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4 Trends That Will Reshape the Energy Landscape in 2023

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Sean McEvoy's picture
SVP, AI Energy Solutions, Veritone

I am a seasoned software executive with 20+ years of experience in the software industry working at such companies as IBM, DELL, QUEST, and Symantec. I've held executive leadership positions...

  • Member since 2022
  • 2 items added with 1,034 views
  • Feb 14, 2023

This item is part of the 2023 Predictions and Anticipated Trends for the Power Industry - January/February, click here for more

In many ways, 2022 was a transformative year for the US power sector:

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Based on recent events, however, 2023 is poised to be an inflection point for the energy industry – one that future historians might cite as the country’s first truly committed step forward in the fight to halt climate change. 

Here are 4 major trends that help explain why 2023 will be a banner year for America’s energy sector.

1. Greater Investment in Grid Resilience and Business Continuity

From California to Texas to Louisiana, utilities nationwide have been hard-hit by increasingly frequent and severe weather-related events. In addition to service disruptions, climate change also leads to runaway spending as utilities scramble to repair aging and dilapidated grid infrastructure. Power providers must also invest heavily to weatherproof their energy generation and transmission assets in anticipation of future droughts, blizzards, and hurricanes. 

Grid resilience has always been a top priority for the energy sector. But 2023 represents a radical shift in strategy as utilities increasingly explore innovative ways to incorporate more redundancy into their operations. 

For example, Louisiana-based utility provider, Entergy, recently announced that it would invest $9.6 billion in 10 new microgrids and other resiliency upgrades as an alternative to traditional transmission. The decentralized power generated by these microgrids will provide redundant energy capacity for the utility’s entire customer base. However, the main goal of these projects is to ensure reliable electricity delivery for those most impacted by severe weather storms. 

According to Entergy’s official project request, 

“Absent the sort of commitment to and substantial investment in resilience measures included in the resilience plan, the Gulf Coast will be insufficiently prepared to address the future risks posed by extreme weather events, which are becoming more frequent, severe, unpredictable, and costly, and are disproportionately impacting the Gulf Coast region…” 

Note that this trend isn’t limited to Entergy. 

To reduce the risk of sparking future wildfires in drought-stricken California, for example, PG&E is poised to spend $10 billion  to $40 billion “undergrounding” thousands of miles of power lines. In addition, more businesses are investing in on-site solar power generation and energy storage – from Amazon to Google to Facebook. These private investments will help control rising utility costs for these corporate stakeholders. The ability to generate and store solar power is also crucial for business continuity since these companies’ data centers all require 24/7 access to electricity in order to operate:

  • They rely primarily on real-time solar power during the day, with excess energy going into their on-site batteries.
  • When the sun goes down, these companies then draw the power they need from their batteries – only turning to the grid when their energy storage systems are fully depleted.
  • During grid outages, these companies can still power their operations using a mix of real-time and stored solar energy.

This combination not only delivers measurable savings (in the form of avoided utility costs), but it also ensures 100% uptime – regardless of grid conditions. 

The above is happening right now. But these investments will receive a huge boost in 2023 thanks to several complementary trends that are already starting to converge.

2. New Green Incentives under the Inflation Reduction Act

The Inflation Reduction Act (IRA) is a historic piece of legislation designed to curb runaway consumer spending. However, it also includes many key provisions to help promote renewable energy investment across all sectors of society. In fact, the IRA includes $369 billion in funding for sustainability projects – making this the single largest investment in climate change action in American history. 

Although the IRA was officially passed in 2022, 2023 represents the first full year in which the incentives under this program will be active. The full list of subsidies and provisions is available here. But some notable highlights include:

  • Expansion of the Investment Tax Credit (ITC) for residential and commercial customers. Prior to the IRA, homeowners and businesses who go solar qualify for a 26% tax credit from the federal government, with subsequent downgrades scheduled over the next few years until the program disappears forever. The Inflation Reduction Act has restored the ITC to its original 30% for the next 10 years. And this will help spur even greater demand for solar PV systems, on-site battery storage, and even electric vehicle-charging – all of which are covered under the IRA’s sweeping provisions.
  • For the commercial sector specifically, producers and manufacturers of renewable technologies like solar, wind, and batteries qualify for $30 billion in tax credits from the federal government.
  • The IRA also includes $2.86 billion to help utilities and independent power producers (IPPs) upgrade their transmission infrastructure as the nation’s aging electricity grid prepares to accept an influx of renewable (and intermittent) green power sources. This money is in addition to the $10 billion in loan funding set aside for utilities that primarily serve rural and underrepresented communities. 

