Accelerating Into The Straight, and Then ...
Steve Mitnick is President of Lines Up, Inc., Editor-in-Chief of Public Utilities Fortnightly, author of “Lines Down: How We Pay, Use, Value Grid Electricity Amid the Storm,” formerly an expert witness that testified before utility regulatory commissions of six states, the District of Columbia, the Federal Energy Regulatory Commission, and in Canada, and a faculty member at Georgetown University teaching undergraduate microeconomics, macroeconomics and statistics. He’s sheltering in place like nearly everybody else, but writing even more as a result.
As in a racing car accelerating out of a corner, the electric power industry was rapidly picking up speed for the straightaway. One utility committed to an aggressive decarbonization target. Then another. Then, in quick succession, a couple of others. Then, well, everyone else seemingly did too. The industry had hit top speed entering the straight.
And just at that precise moment, when it seemed clear how the race would result, out of the blue there's a massive pileup. After the crushing and crunching of metal subsides, there comes a strange quiet. Drivers and fans alike are stunned by the sudden disruption of what's inevitable. And they start searching for what's next.
That's where we are right now, in the electric power industry. We settled at last with steely determination, steering from the corner into the straight. Just ahead, the length of the course which we call the industry transformation - decarbonization, electrification, digitization. But the abrupt accident and the ensuing wreckage really does unsettle the race.
What's next? It's too soon to fully reckon, as the dust of the coronavirus crisis is stubbornly still in the air. Soothsayers and fools know the industry's future exactly but the rest of us cannot.
It's human nature however to begin speculating what's next. And, for our society's cornerstone - by that I do mean the electric power industry - divining the future and securing it with the necessary infrastructure, protocols and processes is not a choice but a mandate.
Once the crisis moves from headlines to history, shall the industry return to the old normal or depart to a new normal? Shall we get right back into our car seats and resume the race, putting the pileup behind us as if it never happened? Or shall we factor in that we face new roadblocks that will slow us down? Though there might be new ways to maneuver around in the roadway that - if we take them - will actually speed us up.
There is one thing we can count on and know for sure of what is to come. The pages of Public Utilities Fortnightly are bound to be filled with arguments this way and that about how the coronavirus crisis proves utilities and utility regulation should steer to the left or should steer to the right on a broad range of issues.
There will surely be arguments that economic and financial hardships on the public and its utilities necessarily constrain the pace and very nature of the industry transformation. And, there'll be arguments that the crisis convinces us that a reshuffling of priorities is called for, with more focus on the immediate needs for resilience and less on the frills of the future. And, on the other hand, there'll be arguments that the lessons learned make it imperative that we redouble transformation initiatives to better prepare for crises to come including from climate change.
A number of utilities may come out of this crisis hard-hit financially. The regulatory proceedings that address these impacts may very well become contentious considering the weakened financial health of many utility customers. Undoubtedly, some parties will propose a scaling back of any utility initiatives that have a longer-term and more abstract purpose such as elements of industry transformation.
Many utilities, together with their regulators, may feel the need to reinforce their capabilities to withstand the full range of resilience challenges to the continuity of electric service - biological, extreme weather, cyberattacks, wildfires, etc. - by raising investment in infrastructure and the workforce. As for investments in other areas, their priority and the resources devoted to them might be ratcheted down.
In contrast, many utilities may believe that remote and automatic technologies - that are natural components of industry transformation - are essential for greater cost efficiency, enhanced resilience and improved environmental performance. The argument will be that we must continue to follow the road to industry transformation notwithstanding the virus pileup and its residual effects over the next few years.
The coronavirus crisis reminds all of us that nature is an indomitable force. Though mankind has grown in its mastery of the environment in many ways, we're humbled time after time when nature strikes a blow. All we can do is plan and prepare for the black, gray, and white swans. The electric power industry by necessity does this as well as any sector of the economy.
And that is why the electric power industry was accelerating the transformation, up until the unfortunate term "social distancing" became all too familiar. And that is why, I suppose, the industry will endeavor to rev up the engine - once it is safe to diminish our distancing - and find its top speed again, to decarbonize, to electrify, and to digitize for a more secure future in the public interest.