Anthony Allard is head of Hitachi Energy, North America.
With the industry at a crossroads, thousands of energy industry executives, thought leaders and practitioners descended in March on DISTRIBUTECH and CERAWeek, two critically important conferences that tend to shape the direction of the energy industry over the subsequent months and even years.
What came out of this year’s events was something I wasn’t expecting: near universal acknowledgment that the conventional approach to orchestrating grid capacity expansion needs to change. Given this acceptance, now may be an ideal time to make dramatic, fundamental changes to how we transport electricity, deliver it to customers and fund new projects.
Years of underinvestment are taking a toll
The industry has seen decades of underinvestment in our transmission grid, which has emerged as a key bottleneck in the energy transition. With initiatives such as the DOE’s new proposed transmission corridors, this is starting to change, but persistent challenges could hamper the speed of this progress. Notably, we need to make sure developers are able to move projects forward, and that the industry can keep up with the fast-growing demand for hardware and expertise.
Right now, the industry faces supply chain challenges as well as regulatory and financial constraints. Addressing these roadblocks will take a multi-faceted approach over many years or even decades. The industry needs to collaborate more effectively, abandon outdated business models and accelerate execution to meet this moment.
Fortunately, optimism abounds
Recognizing you have a problem is often the first step toward solving it. For the traditionally conservative energy industry, this recognition has been a long time coming. But, as I spoke with customers at DISTRIBUTECH and CERAWeek, I encountered a refreshingly open perspective about exploring new types of collaboration, new funding models and new technological approaches to combating climate change. This change in mindset is very encouraging.
But what specific changes can we make? What’s necessary and what is realistic? What can we focus on as an industry to meet this incredible moment?
I propose two radical changes in how we do business:
1. Long-term collaboration in the form of capacity reservation agreements
Large-scale transmission projects have historically been developed one at a time, on a bespoke basis — an approach that is inefficient, costly and time-consuming. The industry is now taking lessons from other industries to accelerate these mammoth infrastructure efforts.
One way to ensure a more holistic approach is to encourage longer-term, multi-project agreements between grid technology providers and developers. This approach can give equipment providers assurances to make the sizable investments needed to increase manufacturing capacity and expand and train the required workforce. This approach also maximizes standardization and increase efficiency, accelerating and reducing the cost of successful projects. It’s an arrangement that has been proven to work in Europe, where this model was introduced a few years ago, and I think it’ll work here in the U.S. where we need more system-wide planning, as well as incentives to strengthen the supply chain.
2. Drive project standardization
Moving from a customize-everything model for installations to a more standardized, program-oriented approach would go a long way toward speeding time to market for these massive infrastructure upgrades. I recognize that this suggestion might not seem revolutionary, but in a historically risk-averse, slow-moving industry, this represents dramatic change. The results we’ve seen in other markets are unassailable — these multi-project partnerships have accelerated development schedules, reduced overall cost and yielded significant efficiency and scalability benefits, while making genuine progress toward sustainability targets.
This is just the beginning
It was great to see the industry come together at these events and engage in a vibrant dialogue around how best to meet the challenges we face as an industry. While opinions on how to address these challenges vary widely, one area of clear consensus is around the need to speed up and expand grid modernization projects across North American markets. We need to continue to push all stakeholders to dismantle cumbersome regulatory frameworks and outdated business models that are limiting progress toward the electrified, carbon-free future the country deserves.
