Multiple competing forces are changing the way both operators and customers think about the opportunities and challenges of our growing energy dependencies:

1. Unprecedented economic incentives have kickstarted a cycle of capital deployment that will forever tip the balance of the global power supply toward renewable sources
2. A growing number of renewable construction projects are being delayed by bottlenecks in network grid connection, thus impeding progress toward net zero
3. Macroeconomic trends are changing the shape and magnitude of electricity demand, complicating system operations and reliability management
4. Both regulation and regulatory models are coming under increased scrutiny, especially in the United Kingdom’s water sector, where shareholder super profits have heightened demands for extra capital to offset the utility debt burden
5. Customers have become more conscious of their service providers, setting new expectations for the experiences they receive and personal data management (accessibility, accuracy and accountability)

These forces, and their impact on utilities, will only intensify in the next year. Non-governmental organizations, governments and private enterprises have fast-approaching deadlines for their decarbonization initiatives. The Paris Agreement, for example, requires its 196 signatories to be on a downward trend with their emissions by 2025 at the latest. In the United States, the Inflation Reduction Act (IRA) has turbocharged the renewables market.

In this context, 2024 promises to be a crucial year for organizations and operators. They must set the right priorities within the constraints of regulated business models and find ways to keep sufficient generation capacity available to customers—and at a reasonable price.

What trends will define the year, and what can utilities do to make the most of them?

Navigate the IRA’s opportunities and challenges

In August 2022, U.S. Congress passed the IRA, one of the most transformative pieces of environmental legislation in the country’s history. The act turbocharges the development and deployment of renewable energy by authorizing an effectively unconstrained pool of development tax credits while also making them more accessible to regulated utilities. The impact on the renewables market will soon become apparent, as the International Energy Agency (IEA) predicts, “Global renewable capacity additions could reach 550 gigawatts (GW) in 2024” under an accelerated adoption scenario.

To make the most of this historic opportunity and lean into the transition to renewable energy, U.S. utility operators should revisit their business strategies and investment priorities to ensure they are maximizing their access to these tax credits and thus lowering rates for customers.

Though the IRA supports the American renewables market, this national initiative will likely impact projects in other countries as it diverts some renewable development to the U.S. At the same time, the International Monetary Fund notes that the act’s “pull on global clean energy investment is already encouraging others to follow suit” with their own plans. What those plans look like, and how collaborative they are on a global scale, will likely define much of 2024.

Deploy next-generation solutions to manage volatility and meet capacity requirements

The growth of renewable resources like wind and solar is a significant step forward in reducing the carbon impact of the power sector. Yet, the intermittent nature of the sun and wind present a significant challenge to system reliability. The challenge of responsibly integrating this unpredictable capacity into a system with predictable customer demand will become trickier as these resources represent an increasing share of the global power generation mix. The IEA anticipates, “The share of renewables in the global power generation mix is forecast to rise from 29 percent in 2022 to 35 percent in 2025.”

So, how can utilities deploy renewables while still ensuring that they are fulfilling their obligation to provide power to customers? Operators must ensure they are meeting capacity requirements by using a mix of traditional baseload generation and renewables. By mitigating supply shortfalls with creative solutions—such as electric buses that can backfeed onto grids—organizations can rely on innovative solutions to enhance grid stability, providing a new backstop for delivering reliable power to customers.

Generate additional revenue with utility-scale battery solutions

Operators have traditionally deployed utility-scale batteries—batteries that store excess energy from sources such as solar and wind—as a means of ensuring that their customers have consistent, ready access to power, even in times of high load demand.

Yet, in some markets these batteries can be deployed in alternate “modes” for additional revenue, particularly as storage capacity is primed to continue expanding over the coming decade. Organizations deploying battery projects may be eligible for incentives. India, for instance, has made $455.2 million available for incentives.

By charging during lower-cost hours and deploying energy during higher-cost peaks, developers can deploy these assets in a storage mode for price arbitrage to unlock customer savings.

