Renewable energy and applications altering how energy is used are rattling the conventional power industry, hastening its transformation even as headwinds – things like rigorous regulations and consumer expectations of reliability – may make it feel like a bridge too far.

As with many major evolutions, the process is plodding but pressing on. And utilities should take note of just how quickly, using this generation as the latest example, that business models changed the moment that technology created disruption. In all of those moments, industries that accepted such challenges as opportunity prevailed.

And now more than ever, utilities must embrace consumer and user experiences as their true north, just as so many industries that have undergone renaissances have taken to heart.

Wall Street – once defined by shouting and hand-signaling traders in cramped pits known as “The Floor” – now is open to trading by anyone, with merely a keyboard and an internet portal. Ridesharing services such as Uber and Lyft have dawned the age of the gig economy and the “uberpreneuer” – ordinary people making cash on the side by using their cars as cabs. Television has been transformed by rapidly shifting consumer preferences and viewing behaviors made more complex and competitive by streaming devices, platforms and services. And legal streaming services — Spotify, Pandora, Tidal and the like – define a music scene once dominated by vinyl and compact discs.

Now roughly 130 years old, the electric industry is facing its time to evolve. Surveys show that many stakeholders believe a “utility death spiral” is fanned by advancements in distributed energy resources (DER) – things such as microgrids, rooftop solar units and electric vehicles – and consumer demands for cleaner, cost-effective energy. That’s if the industry doesn’t adopt alternative energy solutions, or if regulations fail to allow flexibility. Or both.

Environmental and climate concerns are grabbing more global attention, blunting debate about whether renewables are going to be the cornerstone of tomorrow’s power generation. It’s in that vein that the electricity sector and businesses need to show they’re serious about clean power and collaborate on energy solutions for increasingly urbanized societies, rendering discussions about “off-the-grid” approaches less relevant.

Solar power grabs widening spotlight

Renewables globally are outgaining fossil fuel and nuclear capacity combined, accounting for one-third of the world’s installed capacity, the Renewable Energy Policy Network for the 21st Century recently revealed in its yearly look at the market.

Down the road, the Energy Information Administration (EIA) expects generation of renewable energy to spike to nearly half of global electricity generation in the next three decades, with solar growing fastest among renewables. In the coming 30 years, Forbes recently reported, $10 trillion to more than $15 trillion will be funneled into solar and wind energy, depending on the percentage of incremental power that these renewables supply. Energy storage — key to fully harnessing intermittent power generation — is predicted to become a $20 billion annual market.

Electric utilities and commercial and industrial (C&I) stakeholders are taking note. In a recent survey of hundreds of energy consumers, slightly more than one-quarter of them (27 percent) expect distributed energy and renewables to dominate utility service offerings in the next five years. That number spikes to 45 percent on a 10-year horizon and 55 percent when forecasting 15 years out.
 

How much do you agree or disagree with each of the following statements
relative to the future of distributed energy resources (DER)?

(Select one response per row).

Source: Black & Veatch
 

Driving that surge are policies increasingly favoring renewables, regional load growth and declining costs of technology ranging from the photovoltaic panels to the high-capacity batteries that store that energy.

That begs the question: In this dynamic moment in power supply, are the keepers of the grid responding? Put another way, are utilities committing to upgrade a dated system to accommodate renewables and two-way energy flows that come with them?

When asked recently for their biggest concern for tomorrow’s grid development, electric industry respondents to the survey overwhelmingly — 70 percent of roughly 900 respondents — cited a generation mix with fewer traditional baseload units and more utility-scale renewable sources. Respondents, by a lesser margin, also pointed to regulatory lags in addressing needed system changes and the lack of qualified workers to architect and run the more complex system.

Separately, three-quarters of respondents see adoption of alternative behind-the-meter energy options as a threat to the utility business model, either if regulatory models preclude market flexibility or if utilities fail to implement their own alternative energy solutions.
 

With the growing complexity of the grid, its operation and maintenance,
what are the three biggest concerns for future grid development?

(Select up to three choices).

