Utilities are under pressure to be more resilient in the face of extreme weather. They’re rising to the task, but at what cost? The challenge is to articulate the value of resilience when you’re proving the value of a disruption that you pre-empted by being ahead of the game. Here are some thoughts on the situation and what it means for utilities and customers.
Extreme weather isn’t just more frequent. It’s also more variable—and that’s a problem for utilities
Recent extreme weather events serve to highlight the extreme variability we’re now seeing—even from one U.S. state to another, and one year to the next. Scale, severity and geographic spread are so different, making the planning for these events increasingly challenging. Added to that, the factors are many and varied: Sahara dust changes the dynamics of hurricane season; pollution levels have an impact on weather; then if it’s an El Niño year…and the list is changing all the time. Utilities know they need to focus on resilience, but when predicting the next extreme weather event is harder than ever, how can they model likely scenarios and make credible plans?
First up, consensus on what resilience means would help
We understand how to measure reliability. But with no single definition of resilience or a universal way to measure it, it’s challenging for utilities to quantify the value of their investments or strategies and weigh them against potential customer outcomes. Example: most utilities can quantify the impact of short electricity outages (standard reliability). But when you’re faced with an extreme weather event—geographically broad with secondary effects for business and customers, unknown health impacts and safety implications—how do you quantify the value of what you’ve managed to avoid, if resilience has kept the power running? And how do you articulate that value to customers and regulators?
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Resilience inevitably drives up cost to customers. So how do you manage expectations?
Over the past decade, utilities in the United States have taken a lot of actions in the resilience space. They have made investments in areas such as hardening infrastructure and controlling or removing vegetation that may impact the integrity of the grid. Against that backdrop, the remaining actions on the list are increasingly costly. More cost for utilities inevitably means more cost for customers, but in the absence of a clear way to measure the societal value increased resilience brings, tension emerges (both with customers and regulators). And costs may be large. Our research shows 88% of utilities executives believe maintaining extreme weather resilience will cause significant increases in network prices.
Customers have a right to expect safety and reasonable pricing, but they also want steady power supply. Meanwhile, they’re also being exposed to extreme weather conditions they’ve never seen before: Tropical Storm Cristobal came straight through the U.S., bringing strong winds and heavy rain all the way up to Wisconsin. If you are from Wisconsin, most likely you’ve never seen a tropical storm before, and utilities will have to manage your expectations in totally new ways.
Localized solutions and collaboration may help
It may not be quite as binary as that. Utilities are increasingly driving up system flexibility with microgrids, battery storage and other ways to keep the power running to critical locations and vulnerable communities. This type of ringfencing, or islanding, will increasingly be an important tool for utilities, and they know it: 93% of utilities executives think self-islanding solutions will be a major contributor to improved resilience in the longer term. This can include bringing in temporary generation capabilities when there’s an event or connecting solar panels to charge a battery that can kick in when it’s needed.
But going a step further, the future customer will not be a passive recipient of energy. Where traditional distribution models struggle to reach isolated or high-risk communities, actively collaborating with customers on local solutions makes great sense. And it boosts overall resilience, with the utility less stretched across multiple priorities in an extreme weather event. Utilities across geographies are already doing this. For instance, Horizon Power in Australia has outfitted customers with renewable generation, storage and backup generators. These assets are owned and maintained by the utility, but the customers are no longer connected to the distribution network, saving significant costs in maintenance and repair. It’s an example of getting creative in the face of increased disruption, and this flexible mindset will shore up utilities’ path forward.
These challenges aren’t going away, and a range of solutions will be needed for a resilient future. Contact me to find out more about what to do next.