For me, one of the more compelling moments at North America Smart Energy Week — which includes Solar Power International (SPI) and Energy Storage International — last month came when I asked a panel of utility executives what industry issues keep them up at night. Without hesitation, Mary Kipp, CEO of El Paso Electric Company, gave me a six-word answer.
“Climate change,” she told the audience of attendees from solar, storage and other clean energy businesses and organizations. “Specifically, anthropogenic climate change.”
Utilities across the country are increasingly taking a proactive role on initiatives to advance clean energy and grid modernization. But to hear a utility CEO like Kipp focus unequivocally on one of the most critical drivers for the growth of solar and storage was striking — and yet another sign of the sector’s ongoing transformation.
The educational nonprofit I lead — the Smart Electric Power Alliance (SEPA) — has long supported a collaborative and incremental approach to energy industry change. Bringing our 100-year-old electric power system into the 21st century will take time, particularly to ensure we have an economically robust industry that provides clean, safe, reliable and affordable power for all customers.
However, “incremental” can be a purposefully imprecise word. The challenge before us now is whether and how much we can accelerate the speed at which different steps in the transformation are achieved.
The urgency behind this question is mounting. Last month, both the International Panel on Climate Change and the International Energy Agency (IEA) issued reports warning, respectively, of the dire impacts of climate change ahead and the need for a much faster ramp-up of renewable energy in response. Indeed, the IEA predicts that renewables will make up only 14 percent of the world’s total energy use by 2040, about half of what the agency says will be needed to curb the more catastrophic impacts of climate change.
How can we bridge that gap? Technology transitions, such as the ones currently underway in both the energy and transport sectors in the U.S., are enormous economic opportunities for both the startups that often drive initial disruption and the larger, existing firms that can adapt to fast-changing conditions. Recent history shows us that cycles of innovation and new technology adoption by consumers almost invariably occur faster than expected — the solar booms in Hawaii and California being a case in point.
What we see in these states and elsewhere is that what most effectively drives change is often a combination of policy, economics and cross-industry collaboration between utilities, clean tech developers and other key stakeholders. For U.S. utilities, part of this process is shifting from thinking about renewables as a threat to seeing them as multifaceted, complex opportunities — with all the risks and challenges such complexity implies.
The lack of a national energy policy has left a vacuum where states and industry — including the electric power sector — can provide leadership and momentum. We see five issues, or pathways, as critical to accelerating the energy transition, and the opportunities it creates, across the diverse state markets in the U.S. We will be focusing our work on these issues in the coming year:
- Regulatory innovation: Regulation must keep pace with technological change and foster innovation.
- Grid integration: Continued growth of large-scale renewables and DERs, whether behind or in front of the meter, will require new tools and business processes.
- Utility business models: Rather than relying on capital investments, utilities will need to look at new programs and business models that provide value to customers and the grid.
- Transportation electrification: Electrification represents new power demand for utilities, while also driving innovation and rapid decarbonization.
- Resilience: New technologies will enhance system reliability and resilience, and provide an opportunity to offer customers a range of new products and services.