The Speed of Change for Utilities Is Accelerating – Are You Ready to Keep Pace?
The utility industry is tremendously complex. It has a wide-reaching impact on the way we all work and live. To help utilities plan for the future, publicly owned utilities (POUs) – community-owned, not-for-profit electric utilities that safely provide reliable, low-cost electricity to more than 49 million Americans – are required to regularly submit Integrated Resource Plans (IRPs) that detail anticipated customer electricity demands and how the POU intends to satisfy those demands.
The IRP addresses overlaying shifts in both supply side and demand side to create a multi-year roadmap, giving operators the ability to consider the variety of actions available to them, including whether they should build or acquire additional generation capacity, invest in infrastructure, and hire or train their people. In short, the overarching purpose of an IRP is to help utilities plan to meet our future electric needs. No pressure!
IRPs are typically hundreds of pages long, with thousands of additional pages of supporting documentation. They are grounded in well-established paradigms in a historically slow-moving industry. But like most everything else these days, things are changing.
The IRP of 2021 and Beyond
Lately, something has changed with IRPs. They don’t read as updates of the last IRP filed, nor do they sound like the one from the next state over. Recent documents from POUs show an environmental conscience and are refreshingly more strategic than those of the past. What is behind this new approach?
Regardless of whether you work at a utility, a product manufacturer, or somewhere far from them, there’s a good chance that you’re hearing more and more about the ever-growing requirement for carbon-neutral supply chains. Carbon-neutral strategies are turning into required corporate table stakes across virtually every industrial sector. POUs, as traditional sources of carbon, are being forced to adapt – fast.
POUs and the supply side are forced to file their resource plans that include predicting quickly changing future generation capabilities. At the same time, the major consumers of electricity, such as product manufacturers, are estimating how quickly they can develop and implement carbon-reducing technologies to meet the desires of their investors and customers.
The speed of change on both sides of the supply and demand curve is dizzying. POUs are left to figure out how they will intersect in an ever-changing future. This creates a reality where companies are forced to make commitments they don’t yet know how to meet.
Preparing to Tell a Compelling Story Is Critical
Help may be on the way from the Beltway and the infrastructure bill coming out of Congress. The impacts that the infrastructure bill will have on generators and consumers remains uncertain, but even the most cynical predictors believe federal funding will help advance carbon neutrality. I recently asked several utility clients to estimate, on a scale of 1 (most traditional) to 10 (most revolutionary), where they see their next IRP in the context of recent past filings, both from their company and their peer companies. If this question had been posed to them in the past, their responses would have been in the 2‒4 range. But today, they see themselves in 6‒8 range – and the shift away from the traditional approach will likely only continue. It seems the pace of change is accelerating, and utilities are getting on board.
Regardless of where a company is on this scale, the increasing uncertainty in the energy generation and consumption markets is creating tension within organizations. The impacts will be felt far and wide. Everyone has a stake in the change. Investments in the future will consume budgets, macro forces will be felt by employees and customers, and well-intentioned corporate cultures will be challenged to hold it all together.
There’s no one-size-fits-all answer to overcome the challenges ahead, but my most revolutionary respondents agree that crafting a compelling narrative of the future is required. The industry needs to prepare to educate their customers and communities about what services are coming, explain to their investors why today’s investments will lead to a bright future, and teach their employees why today’s uncertainty will create tomorrow’s opportunities for them.
Is your organization doing enough to get in front of these changes that are on their way?