The Time To Act Is Now: A Way Forward Amid Uncertainty For Canadian Power And Utilities Organizations
It’s widely recognized that Canadian power and utilities (P&U) organizations will have a critical role to play in energy transition. However, many are uncertain about the way forward in the face of a series of complex and interrelated questions.
There’s currently serious misalignment between high-level federal climate targets and related provincial and municipal policies and regulations. When will we see clearer direction? And when we do, who will pay for the energy transition? To prepare for increased electricity demand, P&U organizations will need to make significant investments in generation, transmission and distribution technologies. But there will be social resistance to projects such as these, as well as to the associated costs.
Despite all these lingering questions, now isn’t the time to wait and see. It will be impossible for P&U organizations to be ready to meet increased demand and keep rates affordable if they wait to act until there’s more clarity.
Canadian P&U organizations must take the lead on determining the most effective pathway to decarbonization in their jurisdiction, helping different sectors of the economy decarbonize by enabling clean electricity. Here we explore three key steps for leaders of P&U organizations to take now.
A roadmap to decarbonization through electrification
1. Plan for a disrupted future
We expect the amount of electricity needed in the future to double or even triple. But it won’t be sustainable for P&U organizations to simply double their infrastructure. Organizations need to develop an awareness of how consumption will evolve and plan to get ahead of increased demand. They can do this by making more effective investments and leveraging new technologies, such as energy storage and demand-side management measures, but also by enhancing inter-regional coordination to enable clean power trade.
While integrated resource plans based on historical data and load forecasting have worked in the past, a much more holistic approach to planning will be needed as we move into a significantly less predictable future. Plans must be developed with a tacit understanding of the extent to which energy systems beyond electricity are embedded in the wider socio-economic system.
How does this work in practice? Organizations must first map out the possible decarbonization pathways by sector, paying careful attention to the total energy consumed from all sources (e.g. electricity, gasoline and natural gas). Then they need to model a broader set of impacts and develop scenarios for the energy system evolution. The goal is to be able to evaluate the economic, social and environmental impact of each scenario from a multi-dimensional perspective that represents diverse stakeholder interests in order to optimize choices and trade-offs.
2. Enable a future-oriented regulatory environment
Because electricity will be so important in the energy mix of the future, P&U organizations are uniquely positioned to provide the information and resources needed to shape effective future energy plans. They have access to the people, knowledge, tools and data needed to complete effective fact-based scenario modelling. But it’s crucial that they proactively engage with all relevant stakeholders to create an environment of transparency and trust.
There’s an opportunity for P&U organizations to build a collaborative community of energy providers, governments and regulators. The time is now to build the trust needed to lead these important conversations by bringing an objective view of the different options and being fully transparent with all the relevant parties in any given jurisdiction. Ultimately, the objective is to help shape an effective way forward and support the development of more creative and dynamic regulations.
3. Earn the right to win by maintaining affordability
We already know all of this will impact energy rates. However, energy transition will be impossible without social licence, so organizations must prioritize maintaining affordability. In parallel with their energy planning efforts, P&U organizations must transform their cost structure, effectively manage capital allocation and reframe the conversation around energy costs.
It will be critical for P&U organizations to look for opportunities to be more innovative. Investigate where investments in technology can be made to build greater capabilities. Is there an opportunity to optimize the grid with automation? Can maintenance processes be evolved to become more predictive? Field operational excellence will also be key. P&U organizations have a unique opportunity to expand their role in the energy system, but they’ll need to do it well and make sure they’re acting as responsible stewards.
There’s also an opportunity for P&U organizations to broaden the conversation about energy rates and start communicating in terms of the total energy share of wallet. For example, when consumers electrify, even though they may be paying more for electricity, they need to understand they’ll likely be achieving significant efficiencies and consuming less of other forms of energy.
Whatever happens in the next few years, P&U organizations are set to play an even greater role in our economy. But if the desire is to expand, sell products and services beyond electrons and be a trusted energy adviser, organizations will need to carefully manage the perception of their brand in the market.
Bringing it all together
Taking a step back, it’s clear there’s still a lot of work to be done to accelerate the energy transition. Despite the lack of clarity on some key issues, leaders need to act now to prepare for a disrupted future, enable a future-oriented regulatory environment and focus on affordability.
Regardless of what they choose to do today, P&U organizations will find themselves at the centre of energy transition. But those who take strategic action now will be in a much better position to move quickly to meet targets as they’re defined and emerge as leaders.
At PwC Canada we work with energy, power and utilities clients to help them not just survive the current period of disruption, but reconfigure themselves for sustained success. Our experienced team of experts help companies to transform their operations, manage risk, grow their revenues and reduce costs. We work alongside them to develop new strategies, build new operating models, and create new ways of managing to deliver superior customer and investor value.
- Emissions Management