Employee Development Professionals Must Prepare for Top Trends of 2022
by Bob Shively, Enerdynamics President and Lead Facilitator
Energy companies around the world are going through rapid transformation as climate change, decarbonization, decentralization, digitization, and customer desires for customization require radical changes to traditional business models. Employees in all positions at energy companies can expect to encounter numerous trends in 2022. It is critical that employee development professionals anticipate these trends so they can support employees through rapidly evolving expectations.
Here are 10 top trends impacting utility employees:
1. Decarbonization of energy delivery: Energy policy makers, regulators, investors, and customers are pushing energy companies to reduce greenhouse gas emissions. Impacts on the electric industry include changes in electric supply
from fossil fuel generation to renewables, integration of batteries into the grid, programs for electrification of loads, programs to foster electric vehicle (EV) growth, increased energy efficiency and demand response offerings, and growth of customer-owned solar. On the gas side, energy companies must rapidly ramp up efforts to transparently reduce methane emissions, add renewable natural gas (RNG) into supply streams, and, for the longer term, investigate replacing natural gas with blue or green hydrogen.
2. Infrastructure upgrades: Utilities expect to spend billions of dollars upgrading electric and gas infrastructure. For electric utilities, upgrades are needed to address impacts of climate change, integrate digital technologies into the grid, and prepare for a
future of prevalent distributed energy resources (DERs). On the gas side, utilities are focused on upgrading old facilities to improve safety and reliability. This includes replacement of cast iron pipes in older areas, replacement of early-generation plastic pipe that is now failing, and testing/replacing older steel pipe as needed. Some companies will also implement pilot projects to inject hydrogen into gas streams to determine what upgrades are required to make this a viable future option.
3. New services for customers: The old days of simply providing electric and gas supply at reasonable levels of reliability and cost are no longer sufficient for today’s consumers. They now demand service choice, multiple channels of communication,
and customization. Energy companies must find the right mix of services and communication tools. Utilities should realize that while they may have a monopoly on energy delivery, they now have strong competition for numerous other energy-related services.
4. Rate cases and new rate designs: Many utilities have been able to remain profitable for years without going in for new rate cases. Some utilities have gone as long at 10 years or more without filing a rate case. With the need to raise rates to cover
infrastructure upgrades and address potential load loss due to rooftop solar on the electric side and electrification on the gas side, utilities are needing to file rate cases to maintain profitability. In other cases, they are being required to file by their regulators. A key question in rate cases is rate design. With the growth of renewables and DERs on the electric side and potential loss of load on the gas side, the traditional rate structure focusing primarily on flat volumetric rates may no longer work. Considerations likely to arise include time-of-use rates, larger fixed components to rates, and revisiting net-energy metering.
5. New earnings mechanisms for utilities: The utility industry has mostly relied on the cost-of-service model where earnings are based on a return on reasonable capital investments. As we enter the energy transition, this model is being reconsidered
by many policy makers, regulators, and utility managers. New models already being implemented in some regions include performance-based ratemaking (PBR) where earnings depend on performance relative to specific operational targets, shared savings where contracts with third parties help save on expenses and increase shareholder/utility profits, and market-based earnings where new utility services may help boost profits outside of traditional regulatory mechanisms.
6. Energy affordability initiatives: Unfortunately for customers, decarbonization and infrastructure upgrades will cost a lot of money. And for gas customers, load loss results in the same amount of fixed costs spread among fewer customers. Inevitably
rates will go up. A significant concern is the impact of higher rates on low- and middle-income customers. Utilities must work closely with regulators and customers to find ways to mute these impacts.
7. Integration of data analysis into operations: With the cost of data collection dropping and the need for better reponses to climate change and infrastructure costs, data analytics is a key area for energy companies. Of course, most
other industries are also growing this function, so attracting or developing employees with data analytics skills will be critical. Then, these employees must work closely with field and customer service employees to ensure that data analytics translates to actual work benefits.
8. Globalization of gas markets: With the rise in liquefied natural gas (LNG) exports to Europe, Asia, and South America and in pipeline exports to Mexico, the U.S. gas market is becoming increasingly globalized. This results in gas price fluctuations
not only based on traditional national supply and demand caused by weather, production, and storage factors, but also market conditions around the world. Given limits on investment in new production and ongoing investments in export capability, we can expect ongoing volatility in natural gas prices based on global and local factors.
9. Identifying a new future for natural gas utilities: Given the combination of decarbonization and electrification efforts, many gas utilities must face a future of shrinking sales while costs continue to rise due to needed investment in safety and
reliability. Gas utilities must identify new strategies for long-term growth. Transitioning to a business based on multiple fuels including low-carbon methane, RNG, and hydrogen may present a viable future. In the meantime, gas utilities must consider retirement of underutilized facilities and shortening depreciation lives to recognize likely future retirements.
10. Identifying new energy company business models: Utilities around the world must focus on identifying and implementing business models that reflect the new market realities. Utilities must decide if they want to cede providing supply and
services to other entities and simply focus on being a network operator or if they want to be a full-service provider either through a suite of regulated services or through partnerships with third parties. Expect to see lots of experimentation with various alternatives and a variety of directions from different utilities in the coming years.
Given these trends, what can employee development professionals look forward to? Plenty of change but also lots of opportunity. The next decade will likely see the biggest shifts in energy companies since the development of the utility model in the early the 1900s. While the need for basic training will never go away – wires have to be strung on poles, pipes need to be protected against corrosion, customer billing questions need to be answered effectively – employees will also require training on a host of new ways of doing business. As the business rapidly evolves, employees will have a hunger for understanding the bigger picture of what’s going on and how their job expectations are changing. It is up to employee development to address these needs.
Need to provide effective tools for your employees to understand the energy business? Enerdynamics offers a diverse menu of energy industry training products including online electric and natural gas courses, live seminars, books, and our latest microlearning tool, Energy KnowledgeBase. See more details here or call 866-765-5432 ext. 700.
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