The following is a contributed article by Bryce Yonker, CEO & Executive Director of Grid Forward.
Over the course of the discussions late last week in President Joe Biden’s Leadership Summit on Climate, national government, community and business leaders affirmed deeper commitments to reduce carbon emissions and actively engage in more aggressive agendas to stabilize global climate impacts.
President Biden has laid out an ambitious objective to reduce U.S. emissions by 50% over just the next nine years. Coupled with his stated target of having a fully decarbonized energy system by 2035, the direction of the electric sector looks clear. These policy milestones would indeed mean a wave of activity rivaled by few in our nation’s history and would generate a massive mobilization.
On the front line of this effort will be electric grid utilities. These organizations large and small will need to work in concert to adopt changes to the way that we run our grids. Certainly this will mean the rapid acceleration and integration of significant levels of clean energy resources like solar and wind, but what else will this entail?
Outlined below are some of the actions that electric grid operators can embrace to make the path to decarbonized energy an achievable one. By no means is this an exhaustive roadmap, but these 10 areas provide electric grid providers, and the partners they work with, a set of tools to ensure that a decarbonized future can become not only a reality, but indeed a success as well.
1. Leverage demand-side solutions at scale
Historically we have built and run our electric grid by forecasting the customer demand for electricity and building and dispatching central energy generating assets to meet that peak demand. It is time to actively engage, at scale, flexibility that customers would be willing to bring. Yes, this looks like controllable thermostats but it’s so much more. One example of this is the 550 MW Virtual Power Plant that OhmConnect is working on in California. And another is the work that Portland General Electric is doing with its Smart Grid Test Bed.
2. Invest in advanced forecasting, modeling and planning capabilities
With the rapid increase in clean energy resources like wind and solar, the need for better forecasting of asset availability has also intensified. Climate, weather, behavioral and other attributes can be much more clearly understood with deep computational capabilities. From IBM weather forecasting, to machine learning simulation of renewables forecasting at the National Renewable Energy Laboratory, the forefront of this activity is exciting.
3. Increase the visibility on the system
The health and conditions of the electric system must be monitored much more closely going forward. With low-cost monitoring and sensors we can have near real-time information on the status of the system and can work to advance its capability with automated controls. It is critical that areas of concerns or constraint be identified and dealt with rapidly if not proactively. Amazon leveraging the cloud for data analytics is just one of the many examples that illustrate the front edge of analytical capability in making productive use of rich datasets.
4. Adjust rates and pricing
Most traditionally regulated energy markets in North America have long-standing, static pricing structures for energy services. It is critical that newer, more adaptive models of pricing energy be introduced. This will ensure that available resources are maximized and customers maintain high quality of service. Experts like Ahmad Faruqui and Sanem Sergici at Brattle have conducted numerous studies on the role of innovative and time-varying rate structures.
5. Consider R&D a core capability
Electric grid operators have had some of the lowest levels of R&D and innovation expenditures of any industry. During this time of rapid change, new ways of managing and maintaining energy systems must be considered. Investment must be allowed for grid operators in which limited failures are accepted (if not embraced) and upside achievements are distributed across stakeholders. Sharing lessons and replicating and scaling successes rapidly will be necessary so the best breakthroughs can be integrated as soon as possible.
6. Utilize big projects, small resources and solutions of all types
With the expansion of clean energy resources, we will need to ensure that reliable energy supply continues to reach customers. This means expansion and enhancement of a number of transmission corridors. In addition, resources to optimize the system can be aggregated from millions of smaller assets as well. And there are solutions that can be right-sized and scaled for a variety of applications like battery storage. Southern California Edison has laid out a comprehensive modernization roadmap leveraging these various aspects and Xcel is blending transmission expansion with its modernization buildout.
7. Access wide area markets
Efficient access to wide geographic markets provides value to all stakeholders. In the West, the expansion of the Western Energy Imbalance Market has generated over $1 billion of value to participants is just the last six years and new participants are joining even as discussions of new capabilities continue.
8. Diversify assets
As carbon-emitting resources come out of the mix, having a diversity of assets that bring various attributes will be essential. Higher capacity assets like hydro, geothermal and offshore wind will become backbone assets. Active consideration of modular nuclear, carbon capture and hydrogen, as well as advancements in additional areas like fusion may be important in other areas. Some regions will be able to economically decarbonize sooner with the resources they have available and others may take a few more years, but all areas must consider diversity of resources. If Texas this winter taught us anything, it’s that unexpected disruptions will occur.
9. Embrace change and model evolution
Historically almost all utilities have operated in market structures that have provided them a flat rate on invested capital. This model rewards extraction of value from long standing assets. More nimble and flexible models should be considered that align incentives to desired outcomes. Hawaii recently completed a process to outline what performance-based regulatory models can look like in that state. Aggressive technologic advances need to be meet with equivalent changes in regulatory models.
10. Integrate the talent of the future
We need to embrace and train as quick as possible the next generation of workforce to bring the best and brightest to help solve this opportunity. Among the CEOs of S&P 500 companies, women hold the top position at utilities in as high a rate as any sectors, yet only about 26% of energy professionals are women, according to a Boston Consulting group study. Effectively tackling the rapid decarbonizing of energy systems requires bringing people from diverse backgrounds and capabilities to all converge with their expertise and commitment.
In many service territories across the U.S. electricity demand has been flat or even declining over the last decade. Proactively investing in the future can be difficult under such conditions. However, two of the other main aspects of a climate agenda also significantly overlap with the electric sector — energy efficiency and the electrification of transportation and buildings. With significantly increased activity in these areas, electricity providers hold even more responsibility in the decarbonized future. The White House plan includes significant investment in these aspects, which will be yet another driver for all of the topics mentioned here.
These examples are but a handful of the areas where grid operators can seize the moment and facilitate rapid change on the electric system. By adopting these tools and embracing these changes they can meet the needs of consumers and communities and also meaningfully support wider global objectives. It will take innovation in technology, policy, financing, operations and other aspects. Working together we can indeed take the early lessons from the last decade and make them a reality in the one ahead.
At the end of the Climate Summit last Friday, President Biden couldn’t help himself in sharing some casual final remarks. Among them he shared, “I hope we don’t lose focus here, lose a sense of how much we can do together.” I think that message to community, business and international government leaders can also ring true to electric grid providers. What we can do together to revolutionize our system is nothing short of extraordinary. And the time to jump in is now.