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2022 power and utilities industry outlook

The clean energy transition powers on

In 2022, the electric power industry will continue forging a path to a cleaner, more reliable, and resilient grid. While today’s challenges will likely persist, our annual industry outlook explores how digital technologies, market developments and government investment in next-generation energy technologies can help pave the way.

Tackling a tall order

In 2021, the power and utilities industry tackled tough challenges, made measurable progress, and received clean energy encouragement from a new administration. As the US economy began to emerge from its pandemic-induced recession, electricity sales rose 3.8% through August 2021 over the prior year. At the same time, unprecedented and unpredictable extreme weather events challenged the grid’s reliability and resiliency, and cyberattacks on critical infrastructure increasingly made headlines.

In 2022, the tough challenges remain—boosting clean energy, ensuring reliability and resiliency, and maintaining security, while keeping costs down. To tackle this tall order, the electric power industry will likely continue to advance in its “3D” transformation: decarbonisation, digitalisation, and decentralisation. We will be watching for technology deployments to advance and markets to evolve. Industry spending will likely remain high, and renewable penetration could accelerate further.

In our annual power and utilities industry outlook, we explore five trends that will likely impact the industry in 2022, from enhancing decarbonisation and resiliency strategies, to deploying 5G and cloud technologies, to harnessing flexible load and supporting building electrification. In the policy arena, while state mandates such as Renewable Portfolio Standards and federal renewable tax credits have underpinned the clean energy transition to date and will likely evolve further in 2022, we’ll also be watching the potential impact of additional federal policy, investment, and regulatory support.

Utilities expected to further flesh out decarbonization plans

Going into the final quarter of 2021, 46 out of 54 US investor-owned utilities had committed to reduce carbon emissions, many by 2050. And nearly three out of four customer accounts were served by an entity with a 100% carbon reduction target—either an individual utility or a utility owned by a parent company with a 100% target. In 2022, more utilities will likely jump on board and firm up commitments and strategies, driven by consumer support; opportunities for value creation; environmental, social, and governance (ESG) goals; evolving state clean energy mandates, and potential federal legislation.

In the next year, more utilities will likely announce decarbonisation goals and interim targets, increase existing targets, and flesh out their decarbonisation strategies with strategic plans for implementation as stakeholder interest grows. Overall utility ESG reporting will likely become more detailed and consistent as well. Federal policies will likely become clearer, as well as the impact they may have on the transition. And technological advances are a wild card worth watching.

Unprecedented weather events driving new resiliency strategy

The unprecedented frequency, intensity and unpredictability of extreme climate and weather events in 2021 point toward an increasing focus on utility resiliency strategies in 2022. The majority of our power and utilities industry survey respondents have already noticed an impact, with 51% saying extreme weather has affected the reliability of electricity delivery in their territory more than usual in the past year, while 38% saw the impact unchanged.

For electric utilities, resiliency planning is key because extreme events such as wildfires can impact both electricity supply and demand—a costly double whammy. In addition to wildfires, events may also include heat waves, deep freezes, sea-level rise, floods and more intense storms. Experts have made it clear that global weather patterns are in uncharted territory and planners can no longer use the past to predict the future. In 2022, utilities are expected to continue proactively preparing for that uncertain future.

5G and cloud could expedite the clean energy transition

As the electric power sector continues modernising the grid, companies are envisioning how 5G communications technologies and cloud can help them harness the power of the growing wave of connected devices and data. 5G enables utilities to move data from smart meters, sensors, and other devices to the cloud, where they can more effectively and efficiently analyse and act on it.

In the year ahead, many utilities will likely prepare to benefit from 5G technologies by planning for the services they can provide. According to a 2021 Deloitte survey of networking executives across industries globally, 58% of respondents are already deploying 5G or running pilots. Twenty-six percent of our power and utilities industry survey respondents report that 5G communications technologies are incorporated into their company’s strategy, while 36% plan to incorporate it.

Utilities increasingly turning to flexible load programmes

Yesterday’s energy efficiency and demand response programmes are beginning to transform into real-time flexible load offerings that could become a cornerstone of utility resource planning, cost reduction, decarbonisation and resiliency strategies. In 2022, more utilities will likely include flexible load in their resource planning as a supply-side resource and to help meet decarbonisation targets. Nearly 90% of our power and utilities industry survey respondents said their company plans to make greater use of flexible load programmes.

Legislators and regulators are supporting energy efficiency programs at unprecedented levels, and programs are growing rapidly. But dynamic load flexibility programs are not growing as fast as they could. Growth can be hampered by the need for improved distribution system control technologies, communications standards, and incentives for stakeholders. Some have suggested that the cost savings and grid benefits these programmes provide could justify utility cost recovery for the grid modernisation and customer incentives required.

Building electrification is already impacting utility planning

While we know building electrification has enormous potential to boost electricity demand, many see the impact as far in the future. But building stock, building codes and related policies vary widely across the country—and as with electric vehicles, the future is arriving sooner in some areas. In California and the Northeast, some utilities are already adjusting operations to support growing building electrification, and more will likely follow in the coming year.

Looking into 2022 and beyond, many expect that the grid will be able to handle increased electricity demand, but additional investment may be needed in home weatherisation and grid-responsive appliances to help manage energy use and shape load. Additional energy storage will likely be needed as well, both in front of and behind the meter.

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