For the past 5 years, Guidehouse (formerly Navigant) and Public Utilities Fortnightly have surveyed industry professionals to track megatrends across the power sector in their Pulse of the Power Industry survey. This year, responses from more than 400 participants indicate that utilities face significantly more disruption than at any point in the previous five years the survey has been conducted. Survey respondents make clear that exploring new strategies is necessary for utilities to remain relevant; they also reveal critical perceived challenges to implementing these new solutions. The effects of the energy transformation are being felt more than ever and along the entire utility value chain.

Almost two-thirds (61%) of survey respondents agree that exponential growth of distributed energy resources (DER) and renewable generation are among the most disruptive trends to the traditional utility, which is built on centralized generation and one-way energy flows. DER deployments continue to outpace centralized generation capacity and Guidehouse Insights forecasts that annual net new DER installed capacity segments will achieve more than 500 GW annually by 2030.

Simultaneously, utilities must respond to the effects of climate change in the here and now. Almost three-quarters (71%) of respondents note that climate change is already threatening their business models. This finding strengthens the sentiment, also felt last year. The majority of respondents (66%) preferred an all-of-the-above approach when presented with options to prepare for the continued effects of climate change, including converting generation fleets to renewables plus storage, embracing sustainability across all operations, and integrating resiliency throughout the network.

Respondents indicate they must take proactive action to keep pace with today’s disruptive forces; however, the strategies they pursue may vary. Answers were split almost evenly across efforts to continue to focus on local distribution infrastructure and services (28%), rapidly expand renewable generation and integration (34%), and pursue nontraditional business models (38%).

Despite this varying preference in strategies, respondents do recognize that grid modernization remains a priority for utilities and their regulators. Over half of respondents (54%) note the power industry should embrace electrification of everything, including transportation, to promote sustained growth. Guidehouse Insights research aligns with this sentiment, finding electrification inevitable and projecting that more than 2 million plug-in EVs will be part of the North American fleet by the end of 2020.

Utilities and their partners need to remain flexible to overcome the challenges caused by disruptive forces and industry evolution. Almost half of respondents (47%) believe the most attractive new business model for utilities is to build transactive platforms and facilitate new third-party participants—but building these platforms might be easier said than done.

Consistent with findings from previous surveys, two-thirds (66%) of survey participants think the technology and telecom industries pose the greatest threat to utilities. The technology and telecom industries can move much more rapidly than the utility sector, and nearly half (46%) of survey respondents noted that utilities’ risk-averse culture continues to impede proactive initiatives relative to competitors. The rigidity of utility regulation and rate structure (35%) and immaturity of new business models and uncertain potential (19%) also prevent more rapid adaptation.

By acknowledging the above constraining factors, the power sector recognizes that adaptation is critical to staying competitive. The industry is evolving toward the Energy Cloud, with the proliferation of clean, distributed, intelligent and mobile energy. As the power sector undergoes this transformation, existing challenges will intensify, and new obstacles will emerge.

Grid to Cloud The Energy Transformation

New and existing trends uncovered in this year’s Pulse of the Industry survey demonstrate that utilities understand it is imperative to adapt to unlock and capture new value along the entire supply chain. Despite this understanding, disruptive forces are only intensifying across industries at rapid speeds, and the power sector needs to act to remain competitive and implement new, agile products and solutions.

The full report on 2020’s Pulse of the Industry survey findings can be found here.