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If carbon neutral by 2050 is the Moon Shot, where's the Rocket Ship?
Leslie Ponder and Kevin Cornish, Black & Veatch
When Kennedy said we would send a man to the moon, people were doubtful this could – or should – happen.
History may paint a rosier picture, but in 1969, only 47 percent of the public supported the moon landing. They weren't necessarily on board, but for the teams of scholars, researchers, scientists and engineers working around the clock, failure was not an option.
Today, we're seeing a lot of parallels when it comes to decarbonization – the new "moon shot" of the 21st century. And the "moon"? The promise by electric utilities of delivering net-zero carbon emissions or carbon-free energy in a rapidly decentralizing marketplace.
There's no set path to decarbonization and no single rocket ship that will get us there. Although it's a common goal, the players – utilities, governments, corporations and other entities – are at different starting points, with different drivers, timelines, and levels of complexity. Some have staked out aggressive goals, e.g., 100-percent renewable energy or a zero-carbon footprint, while others are aiming for more intermediary steps, such as working towards cleaner coal or relying on natural gas as a transition fuel toward a cleaner energy future.
What is known is that decarbonization will require a colossal effort. Utilities know where they want to go, and they know that a moon shot is necessary to get there – but the exact trajectory remains unclear.
How to Build a Rocket Ship
The march towards renewables isn't slowing anytime soon, spurred on by an accelerating pace of change, increasing-price parity for new technologies, and new advances in electrification, decentralization and digitization. As a result, we're seeing sweeping changes in how electricity is produced. Coal continues to decline, dropping 18 percent in 2019, while natural gas has surged ahead to become the No. 1 source of generation in the U.S.
Today, market players have more options than ever before, including large-scale solar and wind, battery storage and associated technologies, the replacement of coal with natural gas, and the advent of hydrogen power and next-generational nuclear energy. Utilities, governments and corporations are evaluating these technologies as they build their "rocket ships."
These measures will get us 70 to 80 percent of the way there, but to make it to the moon, we need new regulatory and market processes and evaluation of new technologies that are not yet fully developed to meet 2050 goals.
There are a lot of potential solutions, and new ones are being added all the time. But utilities will have to take an individualized approach based on their current situation. For example: Do they own generation? Will they need to retire or make new investments? If they do not own generation, are they going to invest in 100-percent renewable generation? Or are they going to buy credits? How do state and national regulatory components need to change to support my changing business? Where are the other market players?
Rapidly changing technology is also forcing utilities to address new issues. For example: In the past, power flowed in one direction and optimization happened based on that scenario. Today, distributed generation has spawned bi-directional power flows, introducing a slew of new challenges when it comes to protecting and operating the grid. In addition, utilities must include assets they often don't own or control into their grid control and optimization strategy, while still providing safe, reliable power to their customers.
Add to this list, increasing penetration of distributed energy resources (DER), growing concerns over grid resilience and reliability, aging infrastructure, increasing load demands due to growing electrification, distribution modernization, increasingly connected (and vulnerable) IT and communication networks, third-party market participation, and security.
How to Achieve Liftoff
Data management will be critical. The ongoing digitization of the grid combined with the influx of new market players and new digital assets is driving immense amounts of data being collected by smart sensors and remote devices. Good data management comes down to obtaining secure, reliable, timely, coordinated information from both utility and non-utility assets, and aligning that data to tell meaningful stories. Considering the level of distributed assets – with third parties owning, controlling and selling assets into the marketplace – utilities are facing a different market model that will require unprecedented levels of information sharing.
Move decision-making to the grid edge. All too often, there is latency in data transmission caused by data traveling from a device to the centralized system for a decision to be made, then returning that decision to the device. To remedy this, grid operators must havethe ability to make decisions very rapidly, near the grid edge close to where operations occur, while still relying on a centralized control system to provide oversight. Sharing information at the grid edge will require a whole new level of communication and security infrastructure to protect critical data and assets.
Improve visibility into distribution and transmission systems. Utilities must understand what impact both utility and non-utility-owned assets are having to the distribution and transmission grids. A collection of assets on the distribution side can cause instability on the transmission side, and vice versa. Optimization can no longer occur on one system. Utilities must understand how DER impact the grid, and access to the right data will be critical for forecasting and alignment of load and generation at increasingly complex levels of granularity.
Advocate for regulation modernization. Regulators will be a key inflection point and new utility business models will be required to help ensure an orderly transition to this new marketplace.How much ability will utilities have to shape the rules of engagement? At this point in time, utilities may be
responding to the market rather than leading it, but with data coming from all these different sources, data integrity and security become significant issues. To mitigate this, utilities will need to integrate with third-party participants. Utilities will also benefit from collective advocacy for regulatory changes and structures at both the state and federal level that support their evolving business models.
How to Thrive, Not Just Survive on the Moon
Once we achieve our moon shot, what can utilities do to ensure that they can thrive in this new energy ecosystem? What do they need to be aware of?
For one, business models and customer requirements will change. Loads will decrease as customers deploy their own generation sources, even as utilities deploy solutions to address customer's evolving needs. To stay competitive, utilities will need to implement systems and processes that help reduce operational costs, such as asset management, monitoring and maintenance; predictive analytics; and automation, AI and machine learning.
Utilities will also need to develop trusted partnerships with regulators and advocate for regulation modernization to support new utility business models. Left as-is, the current rate structure will increase rates as utilities deploy the technologies that are required to address a distributed grid.
However, as customers continue to deploy self-generation, relegating the utility grid to a standby or backup role, the number of full rate-paying customers will decrease, risking the possibility that the only customers left bearing the financial burden will be those who can least afford to generate electricity themselves. To mitigate this issue, the market needs new regulatory models and rate structures that address the need to balance the costs of going from the grid we have– to the grid we need.
Once the future grid is in place, utilities may see changes in the amount of infrastructure required to produce and distribute energy; less infrastructure may be needed to meet demand. For example, with more DER on the horizon, utilities may need fewer transmission facilities. The market may not need larger substations – or more substations – if it generates energy at the distribution level where it's consumed. Utilities may end up with extraneous assets that simply aren't needed.
The relationship between utilities, customers, vendors and regulators will change and become more collaborative, and new third-party players will continue to enter the market and deliver the technologies needed to get to the moon. To address this, utilities will need to step up to serve as an "ecosystem orchestrator" for markets and grid operations and become an active participant in customer offerings.
When it comes to decarbonization, utilities have significant industry-changing goals. Although the end game may be the same, no one trajectory will get utilities to where they need to be. There will be best practices to adopt, as well as items to avoid. To build the best rocket ship, utilities must realize a new path, one where they can share lessons learned and act in cooperation while also dealing with the realities of complexity and competition.
Leslie Ponder
About the authors: Leslie Ponder is the technology portfolio director for global distributed energy at Black & Veatch and is responsible for evaluating and delivering technology solutions within distribution, asset management, and distributed generation. Ponder has more than 30 years of experience, including 10 years with Duke Energy, where she led systems strategy and planning for communications, grid analytics, and grid control and security systems. She previously led R&D initiatives and partnered with the Department of Energy and National Laboratories to further the advancement of advanced distribution management systems and the adoption of distributed energy resources.
Kevin Cornish is a senior managing director with Black & Veatch Management Consulting. Cornish has more than 35 years of utility operations, enabling technology and management consulting experience, including 13 years with Pacific Gas & Electric Company. Experienced in managing complex utility technology programs, he is responsible for supporting grid modernization-enabling technology solutions within the electric, natural gas and water industry domains particularly in the areas on advanced metering infrastructure, operating center solutions, IT/OT convergence and business process redesign.
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