Framing the opportunity for electric power providers
For electric power providers, the greatest opportunity may be increased electricity sales as industrial companies and other customers electrify more of their energy end uses. Providers may be traditional utilities or their unregulated subsidiaries, renewable energy developers, or others who can increasingly provide electric power through a variety of new technologies. Of the electric utility companies surveyed in the Deloitte 2021 Industrial Grid Interaction Survey, 68% said they had programs to help customers further electrify fleets, buildings, and industrial processes.
Beyond potentially rising electricity sales, many power providers are already participating in growing markets for electric services, such as the planning, financing, installation, and operations and maintenance of onsite generation, energy storage, electric vehicle chargers, microgrids/nanogrids, and more—often through a turnkey “as-a-service” business model. Two-thirds or more of the utility companies surveyed in the Industrial Grid Interaction survey saw future revenue opportunities associated with providing each of these services.9
For traditional electric utilities, the growth of these services may reduce electricity sales, as customers increasingly self-generate or implement energy efficiency measures. However, these services can also provide benefits for the grid and utility resource planning. For example, as more customers add DER and link their energy usage to increasingly sophisticated energy management systems, the utility or grid operator can tap those resources to meet peak demand or unusual spikes in electricity usage. Operators can also harness this new flexibility to help balance electricity supply and demand as the share of large-scale solar and wind power, which can be intermittent, grows. In fact, 84% of the Deloitte 2021 Industrial Grid Interaction Survey respondents said optimally located DER can be a flexible resource to help balance the grid, especially as more intermittent renewables are added.
In the longer term, these new local sources of incremental electricity output mean utility planners can sometimes defer capital spending on generation, transmission, and distribution infrastructure. More than half of the Industrial Grid Interaction survey respondents said DER can help their company reduce capital spending on grid infrastructure, such as new generation or transmission. Finally, some traditional electric power providers see the expanding market for energy services as an opportunity to differentiate themselves, and 52% of respondents said their company could gain a competitive advantage as they compete with new market entrants in this area, usually through an unregulated subsidiary.
Outlook for deployment: The industrial smart energy management revolution and the role of DERs
In many industrial settings, building management systems (BMS) were traditionally focused on high-traffic areas and were geared toward optimizing the performance of the HVAC systems. However, with the rise of Industry 4.0 inside manufacturing environments, sensors, IoT, and cloud analytics can move toward “smart” energy management that encompasses heating and cooling of all spaces including warehouses and the production floor, but also industrial equipment, pumps, generators, and even vehicles and lighting. The 2020 Deloitte and Manufacturers Alliance for Productivity and Innovation Smart Manufacturing Ecosystems Study identified that 80% of manufacturers surveyed are investing in plant consumption and energy management use cases for the smart factory.10
The goal of such a use case is to leverage contextual data to optimize energy use and reduce overhead costs, enabling efficiencies, such as auto-idling of assets that aren’t being utilized. In addition, smart energy management systems could hold the key to unlocking the potential of greater grid interactivity for industrial companies.
A smart energy management system is a computer-based system designed to monitor, control, measure, and optimize energy consumption in a building, factory, or any facility. The systems can connect electricity-consuming systems, such as HVAC, lighting, and manufacturing equipment, with meters, sensors, and other devices that can track, measure, and aggregate the data internally and potentially communicate with the utility or grid operator to time interactions, such as energy purchases during cheaper, off-peak hours; participation in demand-response events; EV managed charging programs; and transmission of surplus energy as part of other utility or grid operator programs.
The following are some of the types of solutions industrial companies can deploy to help reduce energy costs, meet ESG goals, and boost resiliency from weather-related outages. To understand how some of these examples could be applied to a hypothetical industrial company, see the infographic.