Source: Black & Veatch
 

Businesses rethinking energy options

As renewables gain a widening footprint and reach price parity with power from the local utility, the changing energy landscape is pressing businesses to rethink how they use and manage electricity. For utilities that don’t notice or react, bad news is defined by a single word: defections.

Companies mindful of sustainability are migrating toward the cheapest form of renewables or a basket of green energy options that gets them a reasonable cost of power. The catalyst is that businesses have a deeper menu of ways to satisfy their appetite for power, and they may see renewable energy — chiefly solar — aligned with their sustainability goals.

Some large companies have said they’d power some of their operations with renewable energy. Many others are going all in, reflected in a “RE100” listing by The Climate Group that shows more than 120 multi-national companies — many in the C&I sectors — plan for their power to come entirely from renewables as part of a global corporate leadership initiative.

Many of these companies are generating their own energy and buying renewable-based power from off-site, grid-connected generators. Beyond the environmental benefits of switching to renewable energy, they insist the business case for green energy is strong. But progress is slow, very little renewable generation is on-site or localized, and the pressure to see an economic return is beginning to build.

So what does that mean for utilities? Lacking agility in making changes that align with growing clean energy and decarbonization mandates could drive away sizable commercial and power-craving industrial clients who have the financial means to turn to renewables or distributed generation on their own. Such defections from the grid inadvertently would make the system more expensive by spreading its fixed costs among fewer ratepayers and adding to the network’s complexity.

Utilities can make their investments more valuable by using monitoring, control and automation technologies to unlock the potential of grid assets for greater reliability, efficiency and security. This includes renewables and two-way communication on the grid, giving utilities and consumers more control and insight into everything from power generation options to bill management.

Renewables gain growing favor among regulators

As coal-fired generation continues to fall out of favor, new plants powered by cleaner-burning natural gas are drawing growing scrutiny in favor of renewables.

In early 2019, Indiana regulators unanimously rejected a proposal by electric and natural gas utility CenterPoint Energy division Vectren to replace three coal plants with an 850-megawatt (MW) gas facility. Regulators concluded the new site could become a stranded, uneconomic asset as customer demand changes, energy storage matures, and the cost of renewables fall.

CenterPoint’s Lynnae Wilson said in a statement that while “the case was filed at a time of significant changes in generation technology,” regulators have directed the utility “to increase our focus on the benefits of a more diverse resource mix.”

“As we demonstrated in our case, economic and reliability factors are driving a transition from coal-based generation, and the selection of replacement resources will continue to be our focus,” wrote Wilson, CenterPoint’s chief business officer for its Indiana electric utility business.

In the Southwest, the Arizona Corporation Commission in 2019 extended its ban on building new natural gas plants generating at least 150 MWs in the state. That comes as Arizona weighs a grid modernization plan calling for 80 percent of the state’s electricity to come from zero-carbon sources — renewables — and coal by mid-century, along with a target of 3,000 MWs of energy storage by 2030.

Onus on utilities to get current with renewables

Consumers, equipped with increasingly sophisticated technology and no longer content with arms-length relationships, are demanding real-time, transparent engagements with their utility. And along with a growing number of businesses, they’re demanding power in cleaner, greener ways.

The onus of being nimble is thrust onto electricity providers, who admit flexibility to adapt to what’s coming is atop their wish list. More than half of the survey respondents said that when it comes to identifying the most essential things for tomorrow’s invariably more complex grid, 55 percent pointed to innovations that are more malleable in configurations to handle changes, ostensibly those linked to renewables. That’s followed by better modeling and forecasting, and more real-time telemetry and control devices.
 

What tools or resources are most essential for the planning, engineering,
construction, operation and maintenance of a more complex grid?

(Select up to three choices).

Source: Black & Veatch
 

The opportunity for power producers rests in adopting technologically sophisticated, cost-competitive and bankable engineering, procurement and construction (EPC) solutions focusing on integrating the complex grid, modernizing the vast infrastructure and putting reliability at a premium. Persistent regulatory questions will remain, requiring the industry to work collaboratively with their government overseers, among other things, to minimize rate impacts.

The push and pull of cost and consumer choice that reshaped the music, television and investment sectors is taking aim at power generation and delivery. What’s needed now is the deep understanding that time waits for no one.