Even before passage of the Inflation Reduction Act, green investment was already on the rise. These new provisions will only accelerate demand across the board.

3. Stricter Government Renewable Energy Targets

Incentives represent one way to encourage desired actions from the public and private sectors. Regulations represent another way. And in 2023, the Environmental Protection Agency (EPA) is expected to introduce a host of mandatory guidelines designed to decarbonize the country’s power sector. 

These regulations build on some of the EPA’s prior work, with the agency introducing proposed rules in 2021 that would sharply reduce methane and other greenhouse gas emissions across the oil and natural gas industries. 

When the EPA finally formalizes its proposal in 2023, energy stakeholders will have to make drastic changes to their operations in order to remain compliant. Investing in distributed energy resources (DERs) like solar and wind power are proven ways to preemptively future-proof their operations as emissions standards become stricter over time. 

This same phenomenon also exists at the local level, with many states issuing their own renewable portfolio standards (RPS) that mandate how much electricity utilities are required to generate from green energy sources. 

However, there is one more piece of the puzzle – one that has the potential to compound the above benefits exponentially.

4. The Rise of Artificial Intelligence

Although artificial intelligence technology has been around for several years, 2022 marked the first year in which AI came into the mainstream – thanks to the proliferation of publicly available tools that can generate multimedia and content from scratch. The potential applications of AI-powered technologies is limitless, with nearly every industry exploring ways to harness computer-aided pattern recognition and data analysis at scale.

The energy sector is no exception in this larger trend.

In fact, AI is already proving increasingly necessary as utilities and grid operators scramble to balance electricity supply and demand in real time with the legacy energy assets under their direct control. Adding next-generation energy assets to the grid only makes this balancing act more difficult. Entergy’s multibillion-dollar microgrid plan, for example, will indeed help make the utility’s power grid more resilient. But it will also introduce more moving parts to manage. And as more customers in Entergy’s service market invest in privately owned PV systems, solar batteries, and electric vehicles, matching energy supply and demand will become harder still. This is especially true since many of these green technologies generate, charge, or discharge energy at different rates – depending on grid and weather conditions. 

Similar challenges exist across all major utility markets, with power providers constantly struggling to deliver energy reliably and affordably across an ever-changing backdrop of variable electricity supply, demand, and pricing. 

The distributed energy resource management system (DERMS) and energy management system (EMS) platforms that many utility providers currently use are ill-equipped to tackle real-time challenges like these. There’s simply too much data to collect, analyze, and act on. 

By contrast, artificial intelligence can accurately forecast energy supply, demand, and pricing using a mix of historic and real-time data collected from the grid, weather satellites, and DERs sensors. It can also use this information to autonomously optimize DER performance for a more balanced grid. In fact, the large terabytes of real-time data that typically overwhelm grid operators are precisely what allow AI to generate increasingly accurate predictions. This is thanks to iterative machine learning, which enables AI algorithms to compare earlier forecasts against actual results.

Simply put – the more data AI can collect and analyze, the faster and more accurate its forecasts become. As a result, the grid’s growing complexity is no longer a liability that must be managed. It is a valuable asset that allows AI to make energy delivery cheaper, greener, and more reliable. 

Artificial intelligence is already powering so much of society behind the scenes – from loan approvals to medical research to stock trading. But 2023 will mark AI’s transition into the energy sector’s mainstream as utilities and IPPs simultaneously try to maximize the value of their energy investments and make the grid more resilient against a backdrop of volatility. Once sufficiently trained, AI can also be used to incorporate green incentives, remain compliant with government regulations, and even mitigate operations and maintenance costs.

Conclusion, What Energy Trends Did We Miss?

America’s energy sector will only become more fractured and segmented as consumers, businesses, and utilities alike all continue to invest in distributed energy resources like solar PV and EV-charging. This nationwide push creates unprecedented opportunities to transform an aging electricity grid once powered by fossil fuel into a truly modern electricity network powered by renewable green energy. 

Government incentives and regulations are already pushing us in this direction – as is the need for greater resilience and business continuity. But even the most ambitious decarbonization efforts would be short-lived in the absence of AI technology that can turn terabytes of real-time data into actionable insights. 

Do you agree with this analysis? Equally important, are there major energy trends that we’ve overlooked? 

Let us know in the comments below. 

Matt Chester's picture
Matt Chester on Feb 14, 2023

Lots of investments and incentives, you're right! But the major unknown remains the exact ways those will be implemented-- throwing money at the problem isn't enough on its own, we have to work to make sure the decisions and investments are intelligent and well thought out. Looking forward to seeing that come to fruition!

Sean McEvoy's picture
Thank Sean for the Post!
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