Thomas Edison’s invention of the light bulb often overshadows arguably one of his most important accomplishments: the creation of the United States’ power grid. That’s right, Edison designed and built the first electric network and power plant that serviced 59 customers in New York. The modern power grid was derived from the same concept that Edison implemented 140 years ago, only today it serves hundreds of millions of customers.

To be clear, it was not until the 1950s and 60s that the power grid really took shape. Originally, it was intended to have a service life of 50 years. While the grid has been neglected for years, it might be that we’re finally at a point where real action can be taken to upgrade our aging infrastructure as utility companies pivot to more renewable forms of energy in the face of accelerated climate change. What does this mean for supply chains?

It is important to understand how the current grid was constructed to get a full picture of the problem at hand. The nation's power grid is similar to our cardiovascular system as it is made up of different arteries and veins that distribute power through three separate grids, the Eastern, Western, and Texas interconnections. Nuclear power plants or fossil fuel-based power plants that burn either coal, oil, or natural gas pass along electricity through high-voltage transmission lines to local facilities called substations. From there, substations convert the high-voltage power to lower voltage that is then distributed to businesses and homes. In total, the grid is home to 7,700 power plants, 3,300 utilities and 2.7M miles of power lines (that’s equivalent to travelling to the moon almost 11 times). It is often deemed as one of the most impressive machines in modern history because of its sheer size and intricate complexities.

There is growing demand for cleaner power generation as the globe shifts to more eco-friendly renewables. Coal plants have been trending downwards in part to high pollution output. Instead, utility companies in the US are opting to utilize renewable energy sources like hydro, wind, and solar which will play a large role in the future. To provide perspective, the US grid produced over 4T  kWh of electricity in 2020, dominated by natural gas, oil, coal, and nuclear energy sources while renewables made up 21%. Deloitte has predicted that by 2040, zero-emission sources are expected to generate nearly 60% of capacity.

US supply chains account for a large chunk of US electricity consumption. In 2020, the industrial and transportation sectors used over 900B kWh of electricity, making up 26% of total electricity consumed. This is equivalent to powering over 18B Tesla Model 3s (assuming they’re standard range at 50 kWh). Supply chains rely heavily on the grid for a consistent supply of power which ultimately opens the door to serious risk. Critical energy resources fall victim to cyberattacks which cause power outages, supply shortages, and inflates commodity prices. There is undue risk around facilities getting power which can affect both the warehousing and manufacturing sectors. Service to downstream suppliers can become disrupted which ultimately negatively affects customer relationships. To keep it simple, here are a few major threats to the nation’s power grid happening today that can have a direct impact on supply chain operations.

In addition to these unpredictable threats, there is a fear that electric vehicle adoption will add major stress to the grid. While the grid will eventually need to add capacity to support electrification, current capacity can support demand for the next 3 decades. According to the Annual Energy Outlook, released by the US Energy Information Administration, demand for electricity will remain under 3% of the nation’s total electrical demand through 2050. The report also states that vehicle sales and utilization would need to increase substantially to increase total demand by more than a fraction of a percent. In short, the rise of EVs will not pose any major threats to our existing grid at this point in time.

Utility companies are exploring the possibility of a hybrid grid, which combines the physical grid with a digital layer. If this approach materializes, the digital layer would allow the utility to spot potential issues and mitigate without the need for direct intervention. But how can supply chains specifically prepare for the risks?  Great question.

Here are three opportunities that can help mitigate risk to supply chain operations during crisis:

One of the most important by-products of any decision under consideration are the added benefits. New value can be added to an entire organization if it takes advantage of the opportunities that digitization and clean energy present.

At the end of the day, supply chain disruptions are bound to happen whether anticipated or not. COVID, for example, created unpredicted outcomes in every existing supply chain vertical. It’s important to stay aware of a supply chain’s operational dependency on the power grid and prepare for worst-case scenarios. Modernizing supply chains today could be the distinguishing factor that keeps a business afloat if a grid failure happens tomorrow.