Energy Industry Players Moving out of their Swim Lanes

Dec. 18, 2020
Markets aren’t providing enough compensation for distributed energy resources (DER) which is blocking its expansion on the grid, Deloitte found. The value streams are insufficient or low value.

New business models — such as utility use of mobile batteries for peak demand — are now emerging, along with new and needed distributed energy resource (DER) integration models, according to two new reports from Deloitte.

Markets aren’t providing enough compensation for distributed energy resources (DER) which is blocking their expansion on the grid, Deloitte found.

Deloitte’s 2021 Power & Utilities and Renewable Energy Outlook examine utilities’ roles in energy storage, DER integration and EV charging infrastructure, among other issues. The reports were prepared by Deloitte’s Research Center for Energy & Industrials, which aims to provide research that helps industries grow.

Deloitte surveyed 350 US executives and 250 others in November 2020, gathering information from respondents in five industries: chemicals and specialty materials, engineering and construction, industrial products, oil and gas, and power and utilities.

The survey found that utilities are now beginning to use batteries to support the grid, said Marlene Motyka, US and global renewable energy leader for Deloitte.

One example is Dominion Energy, which plans to use the batteries in electric school buses to enhance grid flexibility. The utility hopes to have 50 electric buses operational by the end of 2020, and plans to use the batteries as backup to the electric grid in a vehicle to grid project, said Motyka.

Another example of utilities developing new models for batteries is a demonstration project by Consolidated Edison. The utility has implemented a storage-on-demand project under which three mobile lithium ion battery trailers will provide electricity for peak shaving. The project will come online in 2021, said Motyka.

Big expansion in EV charging

Meanwhile, electric charging infrastructure is expected to expand dramatically to serve the growing numbers of electric vehicles (EV) on the road. The US needs to deploy 1.25 million public chargers, 1.2 million level two chargers and 600,000 DC fast chargers by 2030, she said.

“There’s been a lot of discussion around EV infrastructure and how the utility sector should take a lead on this. Up until now, there has not been a clear leader. The tide is starting to turn. Utilities are becoming leaders in EV and charging infrastructure,” she said.

Some see utilities as best positioned to provide EV charging infrastructure. The California Public Utilities Commission (CPUC) approved $436 million for Southern California Edison’s “charge ready” infrastructure program. That will allow the company to add 38,000 new chargers in its service territory.

“With the role that utilities typically play within the grid, they are best positioned with regard to being able to ultimately provide electricity that’s needed for the infrastructure,” said Motyka.

Digital tools needed for DER integration

In addition to focusing on the novel ways utilities are employing battery storage, the reports look at the need for DER integration models. DER integration will require new digital tools to aggregate and manage resources in ways that help the grid.

Such tools could include energy as a service models in which the utility would aggregate the DER. “There would be a platform that customers could plug into that allows the utility to leverage their resources to manage the grid.”

For example, utility customers could install smart thermostats that allow them to increase air conditioning temperatures and lower demand on hot days. Utilities could aggregate the resources made available through a program like this to help meet peak demand, she said.

“This would allow utilities to leverage those resources to manage the grid,” Motyka said.

In addition, third parties could provide demand side management of customers’ resources and offer the resources as a service to utilities, she said.

Meanwhile, markets aren’t providing enough compensation for DER, which is blocking expansion of DER on the grid, the reports found. The value streams are insufficient or low value.

The trends mean that energy industry players are moving out of their traditional “swim lanes” and moving into the lanes traditionally held by others.

“This issue is pressing. Close to 25% of respondents believe insufficient or low value streams are the single greatest obstacle to greater integration of DER into the grid,” said a Deloitte spokeswoman.

One bright spot is FERC Order 2222, which paves the way for aggregated DERs to compete alongside traditional power plants and other grid resources in wholesale markets, said Motyka.

“That ruling could help allow DER to be aggregated and compensated,” Motyka said. But first, the regional transmission organizations must establish pricing for DER and also must look at operating and technical considerations. “It’s not that easy,” she said. “It will take time to think through pricing and operational terms.”

More utility customers self-generating

The reports also found that more utility customers are self generating and competing with utilities. Sixty percent of the 600 businesses surveyed said they have onsite generation, which is up 40 percentage points from a survey completed 10 years ago.

In the face of these trends, utilities are trying to decide which products and services they can provide, said Motyka. “Customers have more choices and businesses are being more proactive.” The trends mean that energy industry players are moving out of their traditional “swim lanes” and moving into the lanes traditionally held by others. For example, electrification of transportations was typically the realm of the transportation sector, but more and more, utilities are playing a role. And oil and gas companies are getting more involved in renewable energy and battery storage

“We see more convergence of more parties participating and partnering to meet the needs of consumers across the industry,” said Motyka. “You will see collaboration and new business models; all of this will keep unfolding.”

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About the Author

Lisa Cohn | Contributing Editor

I focus on the West Coast and Midwest. Email me at [email protected]

I’ve been writing about energy for more than 20 years, and my stories have appeared in EnergyBiz, SNL Financial, Mother Earth News, Natural Home Magazine, Horizon Air Magazine, Oregon Business, Open Spaces, the Portland Tribune, The Oregonian, Renewable Energy World, Windpower Monthly and other publications. I’m also a former stringer for the Platts/McGraw-Hill energy publications. I began my career covering energy and environment for The Cape Cod Times, where Elisa Wood also was a reporter. I’ve received numerous writing awards from national, regional and local organizations, including Pacific Northwest Writers Association, Willamette Writers, Associated Oregon Industries, and the Voice of Youth Advocates. I first became interested in energy as a student at Wesleyan University, Middletown, Connecticut, where I helped design and build a solar house.

Twitter: @LisaECohn

Linkedin: LisaEllenCohn

Facebook: Energy Efficiency Markets

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