What Does The Future Hold For The Electric Utility Industry?

Electric utilities' fundamental changes are similar to a slow-moving tsunami. The growth of electric vehicles, the increased use of renewables and the emergence of smart, distributed power systems have been well-reported for years.

FREMONT, CA: Electric vehicles are turning commonplace on our streets. Maybe there's an electric car in your approach or electric busses in your city. Years ago, fewer than 20,000 electric vehicles were on global roadways. That number will outshine eight million this year.

The pandemic is not decelerating EV sales. On the contrary, despite a reduction in overall vehicle sales due to COVID-19, purchases of zero-emission vehicles have remained steady. Furthermore, consumer interest in electric vehicles is growing exponentially as long-range battery capacities surpass 200 miles and various cost-effective models enter the market.

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Using electric vehicles in corporate and municipal vehicles leads the way, as companies like Amazon and DHL commit to electrifying their fleets. Some countries, states, and cities have planned outright bans on internal combustion cars for a decade. San Jose, Denver, CO, CA, and Austin, TX collaborate with state, county, regional, and utility stakeholders to develop a robust regional charging infrastructure.

The impact on electric utilities is profound. California projects that EVs will depict more than 5% of the state's electricity intake by 2030. A latest U.S. Department of Energy study items to electric vehicles as the primary reason that national electricity consumption will increase by 38% by 2050.

But another major shift is underway: the long-time-coming transition away from centralized fossil fuel-powered generation toward distributed renewable energy production.

Renewables Reach Grid Parity

Renewable energy is the swift-growing energy source in the United States, increasing 100% from 2000 to 2018, making up over 17% of net electricity generation. For years, renewables growth has been driven mostly by renewable portfolio standards and state mandates such as California's Senate Bill 100.

The legislation needs that 50% of the state's electricity come from renewable generation by 2025 and that the state relies entirely on zero-emission energy sources by 2045.

But as the renewables market has grown, technologies have better, and prices have dropped. Today, renewables just make good economic sense. Solar and wind are now the most reasonable sources of electricity, period.

In 2019, reports from analyst firms like BloombergNEF announced that renewables had achieved grid parity. Grid parity means the cost of procuring energy from renewables has become equivalent to competing generation sources. For example, a 2020 study by Lazard confirmed that it is now cheaper to build new renewable power plants than to operate coal plants or build any other generation source.

In addition, after analyzing recent data from two of the country's largest electricity markets, ERCOT in Texas and PJM in the Northeast, Rocky Mountain Institute concluded that utilities are adding renewables to the grid faster than any other electricity source, even natural gas. The age of renewables is here.

The New Imperative: Managing Peak Loads to Improve Resilience

Historically, renewables have generated some challenges for utilities. Renewable power is intermittent, so production timing does not always match demand (though this is largely solved with the addition of battery storage).

Electric vehicles are generally plugged in during the evening when drivers arrive home from work. That's exactly when power-thirsty appliances and air-conditioning systems are also being flipped. Left unmanaged (i.e., without consumer involvement in a Time-of-Use plan), electric vehicle power can double a home's energy use.

Above supply and demand changes from renewables and EVs, electricity demand is also becoming constrained due to more frequent natural disasters tied to climate change.

But innovative technologies like energy storage, demand response software, and electric vehicle charging software can interact with energy markets to help utilities reduce demand and balance the grid.

Smart, Distributed Energy Assets Turn Consumers into Prosumers

Commercial energy users have become unbelievably sophisticated when it comes to energy management. Currently, it is not unusual for a company to have onsite renewables and energy storage, a smart building management system that optimizes operations for energy efficiency, demand response software that can answer to utility signals to decrease electricity use, and JuiceBox Pro smart EV charging stations that can interact with the grid to take benefit of lower time-of-use rates.

Residential consumers are also getting smart about electricity. A modern home's tech stack already incorporates app-based learning thermostats, appliances, and lighting.

Commercial and residential customers are turning into prosumers who consume and produce electricity by taking control of their energy use and becoming active participants in energy markets through smart software and digitally connected devices.

How to Get Ready

Hence, a picture of the electric utility industry's future is clear. Growing demand because of the electrification of transportation. Smart homes and buildings. Solar, wind, battery storage, and microgrids. Integrating distributed, intelligently-controlled energy assets that interact with the grid increases efficiency, flexibility, and reliability.

What's necessary now is a new breed of software and professional services to support all stakeholders manage this once-in-a-century change. The waves still have not crashed onshore. Yet utility service operators, businesses, and fleet managers must prepare now.

With the correct tools and expertise, a future that may at first look threatening is full of huge opportunities as the power industry becomes more resilient, sustainable, and efficient.