That Was the Year that Was
In the early 1980s, My parents took me to a production of Tomfoolery when I was in high school. For those not familiar with the immortal Tom Lehrer, he is a musical satirist active in the 50s and 60s, nimbly skewering society and providing political commentary through songs such as “Pollution” or “National Brotherhood Week.” One of his featured appearances was on the U.S. version of the Television Show "That Was the Week that Was" from 1963-65, and Lehrer recorded his songs on the album “That Was the Year that Was” following the series’ cancelation on in 1965. After seeing Tomfoolery I rushed to collect his albums (still in my possession), and I find his satire to be as compelling today as it was in the ‘50s and ‘60s or ‘80s and beyond.
For me, of any year in my lifetime, 2021 was the Year that Was.
‘Tis now the season for Christmas Carols and end of year retrospectives. For an industry newsletter, this is the time to look back at events and trends over the prior year that affected the industry, and how those trends will shape the coming year. As we sift through our experiences to identify the elusive “wild cards” or “disruptors,” those unexpected events that can and will upend well-laid plans.
Wild Cards and Disruptors I think that in 2021 the wild cards and disruptors took center stage – but these are outside of the utility industry, and we collectively need to figure out how to respond to them. I see “three Cs” – climate, COVID and civil rights – that dominated our lives in 2021 and will continue to do so in 2022.
Climate captured the news early in 2021 and didn’t let go. We experienced the Texas freeze in February, the Western U.S. aridifed and then portions witnessed a bomb cyclone, and we are closing out 2021 with tornadoes tearing through Kentucky, Illinois, Missouri, Tennessee and Arkansas. This was the backdrop to COP 26, with high expectations and disappointments around commitments made to decarbonization, and also shaped Congress’ Infrastructure Investment and Jobs Act.
COVID churned out two significant variants, Delta in the first half of the year and Omicron late in 2021. The emergence of Delta reversed momentum toward re-opening our common spaces – schools, restaurants, businesses, other institutions – and also kicked off conflict at local, state and Federal levels over public health policy and individual rights.
Finally, following the 2020 elections, civil rights debates have intensified, expanding beyond voting rights to election oversight, reproductive rights, religious freedom, education and discrimination. The conflicts are worsened by the social media platforms we have used to connect, making us more susceptible to “complex contagion” by fast-tracking multiple exposures and solidifying opposing positions.
The impact of these “3Cs” isn’t limited to their physical realities. All of them heighten uncertainty and risk, impeding decision-making and collaboration. Personally, I found writing this article and planning for 2022 to be difficult. Conducting a highly “non-scientific” poll on LinkedIn, there are a number of people (call it half in this poll) who feel the same way.
Given the likelihood that climate, COVID and civil rights (to just name three) will be present and persistent in 2022, we are each going to need to build new expectations around uncertainty, and stronger partnerships to respond. Industry Trends Within the backdrop of these wildcards, an existing set of trends continues to shape the evolution of utility sector. The ones most top of mind to me are:
Demand management – from community choice aggregators promoting greater zero-carbon electricity use, to system operators needing the ability to reduce demand, to water utilities seeking lower consumption, utilities need effective demand management programs to sustain their systems, let alone meet legislative or regulatory requirements. We will see utilities doubling down on these efforts in 2022. Performance metrics based on system operations will start to replace monthly or annual goals and cost-effectiveness as the interactions between customer demand and system reliability grow stronger.
Decarbonization – this one shouldn’t go without saying, as more electric utilities are making commitments to decarbonize their electricity supply and states to achieve zero carbon economies within the next decade or two. The natural gas industry is responding with research of their own on equipment and supply, offering “renewable natural gas” and potential hydrogen distribution. Their research and marketing efforts will increase in 2022. Additionally, automobile makers are increasingly focused on electric vehicles, which will create new challenges for the electric grid and potential supply challenges for battery manufacturers. The push for electrification will continue but politics will transform this into yet another battle over public policy and individual liberty.
Data fabrics – this term refers to a “flexible, resilient integration of data across platforms and business users,” and we are increasingly seeing this as a critical need for utilities who want more effective demand management programs. Data systems are moving beyond simply reducing the need to manually lookup data in separate locations to creating centralized, integrated data storage with inbuilt analytics. Utilities will quietly but heavily invest in this area.
Cybersecurity – kudos to Dana Boudreau of Redwood Coast Energy Authority who considered cybersecurity insurance as his Halloween costume this year! For anyone who has sought cyberinsurance this Fall, premiums have increased upwards of 50%. Utility cybersecurity policies are mandating high levels of insurance, helping demand to outpace supply. Cybersecurity policies are having a significant impact on smaller businesses even as utilities seek greater diversity in their supply chains, and utilities will continue to reduce or eliminate cyber risks but drive down the size of their vendor pools.
System resilience – a November 2021 report released by the Energy Information Administration showed that 2020 was a record-breaking year for power outages in the United States. Events such as the Texas freeze (Winter Storm Uri), Hurricane Ida, ongoing wildfires and the Midwest Tornadoes resulted in significant power and gas outages in 2021. Even water utilities needed to cope with resilience in 2021 when the U.S. declared its first shortage on the Colorado River in August. Utilities will continue to be expected to eliminate system risks without the customer base willingness to pay for it. Why should 2022 be any different?
2022 may end up being a lot of things, but “boring” won’t be one of them. It will be interesting to see how a linear, engineering-and-planning-oriented utility sector will respond to the larger context of disruptive forces and trends. There is certainly a tendency to see climate, COVID and civil rights debates as “overamplified” by social media and outside of the control of utility systems operations, and therefore just outside noise to be ignored so that utilities can focus on their "real" work. However, given increasing concerns about system resilience, its interrelationship with customer demand management, and that interrelationship with electrification and climate, utilities will be drawn into policy debates, in many cases against their will. The above trends will continue to shape the utility industry in terms of board room focus, planning and system investment, staffing and purchasing. We are already seeing increased focus on cybersecurity and “data fabric” in client procurement activities, and customer demand management efforts are begging to straddle policy mandates with load growth and resilience requirements. Will these predictions ring true at the end of 2022? Hard to tell. Besides, in the words of Tom Lehrer, what’s important is to understand what you’re doing, rather than to get the right answer.