The Energy Transition’s Going to Happen – Just Not the Way You’re Being Told

Cornell's Enterprise Engineering Colloquium

“The Energy Transition” you’ve no doubt heard about is happening, but it is not the sweeping transition to alternative energy sources that many anticipated. While moving away from fossil fuels is a popular idea in theory, in practice that shift is not happening fast enough, or at enough scale, to make moving away from traditional energy resources viable.

Resource Adequacy Is the Key Issue

PJM Interconnection (PJM), the mid-Atlantic Regional Transmission Organization (RTO), highlights resource adequacy as the key issue for energy companies in its Energy Transition in PJM: Resource Retirements, Replacements & Risks (4R) report. Several factors are fueling electricity demand at a time when older energy systems are aging out.

Electrification is increasing demand for electricity, particularly in industrial applications. Many new industrial facilities are choosing industrial processes that rely on electricity instead of fossil fuels. Some projections have industrial electricity demand increasing tenfold by 2050, which would require doubling the nation’s total electricity generation over the next 25 years just to serve the industrial sector.

Industrial electrification is already creating pressure on power grids in some locations. In Georgia, utilities are developing new “integrated resource plans” ahead of schedule to keep up with new industrial facilities. In Kansas, Ohio and other states, the energy needs of new semiconductor fabrication facilities or “chip fabs” are forcing expensive grid upgrades.

Add to this the proliferation of high-demand data centers in many regions, as well as reshoring of critical manufacturing, and demand for electricity could explode. AEP Texas went from a 7 GW system to 7.5 GW in one year and expects to be at 28 GW by 2030. Interestingly, transportation electrification has not had a meaningful impact on the electric grid due to EV inconsistencies and lack of regulations.

At the same time that demand has the potential for explosive growth, electricity supply is shrinking. Thermal generators are retiring at a rapid pace due to government policies as well as economics, and retirements are at risk of outpacing construction of new resources. Delays result from many factors, including permitting and siting bottlenecks, supply chain, and in many cases, community resistance to infrastructure development. PJM’s new service request interconnection queue for new generation supply is composed primarily of intermittent and limited-duration resources. Absent long-duration storage technology at scale, this could pose serious problems if increased demand peaks at the wrong time. As described in their 4R report, this creates additional supply challenges for the PJM region.

For example, Talen Energy’s closure of the 1,282-MW Brandon Shores coal-fired power plant near Baltimore, planned for June 2025, creates a huge supply hole in PJM’s historically constrained “Southwest MAAC” region that includes Maryland. PJM is attempting to close the supply gap with a $785 million grid solutions package, but the required transmission upgrades will take time to implement. While the buildout goes on, Maryland ratepayers will have to pay for Reliability Must Run (RMR) service to keep the plant running until the planned grid upgrades are finished.

Transmission Investment Continues

A strong regional transmission planning entity is required to weather the storm of intervention for major projects where costs are allocated across multiple states. Truly “greenfield” transmission is only realistic within existing rights of way and utility corridors, so remedial transmission will be required as generation deactivations occur. Besides resource adequacy, individual states retain jurisdiction over transmission siting, making executing transmission within the confines of a single state somewhat less difficult. This is especially true in states with a single-state RTO, such as New York, Texas, or California.

Reliability and Resilience Investment in Supportive Regulatory Jurisdictions

Electricity investment continues in some supportive jurisdictions. The Champlain Hudson Power Express (CHPE) transmission line will deliver 1,250 MW of low-cost renewable power directly into New York City in support of the state’s new Climate Leadership and Community Protection Act (CLCPA). CLCPA requires that New York be powered by 70% renewable energy by 2030.

The CHPE is expected to be fully operational in spring of 2026 and represents a $6 billion capital expenditure for 1,250 MW of controllable transfer capability from low-cost Hydro Quebec to higher-cost New York Independent System Operator (NYISO) Zone J. CHPE represents an optimal allocation of capital because controllable merchant HVDC sells its transfer capability into the market much like an interstate gas pipeline sells its capacity, and as such is subject to the rigors of the power and financial markets.

FirstEnergy plans to spend $26 billion on its regulated utility system over the next five years, a 44% jump from its last five-year investment plan. About 75% of the planned spending will be on investments that can be recovered through state and federal formula rates, which are recouped outside of rate cases. FirstEnergy expects its rate base will grow by 9% per year over the next five years – up from about 6% per year – with single digit rate hikes for its customers over that period. About 45% of FirstEnergy’s capital expenditure plan targets Federal Energy Regulatory Commission-regulated transmission projects, including ones to support New Jersey offshore wind and new data centers.

Challenges Associated with Alternative Energy Options

Despite the need for more energy in the midst of closing power plants, moving away from fossil fuels presents many challenges.

Offshore wind requires complex infrastructure to support, and higher wind speeds, strong seas, and accessibility issues make offshore wind farms challenging to maintain. New York state just cancelled three different offshore wind projects due to impaired economics resulting from a downsize in turbine capacity from the manufacturer. Onshore wind is less complex to implement and is perceived to have better economics, but the blades and turbines have been subject to the same supply-chain challenges as its offshore counterpart.

Until recently, utility-scale solar projects have been the beneficiaries of a declining cost curve. Battery energy storage has experienced cost declines of late, and extension of the Investment Tax Credit to freestanding storage in the Inflation Reduction Act could further help defray costs. With standalone solar or wind, the quantity of energy generated depends on the weather and time of day. The resultant grid imbalances, and potential stability and dependability problems, could be alleviated by a more expansive deployment of storage technologies. Another potential solution would be for RTOs such as PJM to reform their wholesale market structures to better incentivize the development and buildout of more dispatchable renewable resources such as solar + storage and wind + storage vs. the standalone wind, solar and battery storage that is currently being built.

What Are Our Options for Energy in 2024?

Bulk Power System (BPS) reliability has become an increasing concern of regulators and grid operators. According to the North American Electric Reliability Corporation’s 2023 Long-Term Reliability Assessment, there are just a handful of options for the United States power grid: 1) Add new resources with the required reliability attributes and make existing resources more dependable, 2) expand the transmission network to deliver supplies from new resources and locations to serve changing loads, 3) adapt BPS planning, operations, and resource procurement markets and processes to the realities of a more complex power system, and 4) strengthen relationships among reliability stakeholders and policymakers.

Conclusion: The Energy Transition May Take More Time than Previously Thought

While the deployment of zero carbon generation resources such as solar, wind, battery storage, and geothermal will become increasingly important in decarbonizing the North American electric grid, it is also apparent that traditional energy sources will be needed to meet current and future energy demand for the foreseeable future. What this looks like may vary from state to state, because individual states may be poised to solve their state energy concerns in different ways. Building transmission within the confines of a single state is significantly less difficult, and each state has its own regulations and its own supply and demand opportunities and challenges. The individual states can best focus on their localized issues.

If you are not sure how to continue meeting energy demand, Tangibl can help. Tangibl’s power engineering and consulting technical team has decades of experience in the power sector. Our capabilities and experience span the entire capital project life cycle, from project conception and approval through preliminary and detailed engineering, project closeout and commissioning. We can help you choose the right project, ensure its approval, and help you continue generating the electricity you need to stay ahead of increasing demand.