Electricity is the new green. Literally. As technology for decarbonizing electricity continues to progress, electrifying everything―from cars to heating systems―makes more economic and environmental sense. In the new world fueled by electricity, utilities are at the heart of this transformation.
In this third and last article in our series on the Future of Utilities, we explore how electricity itself, which predates the widespread use of energy from fossil fuels, can provide the clean and affordable power we need to thrive sustainably. In our first article of the series (The New Electricity Reality: The Center is No Longer Central), we focused on the emerging growth model for utilities, while the second one (The Utility of The Future Moves to the Cloud) analyzed how the cloud is transforming industry business models. We close out the series by looking at how technology is transforming electricity itself and what this can mean for our future.
Electricity: shining bright to the benefit of all.
The Year of Electricity
The Electric Power Research Institute (EPRI) just released its U.S. National Electrification Assessment, which analyzes the “critical and growing” role that electricity will be playing in the U.S. energy sector. They use a modeling approach that looks at the future of electricity from the viewpoints of stakeholders, from consumers to utilities, and from the environment to the economy. Their conclusion from assessing the growing role of electricity in this manner is that “across a range of assumptions, economy-wide electrification leads to a reduction in energy consumption, spurs steady growth in electric load, and reduces greenhouse gas (GHG) emissions.”
Their growth scenarios for electricity, which encompass conservative to transformational, project that electricity’s share of total energy by 2050 will range from 32% to 47%, up from 21% today. The International Energy Agency (IEA) further expects electricity “to grow at twice the pace of energy demand as a whole in the next 25 years.”
The increase of end uses for electricity, from cars to mobile devices to battery-powered buildings, underlies this significant growth. The IEA asserts: “There are many factors behind the electrification of the global energy system, including the electrification of heat and transport, the growth of connected devices, and the digitalization of modern economies. Demand for energy services, especially air conditioning, is set to expand in households as incomes rise, while the use of electric motor systems drives demand growth in industry.” Accordingly, the International Energy Agency has declared 2018 “the year of electricity.”
Electric Share Increases While Energy Use Decreases
Interestingly, EPRI’s assessment of electricity’s increase in the coming decades happens as final energy consumed (a measure of energy consumed across all fuels at the end use) decreases. This apparent contradiction is driven by the ever-increasing pace of technological innovation in electricity that we are already witnessing, inclusive of more powerful electric vehicles, better batteries, and the emergence of new ways of generating electricity efficiently, such as Hydrogen 2.0.
This projected growth in electricity’s share and final energy consumed means a decrease of up to 67% in greenhouse gases produced by the U.S. while the economy almost doubles. To me, this seems like a no-compromise way to thrive economically, provide better jobs, and take care of our planet, enabling us to continue to lead the world responsibly.
Utilities are Listening
With everything going the electric way, it is the utility sector’s game to lose. Across all their forecast scenarios, EPRI’s assessment concludes that renewables will continue to grow due to cost reductions, government policies, and innovation efficiency. Utilities are already the largest customers of solar and wind energy around the world. Last year, a Greentech Media article explored how data from the World Resources Institute (WRI) indicated that “utilities are turning corporate demand into renewables growth.” Specifically, the data shows that demand for renewable energy over the grid is growing and, most importantly, is effectively being met by utilities at competitive prices where everybody benefits.
The Greentech article illustrates how “utilities are listening” and are “stepping up” to make plenty of sustainable energy available through the grid. This is a true partnership with the industry for economical clean energy. The article notes that Pat Vincent-Collawn, CEO of PNM Resources, plans to eliminate coal by 2031 by shifting to renewables and natural gas as “the best, most economical path to a strong energy future for New Mexico.” Furthermore, they indicate that WEC Energy Group CEO Allen Leverett announced to his shareholders that “Probably the biggest change we’ve seen in the last five years is solar and the cost of solar. The technology curve really has fallen fast in terms of improvement in cost.”
At the Epicenter of the Electrification of Everything
If utilities continue to show the same “listening” abilities and the same drive to innovate to meet customer demand as they have shown in renewables adoption, they will be the clear winners in the new electrification paradigm. As we have written in this three-part series, utilities are at the epicenter of a transformation that will change their business models, their delivery systems, and their interaction with customers faster than we think. As electricity takes over other sources of energy for end use, to stay relevant, utilities need to do what they have so far been doing: listen and adapt.
As the Hydrogen 2.0 ecosystem gains momentum, we’ll be sharing our views and insights on the new Hydrogen 2.0 Economy. We also update our blog every week with insightful and current knowledge in this growing energy field.