Resilience and adaptation: The undercover innovation opportunity
- May 24, 2022 6:47 pm GMT
This item is part of the Special Issue - 2022-05 - Innovation In the Electric Power Industry, click here for more
For the average citizen, the word “innovation” brings to mind buzzy consumer-oriented products and services. The iPhone, Virtual Reality (VR) devices, maybe a smart watch. Often overlooked is the need for and importance of innovating at the “core”. This includes re-thinking, re-using, and adapting the basic, critical infrastructure we rely on every day. Here I want to make the case for why adapting at the core is so important, provide a few real-life examples, and make a call to action.
Why adaptation innovation
There are five key themes driving the need for adapting and innovating around the core:
- Climate change: Climate change has made weather events that cause stress on infrastructure both more severe and more frequent. Think fires, extreme heat, hurricanes, etc. In fact, in April 2022 the US Office of Management and Budget estimated climate change could cost the US 7.1% annual budget loss or 2 Trillion dollars a year (see here), with much of that cost attributable to infrastructure damage. That massive figure includes only the United States, of course, and not the many impacts across the globe.
- Aging infrastructure: The American Society of Civil Engineers gives our electrical grid a C minus grade, identifying a $200B investment gap from now until 2029 necessary to update and replace aging equipment.
- Asset performance: Due to both aging infrastructure and extreme weather events, reliability has been declining. Specifically, the number of outages roughly doubled over the past five years and the frequency and length of power failures are at their highest levels since reliability tracking began in 2013 (see here). Meanwhile there are growing warnings of blackouts this summer
- Customer expectations: While climate change and aging infrastructure have challenged the performance of our infrastructure, customer expectations are rising, conditioned by always on, “push a button” type services like Amazon or Uber Eats. At the same time, we have become ever more reliant on that infrastructure for health-care related services such as respirators, and end uses like heat pumps and electric cars that we are increasingly electrifying.
- Capital allocation: Finally, capital allocation decisions have not yet caught up to the reality associated with the adaptation need. Not only are the numbers associated with the investment gap large, but funding for “transformative adaptation” specifically – the kind that requires real innovation and doesn’t just nibble at the edges or focus on the near term – may be even larger
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