- Jun 29, 2021 6:24 pm GMT
The ways in which utilities operate and interact with customers are changing. This change is partially fueled by the effects of the COVID-19 pandemic, as well as larger, continuous trends including the proliferation of customer-sited distributed energy resources (DERs) and connected devices, the increased number of cyber and physical threats, and an influx of new market players. To adapt and succeed in this changing landscape, the tools and processes historically used by utilities must also evolve.
Guidehouse, in collaboration with Public Utilities Fortnightly, has released the 2021 State and Future of the Power Industry report. This report includes interviews with Guidehouse professionals and leaders in the utility industry about key trends. It also includes survey responses from industry stakeholders and examines what’s next for energy companies as they navigate the global energy transformation and the effects of the pandemic and climate change on utility business models.
The influx in DER installations and clean energy resources has been a continual challenge to the traditional utility business model. Guidehouse Insights’ analysis indicates that DER deployments are expected to outpace centralized generation on a global scale over the coming decade by a healthy margin. Guidehouse Insights anticipates that annual DER capacity additions will be nearly twice that of new centralized generation capacity by 2030.
The increase in DER make the operation and management of the grid much more difficult. The two-way power flow and self-consumption patterns of DER asset owners and the sporadic EV charging profiles of customers strains utility capacity for infrastructure planning, load forecasting, and voltage regulation. In the 2021 State and Future of the Power Industry report, 63% of industry respondents indicated that the proliferation of DER will have a demonstratable impact on the utility business model, and there are no signs of this impact changing. This challenge is expected to become greater as a result of the Federal Energy Regulatory Commission’s Order 2222, which intends to remove barriers preventing DER participation in wholesale energy markets.
If orchestrated at scale, DER could be an asset for utilities by enabling more dynamic power markets. In shifting away from a siloed, top-down approach, utilities will need to adopt new technologies and processes for orchestrating diverse distributed assets. Utility investment in integration platforms and advanced grid management systems, including DER management systems, is expected to increase in response to this shift. These technology platforms enable utilities to quickly aggregate, improve, schedule, and settle several fast transactions to maintain a balanced and reliable grid.
Additional investment in utility automation, digitalization, and other advanced software, such as blockchain and AI, is anticipated. These solutions grant utilities greater visualization into the grid edge and DER while providing new, diverse products and services for customers.
New Challenges for the Industry
External threats to the utility industry, both cyber and physical, are steadily increasing and challenging the resiliency of the grid. Securing the electric grid from physical attacks and cyberattacks is a high priority for the power industry, according to the 2021 State and Future of the Power Industry survey results. Most respondents (86%) indicated that between cyber and physical security, cybersecurity poses the bigger risk to utilities.
The sheer number of extreme weather events and cyberattacks that occurred in 2020 and early 2021—e.g., the recent ransomware attack on the Colonial Pipeline—has increased the pressure on utilities to strengthen the resiliency and security of both their assets and the larger grid. Guidehouse Insights anticipates that the North American market for utility security could reach $436.8 million by 2029. As the number of DER and connected devices on the grid edge increases, the grid becomes more distributed and decentralized, making it more vulnerable to malicious attacks. Increased knowledge of utility data, devices, and systems, and where, when, and how they communicate is essential for utilities to secure systems and networks.
In addition to the operational threats and challenges to the utility business model, utilities are also facing threats to how they do business in the form of competition. Emerging, non-energy competitors—including oil & gas, international electricity and gas, and technology and telecom companies—are slowly entering the market. According to the 2021 State and Future of the Power Industry survey, 55% of respondents felt that technology and telecom companies pose the biggest threat to utilities, 29% pointed to international electricity and gas companies, and 16% cited oil & gas companies.
The rising numbers of competitors in this space can be attributed to the growing demands of customers and stakeholders for more robust programs and services. Some of these include environmental, social, and governance initiatives; reliability improvements; energy efficiency; and programs to monetize customer-owned DER.
Sustaining Utility Growth
The utility industry and the way it interacts with customers are changing. Utilities need to adopt more distributed operational frameworks with nimble, automated processes that can adapt and change with the ongoing global energy transformation. According to the 2021 State and Future of the Power Industry survey, for sustained growth, 56% of respondents indicated that utilities must embrace electrification, one-third (31%) indicated that product and service diversification is most important, and 13% selected digitization and AI.
Electrification is a well-positioned pathway for sustained utility growth, especially as the focus on decarbonization increases and utilities seek solutions to curb declining loads and revenue. However, it is my belief that all three options—electrification, product and service diversification, and AI and digitization—are necessary for utilities to adapt and succeed in the clean, distributed, mobile, and digitalized utility future.
 Guidehouse Insights, Integrated DER: Orchestrating the Grid’s Last Mile, 3Q 2020.
 Guidehouse Insights, Hardening and Securing Utility Control Systems, 4Q 2020.
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