As we head into 2021, my US electric utilities clients are drawing breath and reflecting on the past year. And in the debriefs I’m having with them, one observation keeps coming up: that 2020 has given us a window into how the energy sector will look years from now. With demand drastically down in the midst of COVID-19, we saw the future: variable renewables soared as a percentage of the generation mix, to the point of hitting 42 straight days of renewables generation beating coal in the US in the spring.

All this made the US feel like Europe for a while, if you think about it in the context of the Path to Maximize System Value, developed by the World Economic Forum with support by Accenture. For a few months in 2020, parts of the US were catapulted to the same stage our European counterparts were at pre-COVID: moving out of a generation mix seen in the core transition (the early stage of the energy transition) and hitting the “pivot point” of greater variable renewable in their generation mix.

And as my clients reflect on this temporary glimpse into the future, they can see a time when energy demand will rise again, and this circumstantial progress will fall away. So where do we go from here? Answer: use last year’s experience to shed light on the accelerants for the US to keep that momentum going and hit the genuine system pivot point sooner.

Here are three things I’m counselling them to consider.

#1: Keep focusing on laying the groundwork

When you think about the energy transition, it’s tempting just to focus on where renewables will come from to accelerate that journey. But it’s also imperative to focus equally on grid modernization. It’s the key factor that constrains or accelerates the pace of renewables growth. Why? Because if the grid can’t handle the amount of renewables on the system, then the pace will naturally be curtailed.

It really comes down to an overall question: how can we transition to a network of the future as more variable renewables become available? The answer: smart infrastructure will lead the way to enable an unconstrained, more flexible grid. Investment in transmission and distribution will unlock new areas for wind and solar development, while increased focus on storage and flexibility solutions can balance supply and demand in our more distributed, variable system. Integrated into all these solutions will be data and analytics through the internet of things (IoT).

Importantly, building the network of the future will drive key system value outcomes for business and society such as lower GHG emissions, jobs and local economic impact, and improved systemic efficiency among others.

#2: Grasp digital as the biggest accelerator and the glue that holds it all together         

Digital is going to help us all get there and cope with uncertainty. My clients are wondering: how can I plan if I don’t know how demand will recover across my commercial and industrial customers (C&I) see the EIA outlook. And what impact will that have on renewables getting onto the grid? To deal with that, you need flexible models and ones that can scenario plan as demand projections change.

And analytics, among other approaches, will be critical to thriving amid this uncertainty, helping with demand and generation forecasting in a dynamic way as the conditions continue to change. Digital is going to be the key enabler for all energy transition trends, including IT/OT (integration of operations and information technologies across networks); platforms (cloud platforms providing new ways of delivering energy services); automation (routine tasks like substation inspections being executed without human intervention)…all underpinning better information for better decision making. It’s time to make digital central to your future if it isn’t already!

#3: Use regulation and stakeholder expectation to drive progress

Legislators and other stakeholders alike are creating a tailwind, with the Biden Harris administration pledging $2 trillion of investment in green infrastructure including clean energy over the next four years, and at least 9 state-level net zero targets. Local regulation and action are also helping, with for example, cities from Atlanta to Seattle implementing EV-ready building codes and city EV strategies to tackle transportation emissions—America’s largest source of GHG emissions.

There are more accelerants at play. For example, an increasingly vocal C&I customer base has been lobbying for increased renewables in their generation mix, and having a real impact in Virginia among other places.

But what of corporate citizenship? Investor and stakeholder scrutiny is rising toward all types of companies, delivering the rallying cry for utilities and others to set ambitious climate targets and hold themselves accountable. A case in point is the much-discussed Larry Fink letter of 2020 laying out the thesis that purpose is at the core of profitability, and the understanding that tackling ESG issues is essential to managing risk. 

So where does that leave US electric utilities? This is how I’m articulating it to my clients: it’s time to look at these accelerators or shifts, understand where you are today, and build your cohesive long-term strategy. Momentum is rising around you, and the “pivot point” is in sight. Now it’s time to double down. Contact me to find out more about how.

Scott Tinkler

Managing Director – Strategy & Consulting, Utilities, North America

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