Grid Reliability in the Food Processing Industry: Increasing Food Industry Operational Costs and Consumer Food Prices
Ensuring grid reliability is crucial for American manufacturing and consumer costs. In the face of extreme weather events and transition risks, proactive measures are needed to help mitigate evolving challenges and ensure grid resilience and reliability. This is particularly important for American food producers and processors, as foreign competition in the food space has the United States as a net food importer for the first time in our history in 2023 and that is projected by USDA for the near future. This has resulted in the shuttering of many American food processing facilities.
Grid Fast Facts
Power outages cost the U.S. economy approximately $150 billion each year.
Over 70% of the grid is more than 25 years old and will need replacing in the coming decades.
Between 2020-2022, the U.S. experienced 297 minutes of power outages, marking a 172% increase compared to 2013-2015.
Peak energy demand nationwide is forecasted to grow by 38 gigawatts (GW) through 2028, which would be the equivalent of adding another California to the grid.
Increase in Power Demand and an Aging Grid
Demand for power is growing at its fastest pace in 30 years. In the next decade, peak summer demand is forecast to spike by more than 78 GW and by 90 GW in the winter as the transportation and building sectors electrify. Simultaneously, US utilities expect to continue decommissioning coal-fired power plants and other fossil fuel facilities in the next 10-years, with 83 GW of fossil fuels or nuclear power plants expected to retire.
There are several drivers of electricity demand growth:
The electrification of transportation and buildings
New investments in hydrogen fuel plants
More frequent and severe extreme weather events driving record peak demands
A surge in data center construction
Power Outages: A Costly Disruption for Food Manufacturers
Aging infrastructure, coupled with increasingly frequent severe weather events and rising electricity demand, poses significant challenges to reliability. Food processing facilities (food manufacturers), rely heavily on a stable and uninterrupted power supply to maintain operations. Any unplanned loss of power can result in complete halts in production, leading to loss of material, clogged equipment, downtime and the potential for supply chains to shut down altogether. The intricate nature of shutting down food processing facility means that even brief power disruptions can lead to extended recovery periods, sometimes surpassing 24 hours. These increased operational costs are ultimately reflected in the cost of food for consumers.
Overall Risks Inclue:
Production Disruption
Equipment Damage
Quality Control Issues
Supply Chain Disruption
Financial Loss
There are real risks that some areas – especially rural ones – may miss out on economic development opportunities because the grid can’t keep up. Such instability undermines the international competitiveness of American businesses and jeopardizes the reliability of the supply chain, ultimately impeding economic growth and prosperity.
Outlook: The US Grid Faces Power Shortfalls
Increasing demand is being met by unprepared supply. The Midwest and parts of the Southeast face the highest risk of reliability problems due to heightened demand and inadequate supply, followed by the West, Texas, New England and New York. The grid encompassing most of the Midwest is expected to have a 9.5 GW shortfall in 2029 due to planned generator retirements. New power generation and transmission networks can take years to bring online, underscoring the urgent need to address the impending reliability concerns.
Many food processing facilities – like many businesses facing power uncertainty – have entered into voluntary load shedding agreements with local utilities to lessen power usage in high-demand situations to avoid unplanned disruptions. These agreements greatly reduce the threat of complete outages, but still result in decreased output and recovery costs. Batteries and on-site backup generators could provide short-term relief but are capital-intensive and expensive to maintain.
To enhance the reliability of America’s power supply, it's essential to augment power generation and transmission lines, bolstering their ability to withstand shocks like extreme weather events, and minimize unnecessary major increases in demand that could strain the grid during challenging periods.
The Solution Must Come from Improving the Grid
Many food processing facilities – like many businesses facing power uncertainty – have entered into voluntary load shedding agreements with local utilities to lessen power usage in high-demand situations to avoid unplanned disruptions. These agreements greatly reduce the threat of complete outages, but still result in decreased output and recovery costs. Batteries and on-site backup generators could provide short-term relief but are capital-intensive and expensive to maintain.
To enhance the reliability of America’s power supply, it's essential to augment power generation and transmission lines, bolstering their ability to withstand shocks like extreme weather events, and minimize unnecessary major increases in demand that could strain the grid during challenging periods.