Manage assets and optimize processes to improve reliability

The electrification revolution will add unprecedented demand on grid networks: National Grid estimates that by 2036 in both the U.S. and U.K., consumers will increase their electricity consumption by 50 percent. At the same time, grid utilization remains low and a scarcity of transformers will make it difficult for operators to meet rising demand in the coming years. So, what can operators do in 2024 to optimize utilization and reliability while preparing for rising demand?

Operators should invest in their assets in two ways: by enhancing grid reliability and modernizing core infrastructure. This two-pronged approach ensures that organizations can make the most out of their current assets while also preparing for the future. At the same time, operators should feel empowered to balance their investments by prioritizing the most pressing issues first so that they can do more with less investment.

Grid modernization in particular provides a way for operators to maximize usage and manage their processes and assets more effectively. A key component of grid modernization includes investing in advanced, sophisticated systems that collect, curate and integrate data to help with:

• Predictive maintenance: By collecting and analyzing data from sensors and devices, organizations can proactively schedule maintenance activities to reduce the likelihood of unplanned equipment downtime and reduce repair costs
• Performance monitoring: Organizations can track the performance of equipment over time to anticipate issues and potential problems and avoid them with preventative maintenance
• Resource planning: Maintenance data can embolden organizations to plan resource allocation for periods of high or low maintenance

Operators can thus use analytics to gain valuable insights into metrics, usage and consumption patterns to better maintain their equipment, plan maintenance processes and strategize their investments. To enable this modernization, utilities need to build a future-ready systems roadmap and a robust modern integration framework that will enable these sophisticated operational technology (OT) systems to talk seamlessly with each other and with the organization’s IT systems. Many utilities are still in the early stage of this journey.

Support customers by lowering costs with the help of generative AI

Utilities organizations have a duty to keep costs low for customers, but this has been challenging in recent years, due to a number of developments:

• Extreme weather means increased prices—as in Germany, where ratepayers paid an average of 38 percent for power in the winter of 2023—so prices will likely remain elevated in 2024
• As consumers continue to use more devices, they can expect to pay more to utilities companies; e.g., fully charging an electric vehicle in the U.K. adds £23 onto a customer’s bill but saves £41 at the fuel pump
• Governments and regulators are questioning whether the traditional power merit order utilizing pay-as-you clear models (which establish the order in which each energy source is deployed) is truly working to keep costs down and ensure customers benefit from renewables’ significantly lower production cost vis-à-vis gas as the marginal producer

What can utilities do to support customers and further lower their cost burden as they increasingly utilize the grid? Artificial intelligence (AI) can help organizations keep rates down by optimizing energy distribution and consumption.

AI can analyze data from smart meters, sensors and other sources to identify patterns and trends in energy usage. This analysis can be used to predict energy demand and optimize the distribution of energy to reduce waste and minimize costs. In addition, AI can help utilities companies predict when energy consumption will be particularly high—such as during peak hours—and implement strategies to reduce usage during these times. This can involve:

• Targeted outreach and messaging to customers to incentivize energy reduction at peak times
• Automated systems that adjust energy usage based on demand

Generative AI holds promise as a new tool for utilities to improve employee productivity and communicate effectively with customers to help them change their usage behavior. By introducing new ways to unlock value for customers with the help of AI, utilities organizations can further make the clean energy transition affordable for the people they serve.

Adopt a customer mindset

Buoyed by decarbonization initiatives, utilities customers around the world increasingly adopt low-carbon technology, such as solar panels, heat pumps and electric vehicles. The U.K., for example, plans to phase out the sale of new gas- and diesel-fueled automobiles by 2030.

Consequently, transmission and distribution companies will sit at the frontlines of the move toward net zero and manage a significant growth in connection requests in the coming years. How can they prepare?

In order to support an increased number of connection requests, organizations need to become customer-centric. They should think of ratepayers as customers who expect a sophisticated level of engagement with organizations. Companies should also reinvent customer-facing journeys with the help of apps, self-service portals and easily navigable websites that meet customers’ needs.