Weekly Brief

Modern Energy Trends And Its Effects On Utility Companies

Amy Carstens, Director, Transmission Services, Dairyland Power Cooperative

Amy Carstens, Director, Transmission Services, Dairyland Power Cooperative

Technology across the globe has seen extensive growth over the past few decades. Companies like Walt Disney and Lego embracing this shift found new opportunities that thrive and meet new expectations of their customers, which has not been the case for most prominent businesses. Once recognized, Blockbuster Video and Polaroid are great examples of entities that failed to develop business strategies that would adapt with innovation.

Success with any business is primarily determined by the robustness of corporate strategic planning activities and a company’s ability to flex when the environment around them reaches a strategic inflection point. The electric utility industry is not exempt from the impacts of technology’s growth. The strategic interests of utilities once focused on the development of the plant to serve an ever-growing load base where reliability improvement and expansion were the basis of most utility strategic plans.

The consumer wants and needs to drive utility value. For example, being good stewards of our planet is a desire that impacts today’s utility. We must understand what trends will influence the ability to utilize more renewable resources without deteriorating the electric grid’s reliability. Wind and solar, energy storage, smart grid, and smart home trends are key focus areas for utility strategic planning teams. In addition, environmental legislation, electric vehicle adoption, and equipment supply volatility are influential trends that need to be monitored.

There are multiple inflection points that a utility strategic planning team may want to identify that are linked to corresponding changes in their business plan. Scenario planning can be an excellent tool for understanding what impact those changes will have on a company’s current business plan. It is also helpful to examine the amount of risk and reward associated with the timing and the scope of any potential adjustment.

“We must understand trends like environmental legislation, EV adoption, and equipment supply volatility. They must be monitored and how they will influence the ability to utilize more renewable resources without deteriorating the electric grid’s reliability.”

Some changes may be more disruptive than others and the disruption may be positive, negative, or both depending upon the utilities’ current operating environment and structure.

For the example above, the strategic planning team may create a scenario that accelerates battery storage due to a new battery design breakthrough while also experiencing supply chain issues with new solar panels and turbine blades due to political unrest in the countries that supply such materials. In this scenario, reliability issues associated with non-dispatchable renewable energy resources are mitigated as storage progresses, yet the generator supply chain is compromised and will in turn slow adoption rates due to the lack of resources and increased prices. A possible business strategy may be a two-step approach for meeting the renewable energy demands of the consumers.

The team identifies that if a certain inflection point for the battery technology is met, a new line of business will be launched focusing on selling behind-the-meter battery storage as a reliable backup to the utility source and a load shifting tool optimizing time-of-use rate. When sourcing issues resolve or a new source is found, and another inflection point is met, the company business plan changes again. Renewable resource buildouts are included in the utility generation plan. The original battery business can be leveraged for the pairing of batteries and renewable generation, eliminating some of the reliability risks associated with adding non-dispatchable renewable resources.

If strategic planning is not considered a priority for a business. In that case, that business will become a future Blockbuster or Polaroid. The world around us will continuously evolve, and strategic planning helps ensure a company can be sustainable in that new operating environment.

Since we are not sure what that environment will inevitably look like, we can use trend monitoring and scenario planning to help build different views of that future to test the robustness of our business plans and prepare to handle the “what” and “when” when it happens.