Grid Modernization

Optimizing Utility Transformation

There are many ways to mark utility progress — and many ways that utilities define it.

The Smart Electric Power Alliance introduced a Utility Transformation Challenge, which evaluates utilities’ progress toward transitioning to modern, clean systems. The evaluation analyzes utility progress across four dimensions: leadership, clean energy resources, modern grid enablement, and alignment and engagement with other stakeholders.

Among the more than 130 utilities that completed SEPA’s inaugural survey on the topic, public power utilities accounted for five of the 10 highest-scoring utilities. The five are Austin Energy in Texas, Holyoke Gas and Electric in Massachusetts, the Los Angeles Department of Water and Power and Sacramento Municipal Utility District in California, and Seattle City Light in Washington.

A successful transformation, according to SEPA’s evaluation and the highest scoring public power utilities on the initial challenge report, relies on setting clear goals, having strong leadership guide the process, and coordinating with a variety of community stakeholders.

Defining targets amid uncertainty

Utilities with publicly stated goals are moving faster toward decarbonization, even if their road map acknowledges gaps in current technology’s ability to get there.

“Having an ambitious target with no meat behind it doesn’t necessarily do a whole lot of good, but it is an important first step to have a North Star so that everyone knows where you’re headed and can work together in that direction,” Julia Hamm, president and CEO of the Smart Electric Power Alliance, said during a panel presentation at the American Public Power Association’s virtual National Conference in July.

Hamm stressed that it’s not just about making long-term goals, and that making interim, shorter-term goals seems to help utilities to move forward. “You may not know how your utility is going to get all the way to whatever your target is in 2040 or 2050, but you probably have a very good sense of where you can get it by 2030,” she noted.

In California, SMUD set a goal of achieving zero carbon emissions in its power supply by 2030, years ahead of the state’s mandate. Paul Lau, who took over as CEO of SMUD in October 2020, said in the conference panel that he challenged staff to turn the vision into an actionable plan shortly after he became CEO.

In line with SEPA’s analysis, SMUD’s 2030 Zero Carbon Plan credits setting targets for its progress thus far. “Having ambitious goals helped SMUD become the first large California utility to have at least 20% of our energy come from renewable sources,” reads the plan’s executive summary.

The plan details how SMUD will shutter or repurpose five natural gas plants — shutting two down by 2035, and converting three to clean fuel. Lau also pointed to SMUD’s decision to join the western energy imbalance market operated by the California Independent System Operator, which he said will allow the utility to access an array of renewable resources. 

The plan acknowledges that the technology is not yet available to ensure SMUD can get all the way to zero carbon, and therefore emphasizes innovation and partnerships. “Because we can only get 90% of the way there, we have to identify new business models and technologies and working with partners in researching, piloting and possibly bringing those technologies to scale,” said Lau.

Public power utilities are making these transitions with costs and rate impacts top of mind. SMUD, Seattle City Light, and Holyoke Gas and Electric all mentioned how their resource plans allow for little or no changes to rates. SMUD’s plan promises no rate increases through 2030.

Beyond the generating mix

Transitioning to a cleaner and more modern grid isn’t simply the responsibility of resource planners; it requires participation from all departments across a utility, noted Hamm.

For Seattle City Light, which has operated from a carbon neutral power supply since 2005, utility transformation has a deeper meaning.

“When we think about clean energy levels, we don’t have much change to make, but we are very much transforming,” said Debra Smith, general manager and CEO of Seattle City Light. “I sometimes talk about having one foot in the future and one foot in the past, and I think that’s what transformation is all about.”

Smith brought up how Seattle’s customers include both those who continue to expect the utility to stay focused on providing the essential service in a continually reliable and predictable way, and the technology companies that are putting effort into developing products and services that will shape the future — and expect the utility to move ahead as well.

