A shift to increased distributed generation, efforts to modernize the U.S. grid, and a transition to reducing harmful emissions are posing the greatest challenges for the power sector, as the industry evolves in a market driven by demands for enhanced efficiency, reliability and cleaner power supply.
Responses to Black & Veatch’s 2020 Strategic Directions: Electric Report survey reflect these circumstances as the power sector breaks free from century-old concepts and responds to changing consumer behaviors and unpredictable load patterns. All of this is against the backdrop of an increasing use of distributed energy resources (DER) and other customer driven, emerging technologies.
The heart of this transformation can be found in the digital realm of the information and communication technology (ICT) sector, which promotes the unification of higher-bandwidth communications technology with distributed computing, advanced analytics, machine learning and audio-visual systems to enable users to access, store, transmit and better manage information. Innovation in the power industry increasingly is based on digital ICT that includes artificial intelligence (AI), augmented and virtual reality (AR/VR), blockchain technology and robotics.
The infrastructure that utilities rely on to deliver power has well-served its original purpose and, in many places, is in dire need of upgrading or replacement to accommodate the growth of customer-driven renewable power and interconnected DER.
According to survey respondents, the most challenging issues facing the industry include an aging infrastructure, renewable power, an aging workforce, and modernization of the distribution system. One-third of those surveyed said aging infrastructure was the top issue, while 26 percent cited renewable power. Twenty-four percent said an aging workforce was a big challenge, and nearly 22 percent identified grid modernization.
Many U.S. utilities and states aggressively are pursuing grid modernization and cybersecurity improvements to boost the efficiency, safety, reliability and resiliency of their systems. In fact, regulators in nearly every state are considering major proposals to upgrade systems as utilities prepare to spend billions to create a modernized grid capable of accommodating new digital technologies and increasing amounts of variable power generation, such as wind and solar.
Drones, Other Technologies Taking Flight
Machine learning and AI are proving to be an effective tool in power generation to predict malfunctions, detect human error and optimize power plant scheduling. It also means power producers can eliminate unnecessary costs related to fixing an error and getting the system back online.
To that end, 30 percent of respondents said they are considering the addition of AI and/or machine learning to operations. More than 13 percent have considered adding AI or machine learning to operations, and nearly 22 percent said it’s not on their radar.
Along the way, more than half have considered using drones in operations, while one in five respondents said they are mulling the use of unmanned aircraft. Fourteen percent said they may consider using the technology in operations.
In addition to being relatively inexpensive, drone technology can save utilities money and reduce the physical effort — and perils posed to utility workers — to get to hard-to-reach areas on the power system.
Also, nearly one in four of those surveyed said their company is considering the use of AR in their operations, while roughly one-quarter said they may consider it. What’s more, the deployment of AR can be a good tool for training and recruiting new personnel. These technologies also prove useful in recruiting and retaining the next generation of electrical workers.
Creating a digital twin of power plants or electric grids can be expensive, but the return on investment can be significant because it informs power system operators with understanding possible responses to certain scenarios and emergency events before they happen. Some 15 percent of respondents said they are considering the use of digital twins to enhance power plant operations, with an additional 16 percent saying they’re open to the idea of exploring such technology.
On the energy front, hydrogen rapidly is emerging as a clean fuel of choice for power generation, especially in Europe. Electric energy from a wind farm or solar plant can be stored and channeled through an electrolyzer to extract hydrogen from water, and the resulting gas can be used in a converted power plant to generate carbon-free electricity.
Some industry experts say hydrogen could be a part of the generation mix of most investor owned electric utilities within a few years and may be more cost-effective than battery storage to deal with the variability of renewable power. Nearly one-quarter of respondents say they would consider hydrogen as a source of peak generation, while 9 percent said they would contemplate using the gas for baseload generation. Some 19 percent would consider hydrogen for backup power or as a microgrid component.
When asked what workforce management and remote operations solutions would be “most useful,” nearly half of respondents cited new workflow procedures, including staggered hours. Nearly half also chose “remote asset performance monitoring,” and four in 10 respondents said “on-site health screening and diagnostic facilities”.
Responding to COVID-19 and its impact on the industry’s workforce is perhaps the highest priority for today’s utility executives. More than half the workforce at some utilities are working remotely due to the pandemic, and executives appear ready to adopt permanent policies allowing employees to work regularly from home. Several utility executives have pleasantly discovered that call-center staff are more productive working remotely versus in a central office.
Distribution poles are becoming a growing source of revenue generation, offering utilities an opportunity to charge monthly and annual fees to use the real estate for customer owned devices such as illuminated signs and telecommunications equipment. At a time when utilities are seeing limited load growth, distribution poles present an opportunity to add new revenue streams to their income statement.
Four out of 10 of those surveyed — 41 percent — said the value of distribution utility poles is greater today versus previous years, while more than 48 percent said their utility values those poles similarly today versus the past.
Adapting to the Growth of DER
Centralized power generation is losing more relevance in a world with a preference for cleaner, more distributed generation. Many commercial and industrial customers are generating their own power locally, and the power they produce from DER can be an extra revenue source for them when interconnected to the grid.
Nearly one-third of those surveyed said distributed/renewable generation is among the services their company provides, and industry observers expect that number to grow significantly.
Additionally, the use of distributed generators is on the rise in areas where storms are more frequent and severe. The key question: How are utilities going to tap into this source of power production and sufficiently compensate consumers for use of those assets?
Re-prioritizing Investments
Asked how investment in new and existing assets will be reprioritized due to COVID-19 impacts, one in four respondents said investments will be reprioritized to existing assets. Nearly half insisted their investments won’t be reprioritized.
The respondents may be underestimating the need for rethinking their business, given that a major shift in utility investment already is underway in response to the pandemic. For example, Dominion Energy sold its natural gas transmission business and is shifting its capital investments to offshore wind power and other forms of renewable power, recognizing that continued investment in gas transmission would result in a lower return on equity versus investments in renewable power.
At the turn of this century, more than half of the nation’s power was produced with coal, and the prospects of renewable power and energy storage playing a starring role in U.S. power generation were quickly dismissed. The technologies were too expensive, unproven and difficult to integrate into a grid built around coal.
But now, the opportunities for collaboration between centralized and distributed power providers are abundant. The surge in DER is undeniable, and many utilities and states are making progress in modifying their business models to capture the increasing value of DER and cleaner, renewable energy supply.
About the Author
Rob Wilhite leads Black & Veatch’s Global Distributed Energy business line. This includes the design, engineering, development, and monitoring/maintenance of client sustainable power solutions, including distributed generation, microgrids, battery energy storage, asset management services and utility grid services.
