Guidehouse and Public Utilities Fortnightly released the findings from their fifth consecutive Pulse of the Industry survey. Responses from more than 400 utility, regulatory commission, manufacturing, and energy service company professionals highlight the power sector’s continued commitment to adapting to the disruptive forces shaping the future of the utility and power sector.

Findings from the 2020 pulse survey indicate that utilities are aggressively embracing new business models and evolving products and services to address changes from the energy transformation. Four megatrends – greater penetration of clean energy, proliferation of distributed energy resources (DER), increased digitization of the grid, and greater integration of mobility – are affecting the entirety of the energy value chain and increasingly top of mind. Utilities today face significantly more disruption than at any point in the past 5 years the survey has been conducted.

Guidehouse suggests these changes point to the emergence of the Energy Cloud, in which two-way energy flows are supporting greater sustainability, innovation, and agility for all stakeholders across an increasingly networked system. Impacts are increasingly felt across the entirety of the utility value chain.

Energy Cloud Impact Dimensions

Clean and Distributed Power Drive New Utility Business Models

Nearly two-thirds of survey respondents agree that rapidly increasing DER and renewable generation are the most disruptive trends affecting the traditional hub-and-spoke utility business model, which is built on centralized generation and one-way energy flows. The proliferation of DER deployments continues to outpace centralized generation capacity, with annual net new DER installed capacity segments forecast to achieve more than 500 GW annually by 2030. Supporting this growth are fast-growing segments like distributed renewables, energy storage, and EV charging. Utilities are looking to procure advanced software and hardware solutions to allow for greater control of DER devices and coordination across the system as they strengthen their grid orchestration capabilities beyond moving kilowatt-hours. Guidehouse Insights expects that sales of DER management systems are expected to reach $1 billion by 2024.

Climate Change Is Already Here

At the same time, nearly three-quarters of respondents indicated that climate change is already threatening their current business models. When provided with multiple options to address this challenge, two-thirds of respondents favored an all of the above strategy that includes converting generation fleets to renewables plus storage, embracing sustainability across all operations, and integrating resiliency throughout the network. Such a multipronged approach underscores the urgency with which utilities are addressing threats.

While climate change effects all industries, utilities increasingly face pressure to decarbonize the grid from regulators, institutional investors, and customers, many of which must meet their own mandated or voluntary sustainability targets. Energy procurement plays a significant role in greenhouse gas calculations, and technology parings like solar plus storage (both behind-the-meter and at the utility-scale) will continue to proliferate as a strategy to offset carbon-intensive generation.

Intelligent Devices Will Provide Grid Operators with New Insights and Opportunities

Grid modernization remains a priority for utilities and their regulators in front of the meter, with around half of respondents indicating that the power industry should embrace electrification of everything to promote sustained growth. Behind-the-meter, customers continue to adopt two-way communicating devices from battery storage to EV chargers and smart home appliances.

The intersection between smart home and smart cities infrastructure with utility systems will provide grid operators with opportunities to capture new value from the strategic use of data streams. For example, by the end of 2020, Guidehouse Insights projects that approximately 2 million plug-in EVs with be part of the North American fleet. Charging infrastructure vendors and utilities are already working in partnership to tactically manage the charging of these EVs while also providing grid services. Such services include peak demand reduction and the absorption of excess renewable capacity during peak generation hours.

Utilities Will Need to Remain Flexible to Overcome Existing Challenges

Consistent with findings from previous years’ surveys, the majority of survey respondents (66%) find that potential competitors in the technology and telecom industries pose the biggest threat to utilities today. Unlike its non-utility competitors that rapidly deploy new technologies, the utility industry is not often credited with moving quickly.

Nearly half of respondents noted that utilities’ risk-averse culture continues to be a major impediment to more proactive initiatives relative to competitors. The rigidity of utility regulation and rate structure (35%) and immaturity of new business models and uncertain potential (19%) also inhibit more rapid adaptation. However, utilities increasingly recognize that adaptation is critical to staying competitive in the energy transformation.

As the industry evolves toward the Energy Cloud, existing challenges will intensify as new obstacles emerge. Emerging and existing trends uncovered by survey responses demonstrate that utilities are increasingly proactive in their efforts to examine and develop offerings that unlock new value. Nevertheless, disruptive forces are only intensifying across the industry and utilities will need to remain aggressive in adopting more nimble and flexible products and solutions.

The full report on 2020’s Pulse of the Industry survey findings can be found here.