The World Bank tells us that the current global electrification rate is sitting at about 90% and has risen by over 15% in just 20 years. It is utility companies around the globe that are delivering that energy and – no strangers to disruption and change – they have been keeping our power flowing for well over a century. But as the post-pandemic dust begins to settle, key players in the utilities industry are taking a good look around and realizing that they’re operating in a very different landscape than ever before. If the energy sector wishes to meet its net-zero goals and still remain profitable, it will mean addressing new players and practices and responding to rapidly changing customer demands and behaviors.

When it comes to clean energy transition, the world will be looking to the utilities sector for leadership and technological innovation as we collectively strive for decarbonization.

What is energy transition?

Energy transition refers to the shift from fossil-based systems of energy production and consumption – including oil, natural gas, and coal – to renewable energy sources such as wind and solar. The shift also encompasses the trend toward a connected network of distributed energy sources and away from traditionally centralized utilities and single sources of power. 

Decarbonization and the economic shift toward sustainable energy

In their extensive Carbonomics report, Goldman Sachs notes that, in 2021, spending on renewable energy projects is predicted to surpass upstream oil and gas spending for the first time in history. Part of the reason these projects are so attractive is that the cost of delivering renewable energy is rapidly decreasing. A recent International Renewable Energy Agency (IRENA) report takes a look at the global weighted average levelized cost of electricity (LCOE) of renewable energy projects and finds that in the past 10 years “utility-scale solar photovoltaics (PV) fell 82%; concentrated solar power (CSP) by 47%; onshore wind by 39%; and offshore wind down more than 29%.”

The link between sustainability and business performance

Explore new research on how sustainability is affecting competitiveness and profits.

The report goes on to state that oil and gas spending is down more than 60% from 2014 and that the global oil reserve life (ratio of oil reserves to oil production) has also dropped significantly. In response to these trends, Forbes tells us that in the past year “many private investment banks, including Deutsche Bank, Morgan Stanley MS, and Citi Bank, have also announced their strategies to reduce their exposure to the oil and gas sector. Additionally, big private equity firms are now increasingly putting their investments into decarbonization technologies.”

At the moment, utilities companies find themselves in a time of increased investor appetite for renewables projects and continually lowering costs of related infrastructure and start-up costs.

Utility-scale renewable energy sources and technologies

In the long-term quest to eliminate fossil fuel dependency, there are several arenas of human activity that will need to be decarbonized over time including transport, heavy industry, manufacturing, and the built environment. However, as the provider of energy to most of those other industries, the utilities sector is on point for clean energy transition initiatives.

We are seeing growing networks of smaller, more widely scattered energy generators and distributors, as well as greater overall demand for renewable energy sources like solar and wind.

The term “utility-scale” serves as a yardstick by which we measure the capacity of all these resources. To be considered utility-scale, an energy system or network should be able to generate at least 10 megawatts or more – with reliability and consistency.

Below are some of the most common renewable energy sources and the pros and cons their utility-scale implementation may present.

Net-zero emissions goals in a complex utilities market

In the U.S., investor-owned utilities (IOUs) provide energy to over 70% of the population. But as Greentech Media reminds us, they are under extreme pressure to “turn enough profit to retain their investors in a difficult, constrained, low-margin business.” As the utilities industry prepares for energy transformation, IOUs must address some old and familiar challenges, as well as some new factors that are affecting their sector.

Sustainable and renewable energy: Change is the only way forward

In the 2020s, it’s no longer a matter of “if” we should transition to more sustainable energy sources, but “how” and “when.”

Utilities companies are uniquely positioned with the scope, experience, and existing customer base to rethink their business models and begin a profitable journey toward net zero. Here are some examples of competitive strategies: 

In the power and utilities sector, shifting business models, energy options, and the potential for new competitors to enter the market are creating an urgency to improve the relationship with customers.

Deloitte 2021

Digital utilities transformation and clean energy transition 

In his novel The World Without Us, Alan Weisman describes what would happen to the world around us if humans disappeared. The book gives an account of what would occur in New York City within hours of the power being shut off. The subways would be flooded and, almost immediately, the city’s infrastructures would begin to collapse like dominos. While an extreme example, this nonetheless reminds us of how much our survival depends upon reliable and accessible sources of power – and how over the past hundred years utility companies have created marvels of engineering and invention to fuel those needs.

In the 2020s, this industry is under unprecedented pressure to innovate and reform, for the benefit of the earth and all of us on it. The good news: with this pressure comes tremendous opportunity to build on an impressive legacy and blaze the trail to a more sustainable future.

Explore utilities management systems that support a sustainable future