Updated: Apr 26, 2022
This is part one of a series on the fourth generation electric power system.
The electric power grid of today is in the midst of an influx of change, from the integration of distributed renewable energy sources to expanded demand for energy to fuel electric vehicles (EVs). Climate change and the need to reduce greenhouse gas emissions, as well as newfound consumer expectations, will push electric utilities to reconsider some traditional practices that are not in the best interest of a warming planet.
To address these changes, electric utilities must update the grid to the fourth generation (4Ge) electric power system. This new system will be designed to improve the generation, transmission, and distribution of electric energy within the next 15 years.
Over the next few weeks, Prescient’s blog will focus on changes that are expected to occur in the electric utility industry, from cost restraints and market caps to improved renewable energy integration. For now, let’s take a closer look at some of the factors that will drive the transition to 4Ge electric power.
Pivot Points: Changes that Redefine an Industry
Every industry has experienced change that, years later, becomes recognized as a pivot point for that industry. Take the railroad industry, for example. One pivot point was the transition from steam locomotives to diesel electric locomotives. Another pivot point was the construction of interstate highways that allowed the trucking industry to compete with the railroad industry. A third pivot point was the introduction of intermodal shipping, which allows containers laden with goods manufactured abroad to cross the ocean by ship, then travel by rail, and eventually by truck to locations throughout the United States.
For the electric utility industry, several pivot points have occurred throughout history: when AC systems were introduced; when interconnections among utilities were established; when the Public Utility Regulatory Policies Act of 1978 (PURPA) became law; and when combined cycle power plants with higher efficiencies were introduced.
More recently, the expansion of distributed renewable energy sources and increased use of EVs create yet another pivot point with opportunities for electric utilities to implement changes that will positively impact the entire earth as we, the citizens of earth, face our greatest challenge yet: climate change.
Climate Change and Consumer Expectations
Climate change is now an indisputable fact that utilities must recognize and address through updated policies and best practices. This will lead to another pivot point for electric utilities: the reduction or elimination of fossil fuels as a primary source of energy production.
As electric utilities are faced with the choice of pivoting or not, they will likely receive consumer feedback that pushes them in the direction of making sustainable choices. The companies that fail to accommodate consumer sentiment will be acquired by companies that are more willing to change. Eventually, there may be as few as:
10 investor-owned electric utility holding companies that provide electric energy to 90% of businesses and residences.
10 investor-owned energy production holding companies that provide 80% of the electrical energy consumed by businesses and residences.
Driving Forces of Change
By 2035, energy sources and customer loads will differ greatly from today. These differences will be the next driving force of change within the electric utility industry. Within the next 15 years, we predict that:
60 million EVs will be registered and on the road.
16 million rooftop solar panels will be installed.
Renewables will supply 50% of electric energy.
At the same time, electric utilities will focus more heavily on individual consumer data analytics because of customer and governmental expectations. Data analytics will become another driving force within the next few years, and will allow electric utilities to:
Measure reliability on an individual customer basis.
Measure quality on an individual customer basis.
Charge customers based on demand rather than usage.
The Build Back Better plan, governmental prodding in California, Maryland, and other states, wildfires and droughts in western states, and a general awareness of the severe impacts of a changing climate have started electric utilities on the path to adopting the 4Ge electric power system.
Long held views and paradigms will crumble when subjected to unrelenting data analysis. In the next generation electric power system, holding companies will measure success on a customer by customer basis.
Change is Inevitable, Even for Electric Utilities
At Prescient, we predict that the transition to the fourth generation electric power system will be complete sometime between 2035 and 2050. Over the next few weeks, we’ll discuss the changes that need to be made in a timely manner to ease this transition.
Though change is constant and inevitable, embracing positive change will lead to a more sustainable future for the energy system of the United States. This will benefit utilities and consumers alike.
In part two of this series, we’ll discuss the pricing fiasco that occurred in Texas in February 2021. We’ll present cost restraints, market caps and production incentives as necessary steps to guarantee the availability of electric energy while reducing the production of greenhouses gases. Check out our next generation blog series to learn more about the 4Ge electric power system, and contact us with your questions or ideas.