Before Election Day, I contributed to a Forbes article sharing my perspective on how the outcome of the United States Presidential race will impact the power sector. No matter the occupant of the Oval Office, I am confident that consumer demand for sustainable, resilient, and affordable energy will be the biggest driving force in the sector.
Joe Biden has since been elected as the next US President and has now officially begun his transition process. Though we may still have weeks of court cases and recounts ahead, this is a prime moment to take a closer look at what the 2020 election results signal for electricity providers.
Change is the New Norm In Energy
There were sweeping new regulations approved in local elections around the country. The state of Nevada became the 7th state to pass laws requiring a transition to carbon-free or renewable energy. In Columbus, Ohio, a community choice aggregation program was established that will require American Electric Power to provide the city with 100% renewable energy by 2023, at prices similar to or less than what they currently pay. Meanwhile, New Mexico completely reshuffled its utility commission, and Boulder, Colorado narrowly decided not to municipalize.
For energy providers, these policy updates provide more proof that constant change is the new normal in the power sector. It’s the same principle we saw demonstrated throughout 2020, as the power sector contended with COVID-19 and a slew of natural disasters. In the face of change, energy providers must continue to prioritize resiliency. The rewards of doing so will be a reliable grid, a more profitable position, and better customer relationships.
Preparing For New Federal Policies
Let’s shift gears to talk about the top of the ticket: President-Elect Joe Biden. Here are Biden’s “day one” promises that will have the biggest impact on energy providers:
- Rejoining the Paris Agreement, in turn committing the country to net-zero emissions from energy production by no later than 2050.
- A $2 trillion investment in energy infrastructure to combat the effects of climate change.
- Ensuring that communities vulnerable to the effects of pollution and climate change, or vulnerable to the transition away from fossil fuels, are protected.
Energy providers have already spent the last 4 years optimizing their value chains to meet sustainability requirements. However, Biden’s policies mean accelerating those efforts. To achieve net-zero by 2035, the sector must strategically prioritize cost and reliability, anchored around the alignment of Supply, Customers, and Delivery Infrastructure.
- Supply – The supply stack will shift heavily toward renewables, requiring more quick-start generation and energy storage on-call to mitigate risk from intermittent generation.
- Customers – Carbon-neutral goals will require alignment with customers in an equitable and personalized way. This cannot be achieved with the traditional, top-down approach to customer data.
- Delivery Infrastructure – The transition will also hinge on evolving the delivery infrastructure to manage increased distributed energy resources, electrified transportation, and other electrification technologies.
Energy providers should also be adding data management, digitalization, and collaboration software to their toolkits. Digitalization– including both automation and predictive analytics– will be particularly important. These technologies are key to cost optimization and grid reliability in the face of intermittent generation.
I want to emphasize: it’s important to recognize that these changes are also an opportunity. We will be positioned to lead and drive the transition to new energies and be the main feedstock for the world economic engine via increased electrification. This is a once in a lifetime chance to reposition the sector from being just a commodity provider into the custodian of our sustainable planet.
Will New Regulations Impact Customer Value?
Biden’s energy plan also includes new regulations:
- Reversing environmental deregulatory moves implemented by the Trump administration during the last 4 years.
- An EV infrastructure target of 500,000 new public EV charging stations built nationwide with help from utilities.
- Implementing a suite of new regulations (and tax incentives) to promote decarbonized electricity generation.
There is the concern that as energy providers rapidly add renewable energy generation, initial costs would be passed along to consumers. The same principle applies to EV uptake. Reaching the goal of so many new charging stations represents a huge potential cost for utilities. However, Biden’s plan points to protections for vulnerable communities which would hopefully lead to a more affordable transition. S&P predicts the Biden administration will give leeway on implementation timelines that would prove too burdensome for the customer bill.
Fortunately, the power sector has done much to transform itself over the last 10 years due to customer demand. While Biden’s policies may add urgency, many energy providers are already well prepared for the new energy transition and EVs. Plus, digitalization technologies on the market can help pad bill shock via cost optimization.
Customer-centric focused innovation should continue to be the driving force in the power sector. All stakeholders in the energy value chain need to fully recognize that enabling customers to steer climate action is the cheapest and most accelerated path to zero-carbon. That means giving customers product choices and actionable intelligence to help them understand how to lower their carbon footprint. Further enabling product bundling at the meter level will help accelerate the carbon reduction trend.
Companies Continue To Lead Sustainability Efforts in The US
Recent analysis by S&P Global Ratings suggests that Biden’s promised investments will have a positive financial impact on the power sector. A recent study from the University of California, Berkley also found that, with private and public interests working in tandem, it is feasible for the US to achieve a net-zero carbon grid by 2035 while actually decreasing wholesale power prices by 13%. Of course, with the results of Georgia’s Senate races still up in the air, it’s unclear which of Biden’s policies will actually be enacted. The massive overhauls he promises would in many cases need to pass through Congress, and Biden will likely face significant challenges if the Senate remains under control by the Republican Party.
With that in mind, I think the point I made before the election still holds true: Irrespective of the sitting president, companies and consumers are leading the drive toward carbon neutrality and sustainability. Regardless of who holds power, consumer demand and desire for renewables will continue to push energy providers on a path toward sustainable energy generation. I am excited to see the private sector continue to grow, innovate, and make a real difference for the future of the planet.