6 ‘Election-proof’ Energy Trends You Can Bank On in 2021 and BeyondBy John Carrington, Stem CEO | November 3, 2020
A CEO perspective on what this year’s U.S. policy, industry, and election developments mean for the clean energy economy and what to expect next.
This year has brought more than its share of challenges, but it’s also brought encouraging progress toward a smarter, cleaner, more resilient energy system. With divergent views on today’s ballot, many wonder how the U.S. election results might impact clean energy issues in the new year. Here’s my take on this year’s key developments in energy and what they mean for decision-makers going into 2021 and beyond – regardless of who’s in the White House.
- First and foremost, progress is inevitable. Arguably this year’s most important policy development, FERC Order 2222, emerged from a Republican-led agency under a conservative administration. The order paves the way for distributed energy resources (DERs), like solar PV and energy storage, to participate in wholesale energy markets. The rationale here had nothing to do with politics and everything to do with economics: these resources provide benefits, and excluding them limits competition and raises prices. You don’t need to lean politically either way to benefit from this decision, which will generate savings and market opportunities for consumers and businesses across the board. It’s simply not a partisan issue.
- This year also showed that change can happen fast. California now requires all new passenger cars and trucks, and over half of medium- and heavy-duty vehicles, to be emissions-free by 2035. Starting now, this will catalyze vast investment in electric vehicle (EV) infrastructure to enable interim targets starting in 2024. Meanwhile, Virginia enacted sweeping legislation requiring 100 percent zero-carbon electricity by 2050, joining a half-dozen other states with similar targets. If this can happen practically overnight in Virginia, a state where barriers to clean energy were extensive, it can happen anywhere. Arizona looks to be setting its own 100% target, and other states will no doubt follow.
- Policy helps drive markets, but business needs will always outpace grid infrastructure and the regulatory environment. Corporate demand for clean energy not only helped drive solar’s rapid growth, but also led to new buying innovations like “shaped” power purchase agreements (PPAs) that match energy needs with renewable generation. For trucking and logistics companies, complying with California’s EV order will involve developing new strategies for charging infrastructure and fleet management well within the timeframe of the leases they’re signing today.
- The solution set for these business needs is emerging, and now it’s more than just solar. Increasingly, we’re hearing from companies who are interested in expanding on new or existing solar systems to include EV infrastructure and energy storage. One unwelcome 2020 trend was the continued toll from power outages, most notably after Hurricane Isaias on the East Coast and multiple safety-related power shutoffs in California. Demand for backup power is now at an all-time high, and that solution goes beyond solar to include energy storage and often additional generators.
- All this is heading toward adaptive, intelligent energy infrastructure. Solar has done wonders, not just by giving customers the clean energy they want but also by showing that a high-renewables grid is possible. But solar needs to be paired with intelligent energy storage to maximize economic and grid benefits. Adaptive infrastructure also enables adaptive strategies so companies don’t get taken by surprise, as they did when California shifted electricity rates and dramatically changed solar compensation. Further, it is exactly this suite of customers’ adaptive, intelligent energy assets that will transact in wholesale markets when the effects of FERC Order 2222 are felt.
- Finally, I’m struck by the parallels between today’s energy industry and the technology industry of the 1990s. At the dawn of the 90s, tech was utterly fragmented, with unsophisticated users relying on disparate, single-purpose applications and unsophisticated buyers making huge purchasing decisions in a silo. Recognizing the extravagant waste of all this, companies created the Chief Technology Officer role, and the networking revolution was born. Energy is at the very beginning of a similar transformation, with the elements of an evolving, networked, and intelligent infrastructure coming into view and companies developing an incipient awareness of the opportunity costs of project-by-project thinking.
That’s my take on current trends, and again, those will continue regardless of who’s in the White House. Now, what do they mean for Stem’s key customers and stakeholders?
Companies are well aware of the need for a durable strategy, but many haven’t yet, in my experience, fully connected the dots on energy. This year, the pandemic’s permanent effects on the workplace show that adaptive strategies aren’t just a trend – businesses need flexible models to adapt to short- and long-term changes, both seen and unforeseen. The time to adapt is now. Where technologies like solar and storage are concerned, the financial incentives will never be higher; the benefits will only grow (e.g., from future wholesale market revenues); and the value of experience is priceless. Mindful of the impact CTOs had in the 90s, companies should also consider creating a ‘Chief Energy Officer’ role to implement a single energy platform and drive integrated solutions across the enterprise.
Developers and EPCs can expect a raft of opportunities in new states beyond ‘first movers’ like California, Massachusetts, and New York. Knowing policy environments and incentive requirements inside out and forming strategic partnerships will help ensure a successful entry into new markets. And since energy storage is increasingly key to maximizing solar project ROI, it behooves these companies to learn everything they can about storage – it’s fundamentally different and more complicated than solar, but the rewards are significant.
Policymakers across the country are recognizing the new world we’re living in. The drivers transforming our energy system – compelling economic benefits from new technologies, consumer demand for clean energy, and broad concern about impacts from extreme weather events, to name a few – are here to stay, and momentum will only increase. Getting up the curve on clean energy policy and understanding how renewables and energy storage complement each other will help policymakers realize thriving clean energy economies in their states.
If you’re detecting an overarching theme about the benefits of being proactive, you’re correct. As a pioneering company in the energy industry, Stem knows firsthand the value of rolling up our sleeves, navigating nascent markets, and securing new opportunities. And if you’ve detected a certain bullishness on energy storage, that’s also correct – but we’re hardly alone in that, and all credible growth projections for storage recognize both its unique value proposition and the large gap between the needs it serves today and those it will serve in the future.
When the dust settles on a very eventful 2020, Stem will still be doing what we’ve always successfully done: delivering integrated, scalable, best-in-class solutions that turn energy problems into bankable revenues, and working tirelessly to help bring about a smarter, cleaner, more resilient energy system.