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Keywords: Renewable Energy, Natural Gas-fired Power Generation, Artificial Intelligence (AI), Regulatory Uncertainty, Integrated Resource Plans (IRPs), ARC Advisory Group.
Overview
The energy transition and the movement toward greater industrial sustainability is proceeding, however haltingly. It is becoming increasingly clear that cost-effective service from electric, gas, and water utilities cannot be taken for granted. Fundamentally, the price paid for utility services and the overall “cost” borne by society need to come into better alignment based on long-term realities.
Utilities and their regulators in turn cannot take for granted equipment suppliers’ ability to weather the storms of uncertainty that have been battering their businesses with increasing ferocity in recent years. These include uncertainties across supply chains, regulatory frameworks, business model disruptions, sources of economic volatility, and market inefficiency.
Fortunately, there are mechanisms already in place that demonstrate ways to mitigate energy transition and industrial sustainability risks and other related, seemingly insurmountable, complexities. The evolution of these mechanisms shows promise and is worthy of support from stakeholders across the spectrum of industry and public policy.
Stops and Starts on Energy Transition Pathways
Manufacturers of wind turbines and other power generation equipment have been under considerable pressure and in some cases have recently faced losses on the order of hundreds of millions, and in some cases multi-billion, dollar sums.
On November 1, 2023, two large offshore wind projects that were planned off the New Jersey coast were cancelled (see Orsted scraps 2 offshore wind power projects in New Jersey, citing supply chain issues, CBS News, 11/01/2023).
On November 8, 2023, a developer of a promising new small scale nuclear power plant announced cancellation of a major project (see Nuclear Energy Project in Idaho is Cancelled, NY Times, 11/08/2023).
On November 10, 2023, plans were cancelled for a proposed $200 million factory to manufacture wind turbine blades in Virginia, although the offshore wind project will still proceed for Dominion Energy and Siemens Gamesa. (See Siemens Gamesa scraps plans to build blades for offshore wind turbines on Virginia’s coast, AP News, 11/10/2023.)
Industrial Sustainability Risks and Trade-Offs
There is no energy source which is not without issues that need to be comprehended and weighed. The ability of electric power energy sources to meet complex criteria has been driving plans for many years and continues to do so. Utilities have long-standing processes in place, including Integrated Resource Plans (IRPs) and regulatory mechanisms, which have enabled complex multi-stakeholder plans to be carried out for many years. The IRP processes face many challenges which regulators have been openly seeking to address in important ways, including through leveraging of the latest technologies, including Digital Twins, and Advanced Analytics, cloud-based computing, strategic R&D initiatives, data governance models, among others.
Value of New Industrial Energy Collaborations
Great value is to be gained through industry participation in new ways of addressing energy transition challenges in parallel with evolving utility integrated resource plans. The speed of technological and market changes has led to situations where some IRPs for build-out of new power capacity to meet industrial demand are not improved in time, potentially leaving utility customers in need of more power than their utilities can provide.
Regulators have responded. They have been involved in efforts toward development of standards and collaborative initiatives that foster efficiencies that reduce regulatory lag and regulatory uncertainty.
The shift from traditional integrated resource plans (IRP) to more advanced, AI-driven decision-making processes using improved simulations and collaborative platforms is a starting point. It is to be combined with the need to recognize risks which must be shared in new ways, to create new markets which optimize good competition on the one hand and effective collaboration on the other. Digital twins have a role to play, as does generative AI and related capabilities.
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