CHAPTER 4:
ENERGY SUPPLY, DELIVERY, AND DEMAND

State of the Sector

The Nation’s economic security is increasingly dependent on an affordable and reliable supply of energy. Every sector of the economy depends on energy, from manufacturing to agriculture, banking, healthcare, telecommunications, and transportation (DOE 2017). Increasingly, climate change and extreme weather events are affecting the energy system (including all components related to the production, conversion, delivery, and use of energy ), threatening more frequent and longer-lasting power outages and fuel shortages (DOE 2015a). Such events can have cascading impacts on other critical sectors (Horton et al. 2016; Rosenzweig et al. 2017) potentially affecting the Nation’s economic and national security. At the same time, the energy sector is undergoing substantial policy, market, and technology-driven changes (DOE 2017, 2017b). Natural gas and renewable resources are moving to the forefront as energy sources, forcing changes to the design and operation of the Nation’s gas infrastructure and electrical grid. Steps are being taken to ensure the safe and reliable provision of energy (DOE 2017, 2017b, 2015b, 2015c). However, much work remains to establish a climate-ready energy system to address present and future risks.

Regional Summary

Energy systems and the impacts of climate change differ across the United States, but all regions will be affected by a changing climate. The petroleum, natural gas, and electrical infrastructure along the East and Gulf coasts are at increased risk of damage from rising sea levels and hurricanes of greater intensity (see Ch. 18: Northeast and Ch. 19: Southeast). This vulnerable infrastructure serves other parts of the country, so regional disruptions will have national implications. Hawai‘i and the U.S. Caribbean regions (see Ch. 27: Hawai‘i and Pacific Islands and Ch. 20: U.S. Caribbean) are especially vulnerable to sea level rise and extreme weather, as they rely on imports of petroleum through coastal infrastructure, ports, and storage facilities. Alaskan oil and gas operations are vulnerable to thawing permafrost which, together with sea level rise and dwindling protective sea ice (see Ch. 26: Alaska), may damage existing infrastructure and restrict seasonal access; however, a longer ice-free season may enhance offshore operations and transport. More frequent and intense extreme precipitation events may increase the risk of floods for inland energy infrastructure, especially in the Northeast and Midwest (see Ch. 18: Northeast and Ch. 21: Midwest). Temperatures are rising in all regions, which will drive greater use of air conditioning for space cooling in summer months. The increase in annual electricity demand across the country for cooling is offset only marginally by the relatively small portion of the decline in heating demand that is met with electric power. In addition, higher temperatures reduce the generating capacity of thermoelectric power plants and the efficiency of the electric grid. Energy systems in the Northwest and Southwest (see Ch. 24: Northwest and Ch. 25: Southwest) are likely to experience the most severe impacts of changing water availability, as reductions in mountain snowpack and shifts in snowmelt timing affect hydropower production. Drought may threaten fuel production, such as fracking for natural gas and shale oil and enhanced oil recovery in the Northeast, Midwest, Southwest, and Northern and Southern Great Plains as well as oil refining and thermoelectric power generation that relies on surface water for cooling. In the Midwest, Northern Great Plains see (Ch. 22: Northern Great Plains), and Southern Great Plains see (Ch. 23: Southern Great Plains), higher temperatures and reduced soil water content may make it more difficult to grow biofuel crops.

As the leading cause of power outages in the United States, extreme weather is the principal contributor to their increasing frequency, duration, and associated costs (USGCRP 2017; DOE 2017; NOAA 2017). Extreme weather includes high winds, thunderstorms, hurricanes, heat waves, intense cold periods, intense snow events and ice storms, and extreme rainfall. Such events can interrupt energy generation, renewable sources and infrastructure, and fuel production and distribution systems, causing fuel and electricity shortages or price spikes. Many extreme weather impacts are expected to continue growing in frequency and severity over the coming century (USGCRP 2017), affecting all elements of the Nation’s complex energy supply system, and reinforcing the energy supply and use findings of prior National Climate Assessments (Dell et al. 2014).

