Beginning-of-year 2019 predictions for Centrica Business Solutions

The Trends that will drive change in the California energy market in 2019

1. Decentralized energy becomes the norm: Energy technology is becoming smarter, and an ever-increasing number of energy-related equipment now connects to communications networks. Much like the growing domain of the Internet of Things, the ‘internet of energy’ is rapidly evolving. This world of connected energy devices and energy generation will continue its march towards decentralization. Power generation will become smart, small, economical, and “right-sized,” and supported by a smart grid that can handle two-way energy transactions. California legislation requiring solar PV installation on new residential construction is also driving this trend.
2. Nobody will say ‘solar’ without saying ‘storage’: Both the economics of energy storage technology and equipment as well as the business case for storing solar energy will drive developers and project owners into a new market reality: if you build utility-scale solar, storage is nearly always included. The cost of solar decreased by 86% between 2006 and 2017, and battery storage technology cost dropped by 72% since 2010 (source: U.S. Energy Information Administration and Bloomberg, respectively). Further cementing the marriage of solar and storage are the improved economics of co-locating solar and storage from the start, the incentives for capital investments in both technologies, as well as the monetization of energy sold back into the grid.
3. Harvesting and leveraging energy information and analytics will become a job function in the C&I segment: When we say a device is ‘smart’ we tend to mean that the device includes digital information capture, processing, and communications capability. As energy technology becomes digitized, users and managers of energy technology will reap the benefits of new and better data insights. The promise of these new insights will create many more well-paying, dedicated energy analytics jobs with titles like Storage Revenue Optimization Analyst, Energy System Machine Learning Manager, and Director of Energy Data Science. Utilities have been unlocking the insights from energy system data for years, and now businesses will do the same to reap the benefits of unprecedented levels of control over energy generation, storage, and management.
4. Decarbonization becomes the mission: 2018 brought a slew of initiatives and legislation designed to transform energy in California, including legislation to transition into a 100% greenhouse gas-free economy, standards requiring full electrification of city bus fleets by 2040, and an increase in the cap for C&I direct access. How to accomplish these transitions will be a focus for everyone in this space.
5. Transport Electrification and Infrastructure Go Mainstream: To meet California’s ambitious carbon reduction goals and reduce operating costs, more and more fleet managers will look to EV technology. This trend is also driven by statements from California leaders, like former CA Governor Jerry Brown, who asked for 5 million EVs by 2030 (up from ~450k today), and the call for spending billions of dollars on EV charging infrastructure, which has the backing of multi-state consortia that are already looking at how to achieve the decarbonization of transportation. To wit, the proliferation of electrified autonomous vehicles adds to this momentum. Finally, California citizens have the opportunity to benefit from a more stable and lower cost grid by integrating these rolling batteries into the power grid.
6. Energy choices expand: The energy market is undergoing a profound change in California. A once static and largely single-supplier environment now increasingly looks like a competitive market; the review of California IOU business models is one example of this. A larger field of energy providers means competition and more options for businesses and homeowners, which can foster an evolution for EV charging and the transportation landscape, new energy-related business models, and rapid change in how distributed generation resources are used.
7. For businesses, energy goes from expense to asset. 2019 will expand the reasons for companies in the C&I segment to take control of their energy destinies to build resilience and manage energy as an asset, instead of a cost center. According to a 2018 energy survey of C&I companies, one in three organizations are already thinking about how energy can contribute to business growth, drive more efficiencies, and reduce risk. Treating energy as a strategic asset can improve business performance. When combined with an increase in competition in the retail electricity market, energy becomes a business priority for many more companies, not just energy industry players.
8. Inversion of the economics of investing in energy resilience compared to the cost of suffering outages: Businesses are more dependent on energy than ever, and dependence on power-hungry technology—from the mission-critical hosted applications to electric vehicles—will increase the demand for a stable supply. Outages have a significant impact on financial performance and customer loyalty, and businesses are more motivated to invest in resilience technology than they are to suffering the consequences of business disruption from power outages. In 2017 alone, the National Oceanic and Atmospheric Administration reported that there were 16 weather and climate disaster events with losses exceeding $1 billion each across the United States. On the other side of this equation, the cost of energy resilience technology for businesses is steadily decreasing and reaching the point at which the investment in resilience will be more attractive than the cost of mitigating business interruptions.