2020 Power and Utilities Industry Outlook
Exploring power and utilities industry trends and the impact of COVID-19
In our original 2020 outlook, we saw emerging opportunities for the power and utilities industry as it led the economy-wide clean energy transition. While some of the trends around climate goals, DER, and growth will continue, the COVID-19 pandemic has catalyzed the transition while lending urgency to strategic decisions about DER and growth opportunities. Our midyear 2020 power and utilities industry outlook provides insights to help leaders navigate increased uncertainty in the wake of COVID-19.
Midyear outlook: Examine new power and utilities industry trends
The power and utilities industry started the new decade in a strong position, identifying new opportunities for growth while leading the economy-wide clean energy transition. But just months later, the COVID-19 pandemic struck and tested the mettle of a crisis-resilient sector in new ways.
The outlook for three trends we identified at the beginning of 2020 seems to have markedly changed. In short, COVID-19 may have catalyzed the industry-led clean energy transition while lending urgency to strategic decisions about distributed energy resources and growth opportunities. Will the sector be able to strategically lead? Explore our midyear outlook to get a glimpse into the next six months.
Power and utilities industry seeks growth by leading clean energy transition
In 2019, the multiyear pattern of record-breaking utility capital expenditures amid stagnant load growth continued in the power industry. And it shows few signs of changing as the need to upgrade aging infrastructure, digitize, and secure the grid against natural and manmade disasters such as cyberattacks continues. But while this generally creates upward pressure on prices, once again in 2019 retail electricity customers saw only modest increases. This is due in part to low natural gas prices and declining costs of wind and solar power continuing to dampen wholesale electricity prices.
Natural gas continued to dominate the US power generation mix, at more than 44 percent of generation capacity.1 Wind and solar capacity also continued its rise, to nearly 12 percent of capacity, driven largely by growing corporate commitment to renewables, declining prices, supportive policies such as renewable portfolio standards (RPS), and improved performance. Renewables as a whole, including hydroelectric, reached nearly 22 percent of US capacity, surpassing coal-fired plants’ share for the first time.2 And the rush to deploy battery storage at grid-scale and behind-the-meter surged as battery costs fell sharply.
Other significant trends in 2019 were the federal government’s continuing efforts to roll back environmental rules such as the Clean Power Plan,3 while many state and local governments reinforced their support for clean energy with steps such as increased renewable portfolio standards. Natural disasters such as hurricanes and wildfires hit particularly hard in 2019, continuing a pattern that may signal the need for increased utility planning and even more investment in transmission and distribution systems. At the same time, cyberattacks on the electric grid have increased and become more targeted in recent years, requiring power companies to continue fortifying their defenses. Bright spots were increasing flexibility and resilience achieved through grid modernization and opportunities to boost long-term revenue through electrification, especially in the transportation sector as electric vehicle (EV) adoption rises.
In our 2019 outlook, we explored how the US power and utilities industry is continuing on its path to transformation and experimenting with new technologies and business models, while the traditional utility regulatory structure struggles to catch up. As we move into a new decade, many power and utility companies are not only boosting their own decarbonization commitments and efforts, but they’re also taking on the mantle of leadership in the economy-wide clean energy transition. In 2020, we expect to see these efforts intensify and bring new opportunities for customer engagement and growth.
In the recent Deloitte survey about the transition to 100 percent renewables, responding organizations across the private and public sectors identified “coordination with our electric utility” as the top external enabler for their progress in moving to cleaner energy sources. This underscores the electric power sector’s unique role as a leader in the clean energy transition. And many are ready to embrace that role.
While some may have hesitated a decade ago, today most power companies see rapidly expanding opportunities to address their customers’ increasing interest in clean energy and new ways to manage and control their energy use and costs. From building grid-scale wind and solar plants to providing distributed solar, storage, and EV charging infrastructure—2020 will likely bring increasing opportunities for power companies to create value as a catalyst in the clean energy transition. We’ll start by discussing power companies’ increasing commitments to decarbonization and follow with key trends and opportunities for them to help customers transition to cleaner energy while creating value and managing risk for themselves and their customers.