High winds can damage electricity transmission and distribution lines, causing widespread outages that can take weeks to fully resolve, at sizeable economic costs (DOE 2017, 2015a). Hurricane-strength winds also threaten damage to buildings, cooling towers, port facilities, and other onshore and offshore structures associated with energy infrastructure and operations (DOE 2015a). Extreme rainfall (including extreme precipitation events, hurricanes, and atmospheric river events) can lead to flash floods that undermine the foundations of power line and pipeline crossings and inundate common riverbank energy facilities such as power plants, substations, transformers, and refineries (DOE 2015a). River flooding can also shut down or damage fuel transport infrastructure such as railroads, fuel barge ports, pipelines, and storage facilities (DOE 2015a).

Coastal flooding threatens much of the Nation’s energy infrastructure, especially in regions with highly developed coastlines. Coastal flooding, including wave action and storm surge can affect gas and electric asset performance, cause asset damage and failure, and disrupt energy generation, transmission and delivery. In addition, flooding can cause large petroleum storage tanks to float, destroying the tanks and potentially creating hazardous spills (DOE 2015a). In the Southeast (Atlantic and Gulf Coasts), power plants and oil refineries are especially vulnerable to flooding. The number of electricity generation facilities in the Southeast potentially exposed to hurricane storm surge is estimated at between 69 to 291 for Category 1 and Category 5 storms, respectively (Maloney and Preston 2014). Increases in baseline sea levels exposes many more Gulf Coast refineries to flooding risk during extreme weather events. For example, given a Category 1 hurricane, a sea level rise of less than 1.6 feet (0.5 meters) doubles the number of refineries in Texas and Louisiana vulnerable to flooding (Maloney and Preston 2014). Nationally, a sea level rise of 3.3 feet (1 meter) could expose dozens of power plants that are currently out of reach to the risks of a 100-year flood. This would represent an additional cumulative total of 25 gigawatts (GW) of operating or proposed power capacities at risk (Bierkandt et al. 2015). In Florida and Delaware, sea level rise of 3.3 feet (1 meter) would double the number of vulnerable plants (putting an additional 11 GW and 0.8 GW at risk in the two states, respectively); in Texas, vulnerable capacity would more than triple (with an additional 2.8 GW at risk) (Bierkandt et al. 2015).

Rising temperatures and extreme heat events (see Vose et al. 2017; Wehner et al. 2017; Kossin et al. 2017) drive increases in demand for cooling, while simultaneously resulting in reduced capacity and increased disruption of power plants and the electric grid, and potentially increasing electricity prices to consumers. Increased demand for cooling may also increase energy-related emissions of air pollutants, particularly important in the summer, where warmer temperatures and more direct sunlight can exacerbate the formation of photochemical smog see (Ch. 13: Air Quality). More frequent, severe, and longer-lasting extreme heat events may make blackouts and power disruptions more common and increase the potential for electricity infrastructure to malfunction (DOE 2017; 2015a; EPA 2017a; USGCRP 2017, Auffhammer et al. 2017).

If greenhouse gas emissions continue unabated (as with the RCP8.5 scenario; see Ch. 2: Our Changing Climate for more detail on scenarios), rising temperatures are projected to drive up electricity costs and demand. Higher temperatures may drive up electricity costs not only by increasing demand but also by reducing the efficiency of power generation and delivery, and require new generation capacity, costing residential and commercial ratepayers up to $12 billion per year (Risky Business 2014, DOE 2015a). By 2040, nationwide residential and commercial electricity expenditures will likely increase by 6%–18% under a higher scenario (RCP8.5), 4%–15% for a lower scenario (RCP4.5), and 4%–12% for an even lower scenario (RCP2.6) (Rhodium 2017). Nationwide electricity demand is projected to increase by 3%–9% by 2040 under the higher scenario and 2%–7% under the lower scenario (Rhodium 2017). This projection includes the reduction in electricity used for space heating in states with warming winters. In a lower scenario (RCP4.5), temperatures remain on an upward trajectory that could increase net electricity demand by 1.7%–2.0% (EPA 2017a). To ensure grid reliability, enough generation and storage capacity must be available to meet the highest peak load demand. Rising temperatures could necessitate the construction of up to 25% more power plant capacity by 2040, compared to a scenario without a warming climate (Rhodium Group 2017).

