight of the distribution grid in California is
particularly relevant to the United States as the state
is well on its way to achieving ambitious renewable,
DER, and electrification goals — igniting a fierce
debate on the need to invest more in distribution
grid modernization to maintain reliability and build
resilience in the face of rapid system disruption.
The Case for More Investment
According to the IEA’s “Electricity Grids and
Secure Energy Transitions” report, only 23%
of distribution grid infrastructure in advanced
economies like the United States is less than 10
years old, while more than 50% is more than
20 years — in many cases, more than 50 years
old. That reality led the agency to state: “There
is a growing need to modernize this aging
infrastructure to enhance efficiency and reliability
and accommodate new energy resources.”
Despite steady efforts by utilities to improve
distribution grid planning and performance,
investments in that portion of the grid appear to
be falling short of what is needed nationwide.In a recent report, the American Action Forum
estimated that preparing the U.S. grid for the
coming wave of distributed solar PV adoption and
EVs will cost nearly $1 trillion by 2035. That means
utilities may need to spend upward of $61 billion
per year through 2035 to prepare their distribution
grids for solar PV and EVs. In reality, utilities have
been spending closer to $30 billion per year in
recent years, according to the report.
Many assume that massive electric power
system investments approved in the Bipartisan
Infrastructure Law (BIL) and Inflation Reduction
Act (IRA) will put an end to the underinvestment in
the distribution grid. While those funds do more to
move the needle, they still fall short. In the BILfunded $3.5 billion first round of Grid Resilience
and Innovation Partnerships (GRIP) Program
grants announced by the U.S. Department of
Energy in October 2023, only 50% was allocated
to distribution improvement projects, with 50%
allocated to transmission projects.
Yet, in an era in which more than 90% of
U.S. power interruptions originate in the
distribution grid, does a 50-50 funding
split reflect the system’s actual needs?
Distribution grid underinvestment has a
significant cost to society. The IEA reports that
electric grid-related outages in the United States
in 2021 had a $54 billion economic impact, and
the vast majority of those outages occurred on the
distribution grid.
The Case for Distribution Grid Investment 6
The Case for Better Preparedness
Extreme weather is causing an increasing number
of power outages in the United States, and climate
change is only expected to increase extreme
weather events. Electrification is rising in the form
of mass adoption of electric vehicles (EVs) and
electrified building appliances, such as air source
heat pumps and hot water heaters. Tax incentives
in the IRA are boosting a rapid increase in both
large-scale wind and solar and DERs such as rooftop
solar and battery energy storage systems. All
those factors — extreme weather, electrification,
intermittent renewables, and DERs — put pressure
on the distribution grid. They also necessitate a shift
from an electric grid designed to serve power in one
direction from large, centralized power stations to
one designed for distributed, multidirectional power
with more complex supply and demand shifts.
Given the shifting reality, a status-quo approach
to investment will leave the distribution grid
unprepared for the future — prone to decreasing
reliability and lacking resilience.
The IEA reports that distribution grids are the
element of the power system that is most
vulnerable to climate impacts and the leading cause
of climate-driven outages in many countries. At a
local level, EVs are experiencing rapid growth, yet
countless local segments of the distribution grid are
at risk of failure if too many EVs start plugging in
before upgrades are made.
The IEA also says the electric grid has become a
bottleneck for the transition to net-zero emissions,
with 3,000 GW of renewable power projects stuck in
grid connection queues globally. The IEA points to
an unprepared distribution grid as a major cause.
“To meet national climate targets, grid investment
needs to nearly double by 2030 to over $600 billion
per year after over a decade of stagnation at the
global level, with emphasis on digitalizing and
modernizing distribution grids,” the IEA wrote.
Changing the Narrative
Experts agree that both globally and in the United
States, investment in the distribution grid needs
to double on an annual basis. For utilities facing
myriad demands and pressure from customers
and regulators to limit rate increases, the idea of
proposing such a steep increase in spending can
seem daunting.
But doubling spending is not the only answer.
