Utilities continue to lead toward a net-zero future

Autumn is in full swing here in the Northern Hemisphere, and I’m reflecting on the year so far for my utilities clients and whether what I wrote in January has come to pass!

Back then, I highlighted some key themes for utilities in 2022, among them accelerating decarbonization, prioritizing resilient supply chains, and embracing innovation to power it all.

Those thoughts still feel timely.

If anything, they feel more pressing. Because, self-evidently, the challenges are greater.

As the invasion of Ukraine continues unabated and Russia weaponizes energy supply, the global energy crisis continues to deepen resulting in inflation and predictions of recession. Additionally, the increasing incidence and cost of extreme weather events (the top 10 in 2021 alone cost a combined $170 billion) means the energy transition is more vital than ever.

This energy transition is undeniably at the core of the climate action we must take. But against the backdrop of early 2022, it’s also a tool for geopolitical resilience: a way to shore up countries and industries against supply and pricing instability; and a driver for affordability and social justice.

But citizens are demanding change faster than policymakers can deliver it—and policymakers are looking to utilities to take the stage.

I feel sure they are up to it.

And as we look ahead, the utilities industry is and will continue to be a hugely exciting place to work—at the forefront of sustainable innovation at scale, electrification, digitization, connected business models and policy advocacy.

Here’s what I think it all means for my utilities clients—moving toward the end of the calendar year and beyond.

The consumer continues to drive transition on demand

It’s now even more the case that in the energy transition equation, the power has shifted to end consumers.

They’re demanding action from policymakers, that much is clear.

But they’re also setting the agenda on what they expect from their utilities, and how they want to play in the energy transition. We’re witnessing a democratization of e.g., distributed energy resource (DER) technologies, enabling customers, not just utilities, to make investment decisions.

The emergence of a two-way relationship between utilities and customers will only accelerate, with embryonic innovations (e.g., electric vehicle-to-grid) scaling and transforming the nature and connectedness of citizens and their energy providers.

My clients know this, with 78% of energy providers saying those that do not help their customers achieve net-zero with greener products and services will get left behind.

This dynamic calls for laser focus on customer-centric, connected energy models that reimagine how customers are served. My clients are already moving beyond the meter in the way they engage with their customers, and I’m counseling them to continue putting this high on the list of priorities.

It’s also about focusing now on innovating the business models of the future: for example, as-a-service models, connected ecosystems for electric vehicles (EVs)—e.g., car leasing, charging, tariffs all in one place.

Digitalization remains the glue, and its possibilities are expanding

Agility and interoperability remain at the very core of what it will take to scale innovations, fast, that deliver on net zero.

For instance, we know the EV ecosystem has a way to go before drivers can power up easily via public charging stations; charge flexibly overnight at home; or allow the grid to discharge stored energy in their battery when plugged in (for grid resilience).

Digitalization will play a critical role in addressing in these examples and many more. I’m supporting my clients to invest in and embrace digital now, and stay plugged into what’s coming and its potential for net zero, as the metaverse comes to fruition.

And if I could leave my clients with one takeaway, it’s this: these ideas are not abstract. They’re happening now and the opportunity already exists.

For example, San Diego Gas & Electric (SDG&E) is decarbonizing their fleet using an AI fueled tool that overlays fleet GPS and vehicle sensor data with socioeconomic data, to model different scenarios for vehicle replacement. The idea is to prioritize reducing emissions in vulnerable communities by enabling cloud-based data visualization which feeds a digital twin. This twin helps determine where vehicle replacement should be targeted for maximum community benefit. The project was recently named to Fast Company’s 2022 World Changing Ideas list and won the CIO 100 Award for innovation.

It’s testament to the power of technology to deliver benefits, at scale, with social outcomes in parallel, and in fact, this program has been the recipient of awards for just that.

Aspire to electrification of everything

In January, I talked about decarbonizing everything. The need has only intensified as supply shocks resonate through the world, and countries’ and companies’ resilience is called into question.

So what next?

Collectively, we need to double down on industrial decarbonization through innovation. We already know it works, with industrial clusters more than proven as an approach.

And I’m counseling my utilities clients to stay the course on innovation and hold their nerve as the landscape evolves and the science accelerates to better serve the need.

Take solar as an example. Just 10 years ago, solar efficiency was less than 15% and cost $5 per watt. Today, solar panel efficiency is greater than 22% at a cost of less than $1/watt installed. Meanwhile, researchers are now developing next generation solar panels with efficiencies greater than 45%. The same cycle of innovation is needed for biofuels, hydrogen, battery storage, and carbon capture utilization and storage (CCUS).

But innovation doesn’t stop there.

Regulatory innovation is essential to our ability to achieve net-zero goals. For example, in Europe and North America, transmission infrastructure connecting renewables to load centers can take far longer to permit, approve, and construct than the renewables themselves.  

In the UK, SSE is using computer vision, AI and machine learning algorithms to monitor the domestic puffin population around the Scottish coastline. This pilot is helping accelerate the offshore wind permitting process while supporting biodiversity and the decarbonization at the same time.

Sustainability is the red thread

Sustainability is the red thread running through all of this on the road to net zero.

My utilities clients know this is the right thing to do, for the planet and for society, as well as for resilient economies.

And as basic human needs come into stark focus this year, with energy affordability a pressing worry for so many, utilities can also take heart that doing good and doing well remain inextricably linked.

Our Sustainable Organization Index indicates that leadership teams that build sustainability into the DNA of their organizations are better able to deliver financial value and wider stakeholder impact. In fact, those with the most deeply embedded sustainability management practices outperform peers by 21% on both profitability and positive environmental and societal outcomes.

In short, since I blogged in January, I now feel even more convinced of this: utilities can and must take the lead role in what’s playing out in front of us, and bring regulators, consumers and others along with them to the curtain call of 2050.

Contact me to talk more about how to step into the (renewably powered) limelight.