In some geographical areas, extreme temperatures and shifting climate patterns can lead to drought. Most U.S. power plants, regardless of fuel source (for example, coal, natural gas, nuclear, concentrated solar, and geothermal) rely upon a steady supply of water for cooling, and operations may be threatened when water availability decreases or water temperatures increase (DOE 2015a). Elevated water temperatures reduce power plant efficiency; in some cases, a plant may have to shut down to comply with discharge temperature regulations designed to avoid damaging aquatic ecosystems (DOE 2015a). In North America, the output potential of power plants cooled by river water could fall by 7.3%–13.1% by 2050 under the RCP2.6 and RCP8.5 scenarios, respectively (van Vliet et al. 2016). A changing climate also threatens hydropower production, especially in western snow-dominated watersheds, where declining mountain snowpack affects river levels see (Ch. 24: Northwest and Ch. 25: Southwest)). For example, severe extended drought caused California’s hydropower output to decline 59% in 2015 compared to the average annual production over the two prior decades (EIA 2017a).

Reduced water availability also affects the production and refining of petroleum, natural gas, and biofuels. During droughts, hydraulic fracturing and fuel refining operations may need alternative water supplies (such as brackish groundwater) or may have to shut down temporarily (DOE 2015a; 2013; Galbraith 2012). Shutdowns and adoption of emergency measures and backup systems can increase refinery costs, raising product prices for the consumer (DOE 2013). Agricultural drought can affect the cultivation of biofuel feedstocks and may increase the risk of wildfires that threaten transmission lines and other energy facilities (USGCRP 2017; DOE 2015a).

The energy sector is undergoing a transformation driven by technology, markets, and policies that may affect the sector’s vulnerability to extreme weather and climate hazards. New drilling technologies and methods are enabling increased natural gas production, lower prices, and greater consumption. For example, in 2016, for the first time in history, natural gas replaced coal as the leading source of electricity generation (DOE 2017b, EIA 2017a). Likewise, dramatic reductions in the cost of renewable generation sources have led to rapid growth of solar and wind installations (DOE 2016a). Solar and wind generation grew by 44% and 19% in 2016, respectively (EIA 2017b). These changes offer the opportunity to diversify the energy generation portfolio, but may also affect the operation and reliability of power generation, transmission and delivery. For example, increased use of natural gas generation may improve grid flexibility and reliability, as gas-fired power plants can quickly ramp output up and down (DOE 2017). These capabilities can partially address the variability introduced by wide-scale deployment of solar and wind generation (DOE 2017). In addition, increased adoption of flexible demand programs, increased transmission, and energy storage technologies are being explored as ways to enhance system flexibility and reliability (DOE 2017b).

The grid itself is adopting new technologies. For example, grid operators are improving system resilience and reliability by installing advanced communications and control technologies as well as automation systems that can detect and react to local changes in usage. On distribution grids, smart meter infrastructure and communication-enabled devices give utilities new abilities to monitor—and potentially lower—electricity usage in real time. These technologies provide operators with access to real-time communications for outages, and better tools to prevent outages and manage restoration efforts.

Fuel availability for electricity generation can affect reliability and resilience. Maintaining onsite fuel resources is one way to improve fuel assurance, but most generation technologies have experienced fuel deliverability challenges in the past (DOE 2017b). Coal facilities typically store enough fuel onsite to last for 30 days or more, but extreme cold can lead to frozen fuel stockpiles and disruption in train deliveries. In contrast, natural gas is delivered by pipeline as needed. Capacity challenges on existing pipelines combined with the difficulty in some areas of siting and constructing new natural gas pipelines, along with competing uses for natural gas such as for home heating, have created supply constraints in the past (2017b). Maintaining and storing gas to reduce vulnerabilities to shortages may result in increased natural gas and electricity prices.