Utilities, state regulators, and other distribution
grid stakeholders can work together to pursue a
multipronged strategy to optimize grid performance,
investment, and preparedness to achieve a reliable,
dynamic distribution grid of the clean energy future.
There are several tactics all utilities should consider
developing to execute a successful, multipronged
distribution grid planning strategy.
• Focus on grid hardware: As there has been
increased focus on distribution grid investment,
it has flowed toward digitalization efforts,
The Case for Distribution Grid Investment 7
such as data management systems and digital
controls systems. While these investments are
undoubtedly an important piece of the puzzle,
they should not overshadow the need for
investments in distribution grid hardware.
When a storm hits, software cannot keep the
system online or return it to service without help.
More modern devices installed on the distribution
grid allow the system to survive the storm and
limit economic impacts on communities. When
a highway truck stop wants to install the EV
charging infrastructure to enable electrified
long-haul trucking, which could spike peak power
demand at the site from 250 kW to more than 30
MW, only hardware can prepare the grid to serve
that load. The vision for a reliable, clean energy
future depends on hardware.
• Communicate benefits: Utility customers want
to be able to plug in EVs, replace gas heaters
with electric heat pumps, and benefit from
DERs. As they do so, electricity will become
more important to their lives. Utilities should
implement a communications plan that clarifies
the link between distribution grid investments
and achieving customers’ desired future. To
better communicate with regulators, utilities can
update their metrics to reflect the full reality of
distribution grid performance. SAIDI, excluding
major events, has been a key metric used by
utilities and regulators for years. It tells a story
about grid performance on blue sky days, but
major events such as extreme storms are the
new normal. Metrics that reflect the reality of
decreasing reliability in the face of extreme
weather can help regulators and policymakers
understand the value of distribution grid
spending, especially when coupled with data
showing the negative economic impacts of
outages on communities.
• Continue to innovate: Meeting the challenges of
the future requires innovative technology that will
help modernize distribution grids. Utilities can make
small bets on innovations through pilot programs,
scaling up on innovations that prove to be the
most cost-effective. In addition, utilities can pursue
alternative means of funding, such as federal
grant programs, to limit the cost to customersplus advocate with policymakers for new funding
programs that would best move the needle.
• Advocate for a national standard on
distribution grid resilience: Industry
stakeholders can join together to use their
collective voice to push for a federal standard for
resilience. The standard could be as simple as
measuring SAIDI and SAIFI, including storm days.
This baseline requirement would set a minimum
level of resilience that must be achieved in any
part of the grid and allow flexibility to address
different challenges in different parts of the
country. A national resilience standard would
create a focus on enhancing the grid as a whole,
which would spur technology investment down
to the grid’s edge.
The Case for Distribution Grid Investment 8
S&C Contact information:
Global Headquarters
S&C Electric Company
6601 N Ridge Blvd
Chicago, IL 60626-3997
(+1) (585) 953-0111
[email protected]
With over 100 years of grid expertise, S&C
Electric Company is focused on empowering
the transformation of the grid for the next
100 years. We offer unparalleled expertise,
industry-leading quality, and customercentered innovation. Our technology
solutions work with a utility’s existing
distribution grid infrastructure to automate
and upgrade the grid, extending the useful
life of equipment and improving resilience
and reliability.
The Distribution Grid Can Be the
Best Supporting Actor in the Clean
Energy Future
Increasing extreme weather, electrification,
intermittent renewable energy and DERs are all
putting pressure on distribution grid performance,
while simultaneously making the distribution grid
more important to the economy and the average
citizen’s life. At this moment, when the distribution
grid is being asked to enable the clean energy
future, it needs help to thrive amid those disruptive
changes. The case for improved performance, more
investment, and better preparedness is clear.
Yet, much of the discourse from the kitchen table
to Capitol Hill remains focused on investments in
transmission and renewable energy infrastructure.
Utilities and grid stakeholders know the focus should
be on the distribution grid. It’s time to change the
narrative and take a more aggressive approach to
distribution grid investments so it can play its role as
the best supporting actor in the clean energy future