Grid Modernization

Utilities must transform to keep pace with changes: report

Utilities must transform to keep pace with the changes sweeping through the electric power industry, according to a new report co-produced consulting firm Ernst & Young and the GridWise Alliance.

The report, In an Accelerated Energy Transition, Can US Utilities Fast-Track Transformation?, identifies the challenges facing utilities, including decarbonization initiatives and distributed energy penetration that is decentralizing the industry and turning the conventional one-way flow of electricity into a system where energy often flows both to and from the consumer.

The report highlights several of changes that are transforming the industry, such as energy efficiency programs that in 2017 alone saved enough electricity to power 22 million homes. Meanwhile, distributed solar power continues to grow, reducing demand for grid-supplied power during the middle of the day and causing steep ramp-ups in demand in the evening.

In addition, the growth in electric vehicle adoption is contributing to unpredictable loads and leading to demand surges and supply shortages in some neighborhoods. Utilities are also increasingly having to deal with cyber attacks of growing complexity and severity, as well as extreme weather events, ranging from wildfires to floods.

Together with these challenges, utilities are facing flat sales growth and rising costs from grid modernization and the need to replace and upgrade aging equipment, which is putting pressure on them to increase rates to enable capital investments.

“The current model of rewarding utilities for capital-intensive infrastructure expansion is unsustainable,” the authors say in the report. “This approach functioned well as electricity consumption grew reliably over the course of the 20th century, but not anymore.”

Three-phased investment approach

The report recommends a three-phased investment approach to address for utilities to stay ahead of the changes in the industry. In the first phase, “connect and protect,” utilities should invest in grid modernization in order to accommodate the growing number of distributed energy resources.

The second phase, “sense and enable,” recommends utilities invest in sensors to automate and control the network to create situational awareness at the grid edge and enable improved real-time monitoring and control. That investment can help utilities secure their role as neutral market facilitators and platform providers for trading flexible energy resources.

The third recommendation is that utilities “optimize and control” by taking on higher level responsibilities. Investments in distributed intelligence at the grid edge through advanced, real-time management and control of local distributed energy resources will make utilities platform providers able to provide innovative products and services and moving them from “their long-held status as providers of electrons to lynchpins in a distribution system that is fit-for-purpose in the evolved, digitized and clean-energy world,” the report says.

“U.S. distribution utilities do not have the luxury to wait and watch,” Dana Hanson, principal and Americas power and utilities leader at Ernst & Young, said in a statement.

“They must prepare for a future that will see increased electrification of transport, heating and industry, as well as a growing number of customers empowered to produce and sell their own electricity. This requires utilities to invest in the right people, technologies and processes today, if they want to succeed in the new energy world tomorrow.”

The report was draw from interviews with top level utility executives and from an industry workshop hosted by GridWise Alliance in July.

The GridWise Alliance represents a group of stakeholders that includes electric utilities, equipment and service providers, national laboratories, academic institutions, regional transmission operators, and independent system operators.