A new report from Ernst & Young urges US utilities to act quickly “to secure a long-term, essential role as market facilitator and platform provider in the distribution system of the future”.
The study by EY US and Washington-based trade association GridWise Alliance examines the distribution system solutions needed for a digitized, decentralized and decarbonized electric grid.
Dana Hanson, Americas Power and Utilities Leader at EY US, said that the global energy transition “is rapidly accelerating and US distribution utilities do not have the luxury to wait and watch”.
“They must prepare for a future that will see increased electrification of transport, heating and industry, as well as a growing number of customers empowered to produce and sell their own electricity. This requires utilities to invest in the right people, technologies and processes today, if they want to succeed in the new energy world tomorrow.”
The report outlines that the US distribution utility of the future will need to manage a flexible resources platform – one that allows distributed energy resource (DER) owners and aggregators to participate and trade in a streamlined energy market in which power reliability is optimized across the entire system.
It adds that as DER technologies become more efficient, they are expected to experience tremendous growth, while at the same time decarbonization initiatives will drive the electrification of transportation, buildings, heating and industry.
“The existing grid is unable to respond to the challenges and opportunities this presents, creating pressure on utilities to embrace increased responsibilities that ensure power reliability and tap into new, sustainable, long-term revenue opportunities,” said Hanson.
The report suggests distribution utilities are well positioned to take a leadership role, working with key stakeholders to transform the system into one that is flexible and agile enough to cope with the complexities of managing customer-centric loads and resources.
GridWise Alliance chief executive Steve Hauser said utilities “have the opportunity to assume a significant leadership role in enabling the US electricity system transition. We’ve already seen many examples of progress toward this outcome. Key to this is collaboration between utilities and their peers, partners and regulators. Increased collaboration will allow for shared learnings, help achieve consensus on industry best practices and accelerate the changes needed.”
The report stresses that while there is no one-size-fits-all solution, “given differing state regulatory regimes and varying levels of digital grid maturity across the US, distribution utilities can take steps today to reinvent themselves and secure their future”.
It outlines a three-phased approach to investment, which reflects local circumstances, maturity and dynamics. It also explores the skills and capabilities needed for US utilities to become linchpins in a distribution system that is fit-for-purpose in the evolved, digitized and clean energy world.
Hanson added: “Grid modernization investments to connect and protect the grid are critical to succeed in the energy transition. US utilities need to invest in new and enhanced capabilities across every aspect of their business and capture new revenue streams, while they simultaneously build and sustain trust with all key stakeholders, including regulators, customers, employees, industry peers and partners.”
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