It’s a race against time, as our distributed energy future catches up with the exponential climate change predicted in the White House’s recently released 2014 National Climate Assessment. But these days, even the bean counters at Big Four accounting firms like Ernst & Young are throwing down the renewables gauntlet. Specifically, to utilities hanging on to last century’s dirty business.
“For the electric power sector, the question is not if or even when the change will come, but rather, how fast,” warned Ernst & Young’s competitively named “From Defense to Offense: Distributed Energy and the Challenge of Transformation in the Utilities Sector” (PDF). “Distributed energy is on a trajectory to become a cheaper source of power than bundled utility service offerings that are based on today’s power supply portfolio.”
Inaccurate temporal projections aside, Ernst & Young predicts distributed energy will reach parity with average utilities rates by 2020. That transformative year is coming more sharply into focus the more we scrutinize it. Thanks to the current rate of renewables adoption, President Obama’s green advisor John Podesta explained after the National Climate Assessment was released, 2020 also happens to be the year the White House’s greenhouse gas reduction plan will bring emissions down 17 percent below 2005 levels. Anchored in all of that numerical soup is an economic, and environmental, constant: Distributed solar as de facto infrastructure is heating up the grid.
“This is already — I don’t want to use the word ‘crisis,’ but a severe emergency,” Hawaiian Electric Company spokesperson Peter Rosegg said of some Oahu neighborhoods so heavy with rooftop solar that “they’re causing backward power flows at the sunniest times of the day,” according to Greentech. Accelerated adoption empowers accelerated innovation, which is why HECO recently launched one of the largest solar energy storage proposals on earth to reserve all of that sunshine for a rainy day. Meanwhile, calls to make Toronto and other cities paragons of distributed energy are going viral, while the sector’s growth is scheduled to break $150 billion in 2018.
The utilities’ one-way street is being remodeled, argued Ernst & Young, whether they like it or not. “The current integrated one-way model, comprising generation, marketing and trading, transport, distribution and retail, will become multidirectional, with both conventional and new entrants as well as ‘prosumers’ — consumers who are also producers — acting as generators,” its report predicted. “Utilities must be ready to move quickly to gain competitive advantage. A strategic options roadmap and a dynamic strategic planning process that enables change are essential.”
Ernst & Young’s five-point roadmap is relatively simple. Utilities need to position themselves to compete by transforming to a more competitively “efficient and effective utility operating model”; reboot the grid as a “distributed, digital and dynamic system that provides two-way communication between customer locations and the utility”; struggle to “the fullest extent possible” to achieve “full cost recovery of legacy assets to recover investments made and costs” before distributed generation changed the energy game; spend more time increasing “their customer knowledge”; and, most importantly, “innovate and accelerate” to a “business model that “captures and provides value in connection with distributed energy.”
It’s a tall order, but that’s evolution for you. Adapt or else.