Aug. 17, 2020 | InBrief

From then to now: A mid-year update of the 2020 Energy & Utilities Outlook

Based on how we’ve seen the E&U landscape change because of COVID-19 and other developing trends, we have revised some of our projections from January

From then to now: A mid-year update of the 2020 Energy & Utilities Outlook

When we published the 2020 Energy & Utilities Outlook in January, we couldn’t have predicted the impact coronavirus would inflict on our country and, in particular, the utility industry. Since then, our Energy & Utilities professionals have helped utility executives swiftly adapt their organizations to this new reality. Based on those experiences and other developing trends in the market, we have revised some of our projections. In reviewing them, it was striking how many of our projections are essentially unchanged with some minor modifications despite a remarkably altered social and economic setting prior to the pandemic. The major imperatives of the industry—evolving the business model, accommodating and integrating customer preferences, and running an efficient operation—are all still extremely relevant. 

Capitalize on the rise of distributed energy resources

Due to the economic slowdown and restrictions in fieldwork and supply chain disruptions, solar and storage are seeing a contraction in 2020

However, some utilities are positioning themselves to take a more active role in DER ownership and installation in certain locations due to changing residential and commercial load profiles during and even beyond COVID. Specifically, residential demand is up 20-30% on weekdays with a gentler ramp-up in the mornings and a later midday peak. Demand in the commercial and industrial segment, on the other hand, is down by 15-19%. While feeders in residential areas may be less stressed from two-way power flows, particularly from rooftop solar, the overall increase in demand presents a challenge for feeders that were already at capacity. Leading up to the summer season, we suggest utilities work to mitigate outage risk on these feeders.

Combat the growing cyber threat 

The pandemic is magnifying cyber threats as a result of more people working remotely using video and teleconferencing capabilities. By one estimate, phishing emails have quadrupled since the crisis began. Given the increased risk of a cyberattack, utilities must respond quickly to adapt.

Specifically, utility cyber plans should address threats from mass remote work (at utilities and their vendors), increased remote control of critical assets, and an increased volume of threats.

The cybersecurity playbook should account for this fuller aperture of situations. It must be operationalized throughout the organization via communications, training, and employee accountability. Utilities should invest in infrastructure to prevent employees from choosing to use personal devices in a bid to remain productive if performance of company assets or software lags. 

Conquer the grid modernization challenge 

Grid modernization actions increased to their highest level in any quarter since tracking began by the North Carolina Clean Energy Technology Center. Energy storage is getting more widespread attention from lawmakers and regulators requesting studies and establishing resource targets. Nevada and Virginia adopted goals for 1,000 MW by 2030 and 3,100 MW by 2035, respectively.

Overall, spend on grid modernization in 2020 is expected to be $141 billion, an increase of nearly 17% over the 2019 figure.

PBR is picking up steam across more regulatory jurisdictions. And in states that are moving incrementally toward PBR and in those that have decoupled utility sales from revenues, COVID-19 will muddy the waters related to revenue recovery as the rates in these states still assume a base level of sales based on the utility’s test year. 

To read more about the factors that will determine financial impact, click here for our full report.

Enable transportation electrification 

Global sales of EVs were down 6% in Q1 2020 compared to the same quarter in the previous year and are expected to drop 43% by yearend as a result of COVID, less disposable income, and low gasoline prices which impacts the economics of EV ownership.

While infrastructure buildout is necessary, EVs might suffer a temporary setback through yearend 2020. However, the decrease in the rate of penetration presents a unique opportunity for utilities. They can use the time to improve and refine EV demand forecasting and construct the necessary charging infrastructure to support EVs as sales recover.

Deliver a better customer experience 

Many utilities implemented a moratorium on utility disconnections—some at the direction of regulators and some at the behest of utility management. An attempt to pass a national moratorium on shutoffs did not pass in the U.S. Senate. By July 1, two-thirds of all states will have let their electric disconnect moratoria expire, and 88% will by August. Many limited income customers are suffering from unprecedented financial hardship, and the timeline for a recovery in the economy is unclear. Collections should become an area of focus for utilities.  

COVID also accelerated utilities’ ability to understand and meet customers’ needs through investment in data and technology. Customers’ expectations and behaviors have shifted due to the pandemic, including not only the need for even more self-service and remote options for communications and outreach, but also a need for human connection. By investing in ways to meet these needs, utilities can create tangible value for the organization. 

To read more about intervention strategies for different groups of customers, click here to read our full report.

Compete for talent 

The tide has turned in favor of employers given the historic unemployment figures—13.3% in May down from 14.7% in April. As it relates to hiring new talent, utilities have an unprecedented opportunity to fill difficult-to-fill roles. Of course, this recession has unevenly impacted different areas of the economy. Utilities may consider former employees from industries with strong safety cultures—such as airlines, construction, and manufacturing—for field positions and customer-focused industries—such as foodservice and retail—for customer service roles. 

With utilities becoming more used to remote work, they might also consider hiring workers in distant geographies for especially hard-to-fill positions, such as data scientists. To enable successful hiring and onboarding, attention should be paid to the talent acquisition and HR functions within the utility as they will have an elevated impact in the organization. 

Explore our latest perspectives