Smith said the utility has shifted its vision toward increased community partnership and in offering customer choice with a focus on equitable outcomes. To Seattle City Light, the latter means working one on one with customers and community groups to learn what the utility can deliver specific to their needs, particularly as customers decarbonize buildings and transportation via electrification. 

“In our world, we have an obligation and responsibility to provide the power that people aren’t thinking about, while also serving the customers who are thinking about the future,” she said.

Smith has also been focusing on culture change at City Light, which she described as a balance between being able to create space for new roles while honoring the long-term experience others have built over their careers.

“We are literally transforming an industry that has been very predictable, very reliable, and very stable. When you are a provider of essential services, those are all good things,” said Smith. “It’s hard to make huge cultural change when so much of your organization can’t change what they’re doing, because you need them to keep doing what they have been doing all along.”

Smith shared that driving culture change requires commitment and continuity of leadership to see changes through. “Continuity in the seat is the most important thing when you are trying to make change. It takes a real commitment,” she said.

In Sacramento, Lau said that he is leading SMUD through a reorganization process to ensure that the utility is set up to allow for the collaboration necessary to work toward its 2030 vision.

“The vision is what we’re going to accomplish — culture is what’s going to take us there,” said Lau.

Hamm sees cultures progress when executives adopt a mentality of being open to saying “yes” to changes, with suggestions, instead of a default “no” when presented with new ideas. 

Not going it alone

“Utilities cannot do this alone,” said Hamm. “It is going to require engagement with your stakeholders in a more meaningful way than you’ve ever done in the past.”

Hamm acknowledged public power’s strong track record and model of working across city leadership and the community as being a strong foundation for this pillar of success, noting that transformation will require even deeper engagement with these groups and with new partners, such as technology companies.

She noted how even small utilities have opportunities to engage in research and development.

That’s true for Holyoke Gas and Electric, which serves about 18,000 customers in western Massachusetts.

“We know we don’t have all the tools in our belt right now to get to net zero, but we have been collaborating with higher education institutions in our backyard,” said Jim Lavelle, HG&E’s general manager.

He mentioned that since Holyoke already has a cost-competitive power portfolio that is about 90% carbon free, attracting interest in collaboration and investment from institutions including Massachusetts Institute of Technology, Harvard, and Boston University was not a big lift.

The utility also is no stranger to deploying new technologies — it already has 16 megawatt-hours of battery storage built into its system, with another 30 MWh in the pipeline.

Lavelle said that Holyoke makes an effort to involve various stakeholders at a grassroots level into the planning, so as to boost community engagement and pride in the utility ownership.

Seattle also looks to community input, including from a citizen review panel that advises the utility.

Community engagement is also a tenet of SMUD’s vision. “It is not enough to just engage our internal staff; we need to engage community so they can help us,” said Lau.

He noted the importance of connecting utility changes to community values, such as the impact on public health, equality, or economic development. In Sacramento, Lau has stressed how the vision will support improved air quality in the city, which is of concern since the air quality has led to an increase in childhood asthma there.

Part of getting community buy-in is also allowing community members to be part of the solution. SMUD offers up to $2,500 in a rebate for customers to put storage with solar in their homes and businesses. Such initiatives not only encourage customer investment, but also allow an avenue for SMUD to have visibility into the scope of behind-the-meter assets coming onto its system. For example, California’s push to increase electric vehicles could lead to an additional 400 megawatts of demand on SMUD’s system. 

High stakes

Hamm and the utility leaders acknowledged that shifting the generating mix will look very different from one utility to the next.

“Every utility has access to different resources, but regardless of where they are, their options for low-carbon resources is increasing and getting more affordable,” said Hamm.

Recognizing these differences and being able to collaborate across utilities will be factors in a more widespread transformation of the industry.

“To really have a nationwide clean energy standard to move forward as a country, it is going to require collaboration,” said Smith. “Those who can do more need to do more, because others need more time.”

“The stakes are too high not to — we need to do this for our children and grandchildren,” said Lau. “And we hear this from our customers.”