Utilities need to upgrade distribution — report
Time is not on the side of the nation’s electric utilities if they want to overcome the challenges posed by an erosion of their long-standing business model, according to a new report.
Chief among the challenges is changing their local distribution grids from the single-direction flow of electricity that has been standard for more than 100 years to a bidirectional flow to accommodate customer choices and the adoption of solar power and other forms of distributed power, said Dana Hanson, Ernst & Young’s Americas power and utilities leader.
The adoption of distributed energy resources, including electric vehicles and advanced energy storage technology, is driving the need for a more dynamic process of electricity distribution, Hanson said in an interview.
The report is sponsored by the GridWise Alliance, a power industry group, and released in conjunction with the gridCONNEXT conference in Washington. The report explores whether utilities can speed up the transformation to models that retain their customers as energy technology offers consumers more choices.
The authors said the challenge is for utilities that face new competitors to “act quickly to secure a long-term, essential role as market facilitator and platform provider in the distribution system of the future.”
Among the utilities that participated in a workshop last summer to explore the report’s subject were Arizona Public Service Co., Consolidated Edison Inc., CenterPoint Energy, Duke Energy Corp., Eversource Energy, Exelon Corp., National Grid, San Diego Gas & Electric and Southern California Edison.
Hanson said a big part of the problem is hot spots where some neighborhoods adopt new technology faster than others and add to an already stressed system. Bidirectional flows will inevitably create congestion and can overload the local grid, risking outages.
Billions of dollars in new investments are planned over the next five to 10 years by local utilities to upgrade their distribution grids. The grid modernization efforts include targeted undergrounding, substation automation, advanced metering infrastructure, and a new generation of sensors and cybersecurity software to manage power lines. But the industry’s plans are not uniform across the nation.
“Some see this transition coming and they’re trying to get in front of it and are moving rather aggressively,” Hanson said. Some, where the penetration of distributed power is lower, “they’ve got a little bit more time.”
Cost for smaller utilities is probably the biggest hurdle for most utilities, he said, and for those whose regulators may not be inclined to approve higher electricity rates to make the investments.
In addition to accommodating distributed energy resources, surviving and bouncing back from weather disasters is also a major driver of investment, Hanson said.
“[Utilities] can make a strong case that by putting more self-healing capabilities into the distribution system you can reduce large weather event restoration times by days,” he said, thereby slashing the adverse economic impacts of more frequent weather-related outages.
The next iteration of the distribution will also serve as a platform for the utility to offer new products and services geared to passenger EVs, the broader transportation sector, electrification of home heating and time-of-use rates.
It presents “a huge opportunity for the utilities to see demand growth that they haven’t seen over the last 10 years,” Hanson said.
“You could see utilities getting to 4% to 5% growth” compared with recent years when demand growth has been flat or even declining, he said.