Utility companies may be the linchpin of corporate transformation in the U.S. electricity sector. According to GTM Research, “23 percent of all large-scale solar installed in the U.S. in 2016 was procured voluntarily by utilities under no federal or state mandates. Six of the top 10 owners of grid-scale solar in the U.S. are affiliates of utilities, including Southern Power (Southern Company), NextEra Energy Resources (Florida Power & Light), and MidAmerican Energy Holdings (NV Energy).”
American Electric Power (AEP), a coal-heavy Ohio electric utility, told The Wall Street Journal, “Part of our plan to invest in renewables is to diversify our generation portfolio. All of those investments don’t change with a change in administration; it’s a long-term strategy.” And according to Forbes in 2016, Duke Energy, the largest utility in the U.S., “has reduced its number of coal-generated megawatt hours (MWh) from 70% in 1980 to 30% today. Since sulfur dioxide emissions are reduced by 99 percent by switching from coal to natural gas, Duke will continue replacing coal-fired plants with new gas-fired plants, as is the case with two plants of a combined capacity of 1,920 MW in 2017.”
Lastly, utilities will need to go beyond renewable procurement and construction. As more renewable energy enters the electricity grid, utilities and grid operators will determine how to integrate these resources reliably, efficiently, and cost-effectively. Here, too, many companies are taking a proactive approach. Among the myriad of solutions being tested and rolled out by utilities are battery storage, intelligent solar inverters, new electricity rate designs, and advanced utility analytics and controls.
For over 100 years, the public electric grid has been operated through one-way flows of electricity and information. Thanks to innovations in power generation, sensor technology, computer processing and analytics, and data transmission, grid costs can be reduced and efficiency improved. The development of new technologies has also enabled two-way flows of data and power on the electricity system. Digitization and bi-directional flows are key enablers of a new range of grid capabilities, including increased flexibility, higher system efficiency, reduced energy consumption, and increased consumer options and value.
For these reasons and many others, electric utilities have little choice but to continue moving down a path that includes incorporating greater quantities of higher efficiency, lower cost, and faster reacting distributed energy resources and central power generation technologies within their portfolios. These same utilities will also be able to avoid constraint-related transmission and distribution (T&D) system upgrade costs by incorporating a wide variety of front- and behind-the-meter energy storage and demand management technologies that only a few years ago, were not economically or technically viable options.
The above shift is evidenced by the quantity and velocity of change occurring in the electric utility industry with regard to grid modernization actions. In the first quarter of 2017 alone, 86 formal state-level actions were taken in the following areas: