Three critical themes for utilities in 2022
January 20, 2022
As we come to the beginning of a new year, my utilities clients are returning to their desks, as am I.
And as we collectively draw breath, I’m reflecting on the past year (read what I said this time last year), and gearing up for what’s up next for 2022.
So where are we at when we look back at 2021?
It was certainly a tough year for many. But I think there’s cause for genuine optimism when it comes to the energy transition and the road ahead for utilities.
Despite mixed reviews (and some empty seats at the table), COP26 delivered some important policy outcomes, notably on methane. It also laid bare climate action and climate justice as moral imperatives of our time.
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For me personally, the most striking takeaway was how industry and business must drive much of the change that is needed on the path to net zero. And I came away feeling more positive than ever about how utilities, and the ecosystem in which they operate, will play a central role in decarbonization.
Meanwhile, the huge investment commitments emerging from COP26 (some $130 trillion) mean many plans may now come to fruition. And with a whole new level of regulatory support for the energy transition, with government stimulus at never-before-seen levels, it’s a tailwind we can’t afford to squander.
Against that backdrop, and as we look ahead to 2022, here are the big themes I’m seeing and what they mean for utilities leaders.
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Theme 1: Decarbonize everything
The message is loud and clear: we need to decarbonize faster and more creatively. And with big investment funding a reality, real momentum is on the cards. It may finally solve the “chicken and egg” problem around electric vehicles (EVs), for instance. It goes something like this: Why make cars that can’t easily be charged? If they can’t easily be charged, why buy one? And so on.
Making decarbonization a reality requires multiple approaches, but one key lever will be industry convergence: blurring the lines between industries, partnering in new ways, and even changing how those industries operate entirely.
So, what does it mean for utilities? A lot of it is about forging new partnerships within and outside the industry, and in new ways in the value chain. Take a look at my colleagues discussing industry convergence at COP26 here.
Case in point: BMW in Europe is not only getting into eMobility, but also looking more broadly into energy. And in Europe in particular, we're continuing to see Big Oil invest more into electricity infrastructure, battery optimization and offshore wind.
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Theme 2: The transparent, resilient supply chain
With new levels of investment at stake, and net zero a pressing priority, transparency is now king. And that means setting clear interim goals on the road to net zero; showing the roadmap to achieving it; measuring and managing GHG emissions with robust data and processes.
And it also means shining a light on the supply chain, something my utilities clients are now doing in earnest: who are your suppliers? What are their GHG emissions impacts and are you tracking those as well as your own? And do you understand your other supply chain risks—such as where materials are from?
On top of that, COVID-19 has generated a renewed push for local and more independent supply chains (in place of the globalized view). Example: governments are looking to build batteries (and their materials) and solar panels domestically, to de-risk the supply chain from a resilience standpoint.
And this philosophy may drive new dynamics around prioritizing what countries can produce locally—if you can’t make EV batteries, will you pull back on EVs?
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Theme 3: Be strategic, innovate and scale
Strategic, coordinated and innovative plans will be key around renewables. And that includes a nuclear strategy (with decommissioning pausing or being reversed in some cases) and the realization that net zero without nuclear may not be achievable.
But progress also hinges on two other factors: 1) innovation must step up to solve the tough problems and 2) Take-up at scale (and hyperscale) must become a reality.\
First to innovation.
What does innovative resiliency look like for example? Will battery storage play a big role? Or energy storage at scale? How do we how use satellites, drones, fixed cameras? And how does technology predict and mitigate extreme weather and its effects?
Next, hydrogen: it’s needed to meet net-zero goals, especially for hard-to-abate industries. How do we transport it effectively in our existing infrastructure? How can we spur innovation focused on reducing the green premium between green hydrogen and brown hydrogen?
Next to scale and hyperscale.
Scaling will continue and become a central theme. Already, utilities are looking hard at their own fleets and electrifying them, and helping their customers electrify too. And for another signal of intent on scaling, consider how the National Electric Highway Coalition, sponsored by EEI, has grown from a handful of members to more than 50.
And a sidebar on talent: We are counseling clients to prioritize skilling and reskilling, recruiting and retaining—and cultivating an environment where people are really excited about working at the utility of the future. Location is certainly key: as the pandemic has shifted people to either remote or hybrid situations, 83% of utilities workers Accenture surveyed have indicated they want to work in a hybrid environment. It will be critical that leadership considers the spectrum of work models available to determine which best suits their workforce and improves productivity and satisfaction.
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It sounds simple, but it’s key to moving forward on the plans and delivery of the net zero, equitable future I heard described at COP26. And the writing is on the wall, with 70% of utilities in the United States having made a net-zero pledge already. In July, the European Commission adopted its first proposals toward reducing net GHG by at least 55% by 2030 (compared to 1990 levels). More recent proposals include decarbonizing gas consumption.
As I begin my journey into 2022, I feel optimistic that it’s a great moment for utilities to drive for net zero, collaborate in new ways innovate and inspire. Contact me to talk more about how.
