In the realm of predictions, the future remains uncertain, yet that didn't deter Elon Musk, the CEO of Tesla and SpaceX, from making a rather striking forecast recently. Musk predicted that the demand for electricity in the United States would triple by around 2045, largely due to the widespread adoption of electric vehicles.
This projection places him notably ahead of utilities such as PG&E, which anticipates a 70% surge in demand over the next two decades, and consulting firm McKinsey, which envisions a doubling of demand by 2050. A scenario put forth by the National Renewable Energy Laboratory in 2018, assuming 88% of light-duty vehicles in the US become electric by 2050, suggested that electricity demand in that year would be about 60% higher than the level recorded in 2022. It's worth noting that EVs accounted for merely about 7% of US vehicle sales in the previous year.
While Musk's specific figures might ultimately deviate from reality, and it's clear that he has a vested interest in hastened electricity supply growth, his core argument — that the US power supply could lag significantly behind — is gaining traction as events unfold.
In theory, the US boasts a substantial pipeline of power projects in progress: as of the end of 2022, more than 2,000 gigawatts of planned capacity and storage, predominantly renewable, were in the grid connection queue, according to the Lawrence Berkeley National Lab. Incentives within the newly enacted Inflation Reduction Act and the 2021 bipartisan infrastructure law are poised to significantly bolster clean power construction. For context, total generation capacity across all sources, including gas and coal, only reached approximately 1,200 gigawatts in 2022.
However, in practice, investment in electric power infrastructure has decelerated notably this year. This slowdown contrasts with the overall upswing in manufacturing investment in the US, partially attributed to tax credits from the Inflation Reduction Act and related industrial-policy legislation like the CHIPS semiconductor law. Recent data from CEIC, a data provider, reveals that real, annualised private manufacturing construction investment surged in the second quarter of 2023. Paradoxically, private power-sector construction investment actually decreased. The first half of 2023 witnessed a 19% year-over-year decline in total clean power installations, according to the American Clean Power Association, with newly announced purchasing power agreements shrinking by 47% in megawatt terms.
A significant part of this predicament appears to stem from mounting waiting periods for grid connections. This issue is a blend of political and technical concerns arising from the nature of wind and solar plants, which necessitate more extensive grid development due to their intermittent energy generation and remote locations. The absence of well-defined legal guidelines regarding the responsibility for long-distance transmission line costs and the resolution of permitting disputes could strangle the growth of renewable energy projects, unless swift action is taken by Congress or federal regulators.
This year's unexpectedly robust surge in manufacturing investment poses additional questions. The NREL's 2018 scenarios envisioned relatively subdued growth in US industrial energy demand through 2050, even as demand for power from EVs skyrockets. However, if US industrial policy catalyses a sustained boom in manufacturing investment over the next decade, those projections might appear overly cautious. This doesn't even consider the potential impact of an artificial intelligence arms race or other electricity-intensive innovations that might emerge unexpectedly.
Certainly, numerous new technologies will aid in conserving power and optimising existing grid resources. For instance, dormant EV batteries could potentially help balance a grid reliant on intermittent sources like wind and solar farms.
Yet, unless the legal impediments to new electricity infrastructure are addressed, the United States' aspirations to rejuvenate its manufacturing sector — not to mention the transportation sector — could fall short of their goals.