Increasing electrification in other sectors—including telecommunications, transportation (including electric vehicles), banking and finance, healthcare and emergency response, and manufacturing—will exacerbate and compound the impacts of future power outages (Figure 4.2) (DOE 2017). A more automated grid may also increase system vulnerabilities to other risks, such as cyberattacks (DOE 2017, 2017b).

Industry and governments at the local, state, regional, and federal levels are taking actions to improve the resilience of the Nation’s energy system. Current efforts include planning and operational measures that seek to anticipate climate impacts and prevent or respond to damages more effectively, as well as hardening measures (including physical barriers, protective casing, or other upgrades) to protect assets from damage (Con Ed 2013; DOE 2015a; Entergy 2010; Exelon 2015; PG&E 2016; Seattle City Light 2015; TVA 2014, Zamuda 2016).

Accurate load forecasting and generation planning now require considering both extreme weather and climate change. These are also essential considerations for planning and deploying energy infrastructure with a useful service life of decades. Coastal infrastructure plans are beginning to take into account rising sea levels and the associated increased risk of flooding. Resource plans for new thermoelectric power plants and fuel refineries are considering potential changes to fuel and water supplies. For example, the inability of natural gas-fired power plants to store fuel are leading energy providers to explore resilience options, such as co-firing with fuel oil, which can be more readily stored. Advanced tools and techniques are helping planners understand how changes in extreme weather and in the energy system will affect future vulnerabilities and identify the actions necessary to establish a climate-ready energy system. For the electric grid, improved modeling and analysis of changing generation resources, electricity demand, and usage patterns are helping utilities and generators plan for future changes (NREL 2015). Energy companies, utilities, and system operators are increasingly evaluating long-term capital expansion strategies, their system operations, resilience of supply chains, and the potential of mutual assistance efforts (DOE 2016b, 2015a, EEI 2014). For example, electricity demand response programs and energy efficiency programs are helping reduce or shift electricity usage during peak periods, improving grid reliability without increasing power generation.

Hardening measures protect energy systems from extreme weather hazards. Measures being adopted include the following: adding natural or physical barriers to elevate, encapsulate, waterproof, or protect equipment vulnerable to flooding; reinforcing assets vulnerable to wind damage; adding or improving cooling or ventilation equipment to improve system performance during drought or extreme heat conditions; adding redundancy to increase a system’s resilience to disruptions; and deploying distributed generation equipment (such as solar, fuel cells, or small combined-heat-and-power generators), energy storage, and microgrids with islanding capabilities (the ability to isolate a local, self-sufficient power grid during outages) to protect critical services from widespread outages.

One key category of hardening measures is addressing the vulnerability of the Nation’s thermoelectric power plants in water-constrained areas. Technologies and practices are available to help address these vulnerabilities, including alternative cooling systems such as recirculating or dry cooling technologies (Figure 4.3); non-traditional water sources, including brackish or municipal wastewater; and power generation technologies that greatly reduce freshwater use, such as wind, photovoltaic solar, and natural gas combined-cycle generation technologies (EIA 2016a; 2016b; 2014; Macknick et al. 2012; Peer and Sanders 2016). Technology is also enabling the growing use of produced water (water produced as a byproduct along with the oil and gas) and brackish groundwater for water-intensive oil and gas drilling techniques (Groundwater Protection Council 2015).

The current pace, scale, and scope of efforts to improve energy system resilience are likely to be insufficient to fully meet the challenges presented by a changing climate and energy sector, and there are several key barriers that add to the challenges. Addressing these obstacles involves improved awareness of energy asset vulnerability and performance, cost-effective resilience-building technologies and operations plans, standardized methodologies for assessing the benefits of resilience measures, and more public–private partnerships to address vulnerabilities collaboratively (DOE 2017; 2015a; 2015b; 2015c). Because energy infrastructure is long-lived, decisions about how to locate, expand, and modify the Nation’s energy system will influence—either enabling or constraining—system reliability and resilience, and economic security for decades to come (DOE 2017; 2015b).