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Customer’s Role in Energy Transition - Applying the doability principle



The energy transition involves a seismic change in the way we produce and consume energy. Such a change requires a combination of both top down policy push and grassroots acceptance and conversion. However, the headlines and news reports present an overwhelmingly disproportionate coverage on top down policy developments or the lack of it, and very little on the changes that are happening at the ground level. This is understandable. Compared to the broad interest in UN COP efforts that make great stories of the world governments coming together, the messy, diverse, and disparate actions taken by customers and communities in energy transition are mundane and boring. While installing better insulated windows in houses work in some areas, installing solar PVs with batteries will be important in another. It is indeed hard to make window insulation and rooftop installations interesting and newsworthy! But pivoting to a new energy system must include these efforts and largely the community and customer’s role - to lean-in and become advocates and champions of change. Needless to say much work is required in this area.


Many experts, such as Vaclav Smil have reminded us that humankind is not new to energy transition. We have moved from wood or biofuels to coal and oil and to natural gas as primary forms of energy. But it was not an energy switch. It was indeed a transition that was slow and occurred over multiple decades and varying pace among various communities across the globe. Wood, for instance, was the dominant source of energy until the 1970s in China, and even in other countries. Despite the drivers for the historical transitions - economics, availability, and maturity of supply chains, were evident much earlier, but for the entire system (in fact, system of systems) to shift took time. Ultimately, at some point the better resource simply forced a large part of humankind to change. While we can argue that the drivers for today’s transitions are largely driven by an intergenerational existential threat of climate change, and hence there must be a concerted global push to pivot, historical energy transitions make the case blatantly obvious that until communities make the shift, the transition will not happen. Indeed, this brings us back to the role of customers in energy transition.


Much of today’s energy transition remediation has centered around electrification. News on electrical vehicles, usage of solar PV and wind as new electric power sources, and smart home solutions that encourage energy efficiency and conservation have dominated the public and academic discourse. This is rather a limited view because for complete transition from fossil fuels, it is not the direct emissions, termed as Scope 1 that must be eliminated, but scope 1 and even scope 3 emissions have to be removed.

 

Note: Scope 1 emissions are sources that an organization like a fossil power plant and its owned ICE vehicles emit directly. Scope 2 are emissions that the company causes upstream, e.g., emissions caused in producing EVs or wind turbines. Scope 3 emissions are caused by down its value chain.

 

Even though it is a limited view, electrification is by far the easiest step in this complex march to decarbonization. Given the timeline that most countries are aiming - such as, net zero by 2050, we don't really have the option to rely on multi-decade natural social osmosis for adoption. To engineer an accelerated path, a lot more emphasis is placed on the top down policy driven mechanisms to mobilize and operationalize these shifts. But the reality is only top-down efforts will have some serious structural limitations - such as, COP requirements are non-binding pledges. The largest emitters - China, India, and Russia are not on the same page as the EU and the US.


Therefore, customers and grassroots community efforts will need to continue, which brings us back to customer engagement to mobilize and rally agents around transition efforts. Utilities are in a unique position to lead this charge - given their day to day experience with all customers. By educating and influencing the customer base to make the necessary changes that ranges from reducing electricity and gas usage to lifestyle changes, utilities can make a difference. Customers are not a monolithic group. Commercial and industrial customers usually respond to economic incentives, while residential customers have to tussle with changes in habits and behaviors, even in presence of economic incentives or penalties. Using pricing as a way to influence quantity consumed, requires time of use or dynamic pricing mechanisms that require a web of advanced infrastructure and enablers from tariff policies to smart metering and billing systems. Despite progress in AMI (advanced metering infrastructure), penetration of time-of-use rates are dismally low (<10% in the US). But such numbers need not be demoralizing, if utilities widen their aperture and expand their role into more doable schemes to keep the transition in motion.


Many utilities have for several years examined the use of simpler mechanisms to energy conservation, that make process of decarbonization easy for the customers to act on. Insulating windows, keeping the HVAC units (one of largest suckers of energy) in an efficient operating state, and migrating from gas based heating to electrification are simpler ways to step into transition efforts. Less consumed means less production and less emissions. Such measures are counter-productive to the utility’s core business and absent a policy framework present no business rationale, hence a policy or regulatory mechanism is necessary. This may sound onerous but frameworks for systemic enablement can be developed at a local county or state level. This does not require a shift in national policy nor international pledges. As such, each local community can drive these initiatives at a much faster pace because they are closer to understanding the needs and respond to the community needs to make the shift.


Much could be and must be done by the utilities to drive their communities towards change. Utilities often get called out in how they score against national and international pledges and commitments. These utilities can play a forceful role if they accelerate their efforts to reach out to the hearts, minds, and the wallets of their customers and the communities they serve. The transition will not happen until the customers make the shift - and utilities can use their access and reach to accelerate the transition. While a few utilities have taken a few steps - a lot more needs to be done