Charging Ahead: Innovation in the Energy Industry

The power sector is changing, and rapidly. Though the industry has constantly evolved over time, the scale and pace at which it is now occurring has not been seen before. As Bill Johnson, CEO of the Tennessee Valley Authority recently noted – “during his 40-year career, he has seen more change in the last five years than in the previous 35 combined.” To prepare for such an uncharted future, the next generation of utility initiatives are taking a page out of the start-up handbook by embracing innovation: not only in specific strategies or technologies for the delivery and management of energy resources but in the very cultures of the utilities themselves.

Building Innovative Cultures

When it comes to innovation, the utility industry has historically erred on the side of caution. Among both POU and IOU electric utilities for example, research and development budgets has been small, if not non-existent – rarely exceeding even 1% of revenue. Of course, this makes sense to the extent that with innovation there can be greater risks of failure compared to existing and proven models of operation. However, from Southern Co.’s team research on energy storage to Exelon’s formation of an “emerging technologies group”, utilities across the country are recognizing that formal processes to enable and promote innovation need to be in place within their organizations moving forward.

As further testament to this fact, the Association of Energy Services Professionals (AESP) is helping to drive this conversation. At their most recent annual conference for example, AESP invited Joel Cohen, a veteran writer of The Simpsons, to talk about ways to create an organizational culture that fosters innovation. His recommendations – work in diverse groups, welcome and build on bad ideas, don’t expect efficiency, fight your first instinct – run counter to “business as usual” in the energy sector. However, cultures of innovation - and the creative solutions they garner - will become increasingly necessary in an industry that is changing so rapidly.

Dynamic Demand Side Management The DSM programs of yesterday were built around reducing and redirecting baseloads in order to avoid the costs associated with an excess in overall usage and usage during times of system peak or shortage. The DSM programs of tomorrow will not only need to manage this demand but also incorporate distributed and renewable energy production – often produced by customers themselves. Indeed, by some accounts, it is predicted that just ‘behind-the-meter distributed energy resources will more than double in 6 years, from 46.4 GW in 2017 to 104 GW in 2023.’ Gone are the days when the value of DSM programs could be determined only by avoided system costs through conventional measures (i.e. weatherization or more efficient light bulbs).

Dynamic Energy Management is one innovative approach to managing load at the demand-side. Future programs will be more integrated and flexible to accommodate new technologies and customer-supplied resources. The value of DSM programs will also be increasingly measured by their ability to “provide real, meter-based locational and temporal savings, and optimal grid management when needed.” As Patty Cook, a senior vice president with ICF’s Commercial Energy practice, notes: “in the future, ‘kWh savings anytime, anyplace’ will become ‘kWh Savings at the right time, in the right place’”.

Smart, Beneficial Electricity

With renewable -or intermittent- resources such as wind and solar composing an increasingly greater proportion of our energy supply, the ability to match demand with supply becomes more difficult without the ability to store electricity at scale – as it is not only just demand that fluctuates now but supply as well. Smart, beneficial electrification – or the electrifying of energy end uses formally powered by fossil fuels - is both an innovative and promising solution that can assist in striking the right balance.

Smart technologies and “beneficial electrification” combine to facilitate variable load demand and supply. Whether through electric vehicles, electric water heating, or space heating and cooling – all with real-time monitoring and adjustments – these technologies provide a needed opportunity to manage and determine how and when electricity is used. Doing so will assist in achieving the traditional goals of DSM programs - to support the longevity of existing energy infrastructure and avoid future investments intended to meet increasing demand – while also meeting the modern expectations of reducing negative environmental impacts, enabling more effective grid management, and saving consumers money over the long term.

The utility industry is no stranger to change, having confronted and overcome myriad challenges over time in order to retain their vitality and provide valuable services. Yet many of today's current challenges are of a different nature and will require more novel approaches and strategies. How utilities foster and ingrain innovation as a modus operandi may determine how quickly and effectively they can respond in this modern dynamic.