The power utility sector is one of the industries that are about to see the most dramatic change as parts of the world move towards a lower-carbon energy future. Utilities have been active in lowering their carbon footprint. However, there is still much work to do per the Paris Agreement targets and government pledges for net-zero by 2050. But there’s one thing utilities seem to have underestimated: the need to digitize just as fast as they want to decarbonize. A new survey from EY has revealed that power utilities are almost completely unprepared for a digital future. While the industry is aware of the changes it must undertake to fit in a low-carbon world, the respondents in the survey cited the speed with which their company could change as the biggest challenge for adopting the technology they need to adopt for the low-carbon future—the other challenge: money.
Yet, there is an even greater challenge to the industry’s transformation in tune with government emission goals. Power utilities lack the right workforce for a digital environment and have yet to find it and train it. This, according to the EY survey’s respondents, is the biggest obstacle in the energy transition, with 89 percent identifying it as a challenge. That’s compared with 52 percent who said their company cannot move quickly enough for the transition and 40 percent who identify lack of sufficient funding as a challenge.
Surveys like the EY one could be interpreted in different ways. The most obvious is the simplest: utilities need to pick up the pace and be faster about low-carbon and digital tech adoption to avoid getting left behind. The not-so-obvious perspective, however, is that maybe the urge to shift to renewables and EVs is a little rushed.
Scientific research headlines in the media are getting increasingly grim, and the EU and the U.S. are getting increasingly ambitious with their emissions-cutting. That’s instead of devising detailed plans and sticking to them, which might have set a more palatable pace of change. This could have meant smoother sailing, given that rushed things rarely work as planned.
Take President Biden’s $2-trillion infrastructure plan. It envisages $174 billion in spending on the manufacturing and sales of more electric vehicles. The sum includes money for retooling car factories, grants and incentives for buyers, and incentives for charging stations. The Biden administration plans to build half a million of these across the country to encourage more people to buy EVs.
There is a problem, however, and it has nothing to do with government spending plans. The Associated Press’ Tom Krisher wrote earlier this week that range anxiety is holding EV sales back. This is not news to those keeping an eye on the EV industry, but it may cause surprise among those who witness the litany of headlines that say millions of EVs will be on global roads in a decade or so. Before this happens, manufacturers would need to handle the range anxiety problem.
So, back to power utilities. The general mood that the EY survey seems to have captured is one of urgency and, to a significant extent, one of inadequacy and moving too slowly. However, it may well be the other way round. It may be that agendas and priorities are moving too fast for the industry to respond adequately.
Take workforce skilling and reskilling for a more digital future in the low-carbon economy. Training employees requires a certain amount of time that can only be reduced so much before it begins affecting the quality of the training. In other words, training simply cannot be rushed. According to EY, something similar applies to the adoption of digital technology.
“Digital investments are useful only to the extent that they can be matched with knowledge, skills, and abilities — about the technology itself, its function in your organization, how it fits within your strategic vision, and your competitive position in the market,” the survey report authors wrote. In other words, digital tech adoption is not an end in itself. It is a means of achieving a company’s long-term goals in a changing environment.
Yet, quickly or slowly, the power utility sector will need to change. It is at the forefront of the energy transition. This means it will need to handle a greater share of renewables on the grid and changing patterns of demand peaks and troughs with all the millions of EVs coming. This will be a challenging time, and some experts are warning that the transition simply isn’t possible with the grid as it is right now. In such a context, avoiding rushed decisions and moves becomes even more important, not only for the power utility sector but for every sector. That’s especially true when the sector feels it is lacking in such essential aspects as workforce expertise and digital readiness.
By Irina Slav for Oilprice.com
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