The price of power grids

The evidence is survey data rather than theory. A global survey of grid component costs, which he credits to the IEA, puts real prices for the two largest components at nearly double their level five years earlier, and the shape of the series is the point: the rise began with pandemic bottlenecks, which then receded while the prices did not. American producer price data says the same across transmission and distribution equipment, including less familiar items such as switchgear. Availability moved with price: lead times have quadrupled, and an industry group found most utilities delaying or cancelling projects for want of a transformer, from a residential service upgrade to a data center connection.

There is no single fix, he says, because the bottlenecks run up and down the chain. Grain oriented electrical steel is the worked example: used almost only in electrical equipment, its price tracks how fast the world is building grid rather than the metals market, which is why it stayed high while aluminum and copper eased, and America has a single domestic producer. He names American aggravations, uncertainty over federal efficiency mandates and new tariffs, but says the global story is plain supply and demand, with electrification and data center construction pulling harder than supply can answer. Gas turbines are the same story one step behind: prices have so far risen only with inflation, but the three big manufacturers are reportedly sold out through the decade, so he expects a steeper curve. Renewables are caught in it too, partly because every project needs transformers and switchgear to connect at all, and partly for reasons specific to wind and solar that he refers to an earlier post.

The consequences are where he stops reporting and starts predicting. Efficiency arrives in waves behind price shocks, he says, and has been dull for a decade because the recession, cheap shale gas and the LED bulb removed the pressure; with prices structurally higher he sees old plans coming back out. Microgrids get the longer treatment and the stronger claim. The familiar case is speed: a large consumer in a hurry, a data center developer above all, can buy its way past slow central infrastructure and has shown it will pay a premium. His further claim is that they can also be the cheapest way to add capacity for the system as a whole, supported with a utility program and two portfolio companies rather than a cost comparison. He closes by saying the inventions already exist; what is missing is the pace of experimenting with them.