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To transition to a sustainable world, we’ll need to reconfigure the five domains of our industrial system: how we feed ourselves, how we move, how we construct the infrastructure we live and work in, how we make things and how we power all of this in a way that reduces carbon intensity.
Each of these domains will increasingly need to use electricity to power the way they operate, and that electricity will need to be greener than what we have today. But as we’ve said before, each of these domains will only be able to decarbonize in tandem with the others and with significant regulatory reform and financial support.
Industries need to demand change, and consumers must be ready to pay more for the services and products they have today. Although territories less exposed to climate change may not feel the same sense of urgency, most parts of Canada have seen significant impacts, including forest fires, temperature fluctuations and ice storms, in the last five years.
Most organizations have goals to reduce carbon emissions by 2030. But when we consider the time needed to decide to decarbonize, create the investment profile to build the infrastructure and get regulatory approval, it’s clear we’re very quickly hitting a point of no return to achieve 2030 goals.
Here we outline three key steps utilities must take now to be able to meet imminent demands for more, and greener, power.
1. Understand major changes in electricity demand
Typically, when people think about energy transition, they think generation through to customer demand, but reversing this order is critical. Demand change that’s going to be coming from industrial and large-scale consumer changes will drive the challenges back into the grid and, ultimately, to generation.
Governments, regulators and utilities need to use scenario planning to understand as precisely as possible how, where and when demand changes are going to happen. The goal is to make sure organizations invest in infrastructure, equipment and technologies that are going to meet demand shifts and avoid adding unnecessary cost, infrastructure and carbon footprint.
The three biggest drivers of future electricity demand will be transportation, energy consumption in buildings and new industrial usage (for example, hydrogen production and carbon capture). The other element to factor into the equation is distributed energy resources. In addition to using more electricity, people are going to start producing and consuming their own electricity with technologies such as solar panels and batteries.
While many organizations are trying to optimize their part, they’re not necessarily thinking about the broader ecosystem. Access to data about all these changes isn’t in just one group’s hands.
To better enable the ecosystem, different pieces must connect. Large industrials, the transportation sector and electric vehicle manufacturing facilities, for example, will need to collaborate with the utilities sector to better understand the nature and timing of changing demand.
2. Modernize your electrical grid
Most of the electrical grid system was set up to work in one direction. But as electron flow changes and demand increases significantly—at least two to three times over the next 10 to 15 years—what you’ll need to modernize your grid and optimize electron flow is quickly changing.
Transmission and distribution companies will need to get their current infrastructure to a place where, in addition to consuming electricity, customers can supply electricity back to the grid. Utility distribution businesses can then be structured as distribution system operators, something that’s different from both a regulatory and commercial standpoint.
Very few utilities have a clear and communicated plan about how to optimize major technology plays to get to this point. The order in which organizations should implement these technologies depends on answers to two important questions. What is your demand-side change going to look like? And what have you already placed your bets on from an infrastructure and technology perspective?
It’s essential to make these decisions from the point of view of the customer. This will allow utilities to explain the nature and purpose of these investments simply and plainly in language customers, regulators, governments and stakeholders, including Indigenous Peoples, can understand and accept.
3. Identify the right power generation projects
Once you know where demand is going to change and have optimized your grid, you’ll then know how much additional energy you’ll need to produce and can identify the right power generation projects to invest in.
The question quickly becomes: How broad is your definition of the grid? What are you defining as a green generation source? While hydro, wind, solar, pumped storage solutions and batteries will all help, they won’t be able to provide enough zero-carbon baseload generation to meet all of Canada’s energy needs without compromising grid reliability.
Is nuclear a relevant option for your grid? Here in Canada, we have unique technology and a history developing nuclear with Indigenous Peoples, and these could be differentiators globally. Another option is natural gas. Are you prepared to have back-up capacity that’s fuelled by renewable gas and/or uses carbon-capture technologies to deal with, for example, generation failures or exceptional consumption peaks?
Those organizations that are in a position to make longer-term, bigger bets should be looking at newer technologies. Those who have less are dealing with a different risk profile and income stream and may want to consider more straightforward, already proven technologies.
Transition to a more sustainable world
Does your organization have a plan for how you’re going to meet increasing demands for greener power? If so, does that plan include clarity around where you’re placing your bets from a technology and investment standpoint? Are your customers able to understand and engage with your plan and see clearly how the changes will affect them?
Ready to learn more about the challenges and constraints you’ll need to address now and in the next year or two?
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