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Five in 5: Drivers shaping the distribution grid
Exploring today’s grid and its modernization challenges
Join Power, Utilities & Renewables leaders Christian Grant and Craig Rizzo on the key challenges shaping the distribution grid and its modernization, risks of inaction, and considerations for distribution utilities navigating this quickly evolving landscape. You will gain insight into the rise of artificial intelligence (AI), cybersecurity threats on utilities, and more.
- What is driving the most significant transformations in the distribution grid today?
Christian Grant: Two forces immediately stand out: load growth and rising threats, with both cybersecurity and physical security. Overall load growth is stemming from the large push toward electrification in industries such as manufacturing, the proliferation of “smart everything,” and additional data centers due to AI and crypto. Electrification isn’t just about smart thermostats anymore; we’re seeing an increase in high-powered electric loads such as heat pumps and cooling systems for new data centers placing stress on a grid that was already under pressure to modernize. More power is being drawn due to digitalization and AI spreading further into society, but outages can now have a larger impact due to digital dependency. In response, distribution utilities will have to advance from capacity planning to real-time load management. At the same time, the threat landscape is evolving at an alarming rate. Cyber intrusions are no longer isolated; they’re coordinated, persistent, and increasingly capable of affecting critical infrastructure. In addition to cyberthreats, physical security threats to substations and other assets remain a concern.
Craig Rizzo: I’d add two more: the rapid rise of decentralized energy and mounting climate-driven reliability pressures. The traditional model, where power flows one way from large central plants to consumers, is quickly becoming only part of the solution. Prosumers are turning their homes and businesses into energy hubs, feeding power back to the grid and participating in virtual power plants (VPPs). All this means utilities aren’t just tasked with delivering power; they’re trying to manage a magnitude of unpredictable energy injections from devices they don’t necessarily control. It’s a massive operational challenge. Meanwhile, the changing climate is putting the grid under stress like never before. It’s not just about more extreme weather, although we’ve certainly seen significant fire and storm damage this past year. There are more subtle long-term trends, such as equipment failing more frequently because ambient temperatures are pushing past design thresholds. Combine that with the fact that it’s taking longer and becoming more expensive to replace this equipment, and you start to see more problems start to arise. Distribution poles are seeing shorter life spans as they face more frequent extreme weather events. Our clients are doing a good job of improving reliability metrics, but at the same time, expectations aren’t going down, and the conditions utilities are operating in are becoming more volatile by the year.
Christian Grant: Exactly, and it’s how all these forces play off each other and compound that makes the challenge so significant. Load growth and distributed energy resources (DER) adoption are shifting the fundamentals, while climate change and security threats are introducing new risks that utilities historically haven’t had to manage at this scale. It’s also important to note that Craig and I are focused on operations in this discussion. However, we must remember that affordability is the overarching factor governing how grid modernization plays out.
- How are these shifts creating new challenges for utilities and their customers?
Craig Rizzo: Power no longer moves through the grid predictably. Historically, utilities could model demand with relatively high certainty. But now, DERs, electrification, and data center uncertainty make forecasting much harder. Electric vehicles (EVs) create unexpected demand spikes, while solar can inject power back into the grid unpredictably. Batteries can help manage by smoothing the curve, but without better real-time controls, utilities risk grid imbalances and localized reliability issues. Outages are also more severe. Losing power isn’t just about lights going out. It can disrupt transportation, supply chains, or medical equipment. With extreme weather events increasing, restoration is becoming much more difficult, requiring utilities to rethink grid resiliency strategies.
Christian Grant: Beyond the growing operational complexity, financial investment needs and coordination needs between various entities are also growing. Grid modernization requires massive investment, but many rate structures weren’t built for an era where customers are also energy producers. Utilities need more effective management systems and infrastructure upgrades, but under traditional cost-of-service ratemaking models, recovering those costs can be slow, uncertain, or misaligned with the pace of required investment. The result is often that utilities make incremental investments in upgrades, impacting reliability for customers. At the same time, third-party aggregators/VPPs and EV fleet operators are introducing new forms of flexibility and customer value into the grid. But their operations, particularly when responding to bulk power market signals, can introduce coordination challenges at the distribution level, especially when those signals are not aligned with local grid conditions or constraints. The key question is: Who is making sure that these distributed assets support, not destabilize, the grid? This is all happening at a fast pace, and there’s a real need for utilities to be proactive.
- How do these emerging challenges compound with existing challenges that utilities are facing today?
Craig Rizzo: The biggest issue is that we’re layering new complexity on top of an infrastructure that wasn’t designed for it. Many of today’s transformers, substations, and protection systems were built for one-way power flows and relatively predictable demand. Now, we’re expecting them to handle bidirectional energy flows from DERs, dynamic EV charging loads, new large load growth and more frequent extreme weather events, all without raising rates. This amplifies existing vulnerabilities in the grid, making aging infrastructure a growing liability rather than just a maintenance concern. On top of that, supply chain constraints are delaying the replacement of these assets. We’re already seeing lead times of more than 18 months on transformers. This means if something breaks, utilities might not be able to replace it quickly, which worsens reliability and cost challenges just as demand surges.
Christian Grant: Great point on infrastructure; let’s also look at the business model. With customers self-generating power and aggregators managing fleets of DERs shifting demand in unpredictable ways, rethinking how to recover costs and plan investments is needed. There is another point that comes to mind. The expansion of digitalization is increasing the number of entry points for cyberthreats. Managing millions of connected devices, from smart meters to grid-edge sensors, creates a much larger attack surface for bad actors. The convergence of increasing complexity and expansion of digital assets, with aging information technology (IT) infrastructure, is making cybersecurity a more urgent challenge that also requires budget, again bringing us back to affordability.
Craig Rizzo: And the real challenge? None of these issues exist in isolation. Cyber risks are tied to digitalization. Digitalization is tied to DER growth. DER growth is stressing infrastructure that’s already supply-constrained. It’s all interconnected, which means utilities can’t afford to tackle these issues one at a time. They have to think holistically; because if they don’t, the compounding effect could lead to reliability risks, higher costs, and a grid that struggles to keep up with where the industry is headed.
- What happens if utilities don’t act as quickly as the forces that are transforming the grid, given that the industry has traditionally been more reactive than proactive?
Christian Grant: The reality is that grid challenges don’t wait for utilities to catch up. If they continue operating at a slower pace than load growth and decentralization demand, there’s the risk that outages will become more frequent and severe, affecting both reliability metrics and customer confidence. The grid we have today wasn’t built to handle this level of complexity, so delays in action mean more grid stress, further delays in connecting new loads to the grid, and more costly emergency interventions. If reliability metrics decline, utilities could face stronger regulatory oversight, stricter performance standards, and even financial penalties. The risk isn’t just operational; it’s also financial and reputational as well.
Craig Rizzo: I think it’s important to emphasize that reputational risk. As DERs, AI, and digital technologies reshape the grid, utilities that appear to resist these changes risk being seen as bottlenecks to innovation and customer progress. But the bigger concern is missed opportunity. By taking a proactive role in shaping this future, such as modernizing infrastructure, investing in automation, and enabling distributed energy participation, utilities can reinforce their central role in the energy ecosystem. If they don’t, others will. Prosumers, aggregators, and tech firms are already stepping in where gaps exist. Waiting too long doesn’t just mean a tougher road ahead; it means losing ground. The grid is evolving fast, and utilities that move with purpose can lead it. Those that don’t may struggle to keep up.
- What key capabilities will enable the distribution grid of tomorrow to keep up with the biggest drivers of change?
Craig Rizzo: This transformation requires real-time visibility and advanced analytics. We’ll have a hard time relying on static system models and periodic updates. Operators need continuous, high-fidelity insights into load patterns, DER behavior, and system health. This ties directly to distributed intelligence and edge computing. Instead of centralized decision-making and analysis, we need a network of smart, locally autonomous devices embedded across the grid that can respond instantly to changing conditions. These capabilities will allow utilities to manage volatility, improve resilience, and optimize energy flows in a system that’s becoming increasingly decentralized. Just as important is proactive and predictive asset management. Waiting for failures is costly. AI-driven forecasting and self-healing systems can anticipate risks and take preemptive action. The grid of the future will be intelligent, flexible, secure, and resilient. Utilities that develop these capabilities now will be able to meet the moment.
Christian Grant: Innovation isn’t like finding a dollar on the street; it’s not luck. It’s a capability that can be built, refined, and accretive. One innovation we know is needed is transitioning from large, “big bang” systems projects. Organizing modernization efforts into manageable, focused, shorter projects while reassessing how decision factors changed to determine the next highest and best use project is the future. It’s hard to transition to this approach and yet it’s still a bedrock innovation that’s needed. We are in the process of building out our “Feeder of the Future” architecture. What has already come into focus is outcomes that can improve safety, distribution planning, reliability, and resilience to performance levels never achieved before. These outcomes will likely be delivered from a more decentralized operational architecture that empowers localized decision-making while still providing grid-wide coordination. AI-driven automation will play a critical role here, assisting operators to balance demand and flexibility dynamically, especially as more DERs and smart loads come online. Physical and virtual digital or agentic AI workers will take some time to be accepted, and to be allowed to run part of the grid in the future. However, none of this will come in the time it is needed without a capability for innovation.
Craig Rizzo: But this is just the beginning. In the next edition of our Five in 5, we’ll take a deeper dive into the Feeder of the Future: what the vision is, how it works, and why it matters.