In this blog, we reflect on the energy landscape of 2020 – including expansion of EV adoption, optimization of energy, and continued growth in the solar market. We then explore the key energy strategy trends we can expect to see in 2021 and beyond as part of the new administration’s carbon-cutting efforts – including boosting building efficiency, accelerating deployment of clean energy generation, maximizing flexibility in energy markets to help balance supply and demand, electrifying transportation infrastructure, and financing mechanisms that can make this all possible.
2020 taught organizations the importance of boosting sustainability to ensure resilience during a challenging economic climate. The disruptions caused by the ongoing pandemic have demonstrated that it’s more critical than ever for organizations to reduce costs and boost efficiency to ensure financial performance and boost the sustainability of their operations. Having a clear, defined energy strategy can help organizations anticipate and prepare for changes that might lie ahead – this will be especially important in helping organizations prepare for decarbonization expectations that will likely be established in the US as efforts continue to expand worldwide.
Even during challenging times in 2020, we saw organizations obtain a clear understanding of their energy infrastructure to find the right balance between economic and environmental sustainability, realizing the potential of a lower carbon future and reassessing the speed at which to reach a greener future. Therefore, it was so exciting to see many of the businesses and public sector organizations we work with take huge leaps toward being more sustainable. Across on-site generation, energy efficiency, energy digitalization, optimization and electric vehicles, organizations set their ambitions skyward.
As we move into 2021, action against climate change is set to be a firm focus across the world. President Biden recommitted the US to the Paris Agreement on the first day of his presidency. In the face of the on-going pandemic, organizations will be looking to Build Back Better and accelerate their transition to a sustainable future, underpinned with the support of governmental green recovery programs. And the year will close with the 26th UN Climate Change Conference of the Parties (COP26), viewed by many as the most significant climate event since the 2015 Paris Agreement.
As we reflect on 2020, three key areas stand out as driving significant change in enhancing the energy strategies of organizations around the world, and accelerating our progress towards a more sustainable future.
Throughout 2020, various US local and state governments continued to pave the way forward for EV adoption. For example, California committed to its own target of 2035 for an end to gas-powered car sales. In the UK, efforts for mass adoption have been more aggressive, with the government mandating that sales of vehicles with internal combustion engines (ICEs) must end by 2030. This was joined by business, consumer, environmental groups and NGOs ramping up pressure on the EU to move to similar timelines, with the potential on delivering fleet vehicle transition even sooner.
Learn about Centrica’s own efforts to drive emissions out of our fleet
An increasing focus on sustainability and the rollout of more renewables on the grid continue to challenge network operators across the world on the need to keep the grid in balance. Ensuring access to a stable electricity grid and energy source is fundamental to a business’ operation and will be key to the further incorporation of sustainable generation. One answer to this challenge is the increased utilization of digitalized energy optimization, and those businesses and public sector organizations involved in digitalized optimization of energy grows with the increase in Virtual Power Plants (VPPs), which decrease the need for new, expensive power generation by digitally managing grid demand.
Learn how by enrolling New York City Housing Authority's backup generator fleet into Demand Response, we are helping to stabilize the city's power grid
For businesses, manufacturers, and public sector organizations, the fastest route to creating energy independence, flexibility and reducing carbon remains on-site generation. Solutions such as solar PV are coming into their own as reliable and cost-effective products to implement, enabling organizations with large available areas like rooftops to monetize the space as a source of on-site generation – reducing grid consumption and costs. Growth of the US solar market demonstrated the industry’s resilience and the continued demand for clean, affordable electricity. According to SEIA, 19 GW of new solar capacity were installed in 2020 – a 43% year-over-year growth from 2019.
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A Joe Biden presidency, in combination with a Democratic majority in Congress, means that we can expect to see some dramatic new proposals in nationwide US energy policy in 2021. Driven by Biden’s ambitious and progressive preliminary energy platform that will seek economy-wide net-zero emissions no later than 2050, there are several key trends likely to be the focus of successful energy strategies in the year ahead. Focusing on these opportunities will not only help organizations become compliant with new potential policies driven by the new administration, but become more efficient, resilient and sustainable in 2021 and beyond.
Cutting carbon emissions is at the heart of the Biden energy agenda, and his energy plan promises to retrofit 4 million buildings – homes, offices, warehouses, and public buildings – over the course of 4 years while establishing building standards for new construction to accelerate our nation’s net zero target. Upgrades to the building sector and establishing building code and performance standards will be paired with legislation requiring net-zero emissions for all new commercial buildings by 2030.
The plan calls for manufacturing, installation, service and maintenance of energy-efficient technology like LED lighting and advanced heating and cooling systems that run cleaner and are less expensive. Strict codes and labor standards not only ensure quality and predictability, but energy efficiency upgrades improve indoor air quality and environmental health, ensure safety for residents and employees, and lower energy costs – all while helping with environmental measures.
The average commercial building wastes 30% of the energy it consumes – year-after-year. Energy efficiency upgrades can eliminate this waste while reducing energy costs, increasing equipment life and performance, and improving employee comfort, safety and productivity – but where can organizations start to ensure they will be compliant with the administration’s new standards for retrofits and new construction?
In most cases, organizations don’t have insight into energy inefficiencies – they lack the staff and expertise to develop and manage enterprise-wide energy efficiency upgrades. Others are unable or unwilling to invest in energy efficiency and reduction. Working with an energy service provider (ESCO) will be key to helping organizations optimize their building infrastructure to align with the new administration’s targets and legislation. Not only can an ESCO handle the energy assessments, project design, implementation, ongoing measurement, and verification, but they can provide off-balance sheet financing solutions like Energy-as-a-Service (EaaS). EaaS financing allows companies to implement energy efficiency upgrades with no upfront capital expenditure.
Financing solutions like EaaS are likely to play an important role in providing businesses with a risk-free way to upgrade their energy systems in 2021 and beyond, enabling them to focus on their core business activities while ensuring compliance.
A large component of the new administration’s plan to reduce carbon emissions is rapid deployment of clean energy technologies like solar PV for on-site energy generation. Solar can help organizations work toward newly established net zero goals by 2050 or earlier, while keeping costs under close control – especially as the component costs for solar installations continue to fall.
On-site generation and storage solutions deliver supply, price and carbon certainty. Solar generation is a clean source of power generation and can reduce energy spend and lower carbon emissions by reducing consumption from the grid. What’s more, by combining solar with battery storage, businesses can utilize stored energy during peak price periods for demand charge management – they can even leverage solar energy to charge their vehicles. Organizations are realizing the potential of integrated solar and storage technology – studies indicate that solar and storage pairing rates are expected to grow from 5% in 2019 to more than 25% in 2025, a massive growth in adoption.
Solar policy and incentives under the new administration are currently under speculation, but possibilities currently range from the Solar Investment Tax Credit extension to a reversal in trade policy. The SEIA, the solar industry’s largest trade group, is advocating for a variety of key policy goals to help shape the new administration’s solar agenda. These include broadening the Solar Investment Tax Credit to provide economic relief during the pandemic, ending the Section 201 tariffs imposed by the Trump administration, and implementing a federal-level credit around energy storage.
Looking ahead, we can expect to see organizations increasingly look at how different energy technologies can work together to drive maximum value. This approach can accelerate decarbonization plans. But it can also increase resilience against market and cost volatility, alongside increases in carbon pricing and environmental levies.
To align different energy technologies and unlock this additional value, IoT technology is connecting energy generating and consuming assets together. This is helping to improve decisions about energy and identify areas where cost and carbon savings can be made. We continue to develop our energy insights solutions and PowerRadarTM energy management platform to capture more data sources and importantly, carbon emission calculations. This data will have a critical role in helping businesses to build, track and adjust their pathway to net zero – ensuring that it is both financially and operationally resilient.
Source: 2019 Distributed Energy Future Trends, statistics based on a ten country survey of more than 1,500 energy decision-makers in large organizations.
The economic challenges faced in 2020 have shown what a higher renewables energy system looks like. At the same time, it’s demonstrated that we need to work hard to balance supply and demand. Flexibility will be more valuable than ever before.
While reducing carbon is high on the priority list for the new administration in 2021, that effort works hand-in-hand with optimizing energy use and balancing the grid. Businesses can enable a more flexible energy system while generating revenue by participating in grid-flexibility programs like Demand Response (DR) – which requires them to reduce or shift energy consumption to help balance supply and demand on the grid. Harnessing IoT technology allows for more precise planning of when and how to use energy. This allows organizations to maximize the value of participating in optimization programs and reduce any performance-related risks.
Looking ahead to 2021, harnessing IoT technology allows for more precise planning of when and how to use energy. This allows organizations to maximize the value of participating in optimization programs and reduce the risks. We can expect to see more and more organizations benefit from aggregating different types of energy assets into a Virtual Power Plant. This brings together a combination of flexible energy assets, such as battery storage, solar, or generators from across a number of organizations.
Since each asset has its own operational boundaries and limitations, artificial intelligence is used to decide the optimal way to use the strengths of each asset to meet the second-by-second requirements of onsite demand in interplay with the grid in the most efficient way. It enables organizations to maximize their financial returns by monetizing their flexibility across multiple markets without compromising, and even enhancing, the availability or performance of their assets.
In addition, we saw the Federal Energy Regulatory Commission (FERC) release Order 2222 on September 17, 2020, which opens up wholesale markets to a larger variety of businesses. Over the course of 2021, wholesale market operators will design new rules for compliance with Order 2222, and we can expect participation models to be rolled out across most markets by the end of 2022.
In the US, the transportation sector accounts for the largest proportion of carbon emissions, so it’s no surprise that electrification of vehicles across the nation is expected to be another key element in Biden’s plan to cut carbon emissions. While initiating new fuel economy and electrification standards for car manufacturers, the administration aims to work with local governments to support the deployment of robust and accessible charging infrastructure by the end of 2030 – more than 500,000 new public charging outlets. Already, prominent brands in the EV space – like ChargePoint, EVGo, and Proterra – are going public in an effort to access more capital to be prepared for accelerated growth under the new administration.
Moving into 2021, those organizations who are in the early stages of their EV transition will need to quickly understand what their future EV fleet needs to look like, and the steps that are required to get there. After all, transitioning to EV doesn’t just mean changing the type of vehicles procured. It also means a change in how – and where – those vehicles are refueled.
Once you’ve implemented home charging for your fleet, what do you do with those drivers who can’t have at-home charging? Working patterns may need to change to enable more ‘back to base’ trips for recharging. Greater wait times might be required to enable vehicles to be re-powered. Driver routes may need to be altered to enable on-the-road charging. Processes for reimbursing drivers who charge at home will need to be implemented. On-site energy generation solutions may be needed to enable workplace charging of your fleet, and on-site energy management software can be used to support.
Effective scheduling, procurement, logistics and energy planning can ease these challenges. But decisions will need to be made quickly on the tools and infrastructure that’s needed to support. As we move into 2021, fleet managers find themselves in a critical role for their business, with the eyes of sustainability, finance and HR looking to them for answers on how best to manage the EV roll out.
Investing in new energy infrastructure may seem daunting to many organizations at a time when cash conservation is paramount – and financial constraints could prove challenging for organizations as they strive to implement upgrades while maintaining a healthy cash flow.
Organizations can overcome these barriers and unlock access to more efficient energy technology with a variety of innovative financing. It will be important for organizations to consider flexible funding options for their energy investments in 2021 and explore how different funding options could help support wider business objectives. Many financing options for energy infrastructure upgrades require no capital outlay, enabling organizations to preserve precious cash reserves for core business investments while realizing the benefits of investing in advanced energy opportunities – and be able to balance both commercial and environmental performance.
In addition, the Biden administration plans to make far-reaching investments in clean, more efficient energy adoption. To maximize investment in the clean energy revolution, he is calling for a variety of measures, including innovative financing mechanisms that leverage private sector dollars. As a result, we can expect to see a large interest in the investment of cleaner, more efficient energy technology to meet the targets set forth by the administration.
To maximize these opportunities in 2021 and beyond with a future-focused strategy aligned with changing energy policy and regulations, it will be important that organizations remove any silos that exist across their energy strategy. Ensuring there are seamless connections between supply, renewables, on-site generation, insights, efficiency and optimization will ensure maximum value be delivered from each. Eliminating complexity will ensure these connections are made effectively and will enable organizations to build a future-proofed energy vision that delivers on the risks and opportunities of today and tomorrow.
To learn more about the changing role of energy, download our Distributed Energy Future Trends report.
