Tackling a tall order
In 2021, the power and utilities industry tackled tough challenges, made measurable progress, and received clean energy encouragement from a new administration. As the US economy emerged from its pandemic-induced recession, electricity sales rose 2.4% through October 2021 over the prior year. Additionally, unprecedented and unpredictable extreme weather events challenged the grid's reliability and resiliency, and cyberattacks on critical infrastructure increasingly made headlines.
In 2022, the tough challenges remain—boosting clean energy, ensuring reliability and resiliency, and maintaining security, while keeping costs down. To tackle this tall order, the electric power industry will likely continue to advance in its "3D" transformation: decarbonization, digitalization, and decentralization. We'll be watching for new technology deployments, market evolution, high capex and renewable capacity growth – all in an evolving regulatory environment.
Below are five trends that will likely impact the industry in 2022:
1. Utilities expected to further flesh out decarbonization plans
By late 2021, 46 out of 54 US investor-owned utilities had committed to reduce carbon emissions, many by 2050. In 2022, more utilities will likely jump on board driven by consumer support; opportunities for value creation; environmental, social, and governance (ESG) goals; evolving state clean energy mandates, and potential federal legislation.
More utilities will likely announce decarbonization goals and interim targets, increase existing targets and flesh out their decarbonization strategies with strategic plans for implementation as stakeholder interest grows. Utility ESG reporting will likely become more detailed and consistent, and federal policies and their impact will likely become clearer. Technological advances are also worth watching.
2. Unprecedented weather events driving new resiliency strategy
The unprecedented frequency, intensity and unpredictability of extreme climate and weather events in 2021 point toward an increasing focus on utility resiliency strategies in 2022. Fifty-one percent of our power and utilities industry survey respondents said that extreme weather has affected the reliability of electricity delivery in their territory more than usual in the past year, while 38% saw the impact unchanged.
For electric utilities, resiliency planning is key because extreme events such as wildfires can impact both electricity supply and demand—a costly double whammy. Experts suggest that global weather patterns are in uncharted territory and planners can no longer use the past to predict the future. In 2022, utilities are expected to continue proactively preparing for that uncertain future.
3. 5G and cloud could expedite the clean energy transition
As the electric power sector continues modernizing the grid, companies are envisioning how 5G communications technologies and cloud can help them harness the power of the growing wave of connected devices and data. 5G enables utilities to move data from smart meters, sensors and other devices to the cloud, where they can more effectively and efficiently analyze and act on it.
In the year ahead, many utilities will likely prepare to benefit from 5G technologies by planning for the services they can provide. In a 2021 Deloitte survey of networking executives across industries globally, 58% of respondents were already deploying 5G or running pilots. Twenty-six percent of our power and utilities industry survey respondents said 5G communications technologies are incorporated into their company's strategy, while 36% plan to incorporate it.
4. Utilities increasingly turning to flexible load programs
Yesterday's energy efficiency and demand response programs are beginning to transform into real-time flexible load offerings that could become a cornerstone of utility resource planning, cost reduction, decarbonization and resiliency strategies. In 2022, more utilities will likely include flexible load in their planning as a supply-side resource and to help meet decarbonization targets. Nearly 90% of our survey respondents said their company plans to make greater use of flexible load programs.
Legislators and regulators are supporting energy efficiency programs at unprecedented levels and programs are growing rapidly. But dynamic load flexibility programs are not growing as fast as they could. Improved distribution system control technologies, communications standards, and incentives for stakeholders could support further growth, with cost savings potentially justifying cost recovery for required investments.
5. Building electrification is already impacting utility planning
Many expect building electrification will boost electricity demand in the distant future. But building stock, codes and policies vary widely across the country—and that future is arriving sooner in some areas. In California and the Northeast, some utilities are already adjusting operations to support growing building electrification, and more will likely follow in 2022.
Beyond that, many expect the grid will be able to handle increased electricity demand, but additional investment may be needed in-home weatherization and grid-responsive appliances to help manage energy use and shape load. Additional energy storage will likely be needed as well.
While today's challenges will likely persist, digital technologies; market developments; and state and federal policies, investment and research into next-generation energy technologies can help pave the way to a cleaner, more reliable, secure and resilient grid. For further insights, read the full Deloitte 2022 power and utilities industry outlook.