How the Low-Carbon Electricity Revolution Affects the Grid’s Biggest Customers
The electricity grid of the United States is undergoing a remarkable transformation. Coal-fired and nuclear power plants are closing their doors, renewable energy from wind and solar energy is gaining market share and natural gas has become the dominant source of grid electricity in many regions. Simultaneously, electric utilities are being forced to change their business models, integrate new types of technologies and distributed energy into their operations and plan for a future that hasn’t been written yet. So what does this mean for large companies who consume much of the power delivered by this changing grid?
Grid modernization presents corporations with significant economic and environmentally beneficial opportunities, while also creating complex operational and regulatory challenges. Successfully navigating this landscape can give savvy companies a competitive edge, while bogging down other corporations with inertia and uncertainty. Here are ten things that every large corporation should know about the US’s shift to a low-carbon electric grid:
- Energy efficiency is here to stay, but utility incentive structures are changing.
Aggressive city and state level targets mean that energy efficiency efforts will need to go deeper and further than ever before. Some states are even changing the way their utility energy efficiency programs work. For example, rather than simply offering equipment rebates, California utilities will measure actual kilowatt-hour reductions at the meter, and other states may follow suit.
- Mainstream corporations are getting into the renewables game.
Following Facebook’s and Google’s example, hundreds of companies are now using power purchase agreements to secure renewable energy and hedge against future fossil fuel price volatility. In many locations, costs for renewables have reached grid parity.
- Changes to net energy metering policies may weaken the business case for solar power.
Net energy metering can be critical to building the business case for investment in solar power generation, as it lowers the financial hurdles that companies face when choosing to invest. If repealed or phased out, as has been done in Hawaii and Nevada, the erosion of these policies could weaken returns and prohibit companies from deploying solar.
- The “hidden” costs of grid electricity are rising.
Effective energy efficiency programs and the proliferation of solar energy have cut into utility profits, and in response, many utilities are increasing the flat fees that their customers pay. Companies who are modeling future electricity costs for investment purposes should be aware that these fixed costs are on the rise.
- Smart buildings can generate revenue while stabilizing the grid.
Over the last decade, many companies have modernized their buildings, adding in analytics, sensors, and controls, resulting in remarkable costs savings. Now, these same technologies, when coupled with batteries and demand response plans, can actually generate revenue while providing necessary frequency regulation services for the grid.
- State-level politics dramatically impact corporate emissions reductions.
Governance of the US electric grid is notoriously complex, and state commissions oversee many aspects of the grid. In some states, failing fossil-fuel utilities are lobbying these commissions to shift the cost burden to rate payers, not only impacting electricity prices, but also effectively locking local corporations into dirty electricity for many years to come.
- Big data shows promise, but the vendor space is noisy and crowded.
Energy analytics can be used to model building energy consumption, prioritize investments and manage future energy costs. The cost savings associated with these services are sizable and real and should be strongly considered by large companies. However, vendors in this space face strong competition and have struggled to differentiate their offerings, leading to confusion and challenging contract decisions.
- Peak times of day matter to the grid. A lot.
Energy may be sold at a fixed price in most places, but real-time costs vary significantly throughout the day. As more and more states focus on phasing out expensive, dirty “peaker plants” and incentivizing demand-side reductions, companies should expect proliferation of time-dependent energy prices. To fully take advantage of this opportunity, corporations should be ready with portfolio-wide demand response plans.
- Corporate voices are changing how utilities engage with their customers.
Companies are asking for more from their utilities, and in many places, they are getting it. From data visualization to renewable power options, utilities are listening to the changing demands of their largest customers.
- Regulatory reform offers business new leadership opportunities.
Many eyes are on New York, as it redesigns its utility business model via the “Reforming the Energy Vision (REV)” initiative. As large energy consumers, NY corporations have an opportunity to demonstrate leadership by participating in REV demonstration projects and testing out new approaches to utility customer engagement.
What’s clear is that the status-quo is shifting, and the electric grid of tomorrow will look very different from the grid of today. Navigating this changing environment can be a challenge for corporations, which often manage large portfolios of buildings across multiple states with limited staff. Increasingly, companies are partnering with vendors for much needed guidance and expertise. There is a broad ecosystem of support available to corporations, and strategic partnerships can be a key asset. By being aware of how grid modernization can affect the bottom line, businesses have the opportunity to harness clean energy and play an active role in the grid of the future, while meeting their corporate emissions reductions goals.
Liz Delaney is the program director for EDF Climate Corps a program that embeds trained graduate students in organizations to help meet their energy goals by accelerating clean energy projects in their facilities. By working with over 350 organizations in the public and private sector (including 1 in 3 Fortune 100 companies), EDF Climate Corps has uncovered nearly $1.5 billion in energy savings — improving the organization’s bottom line and environmental impact at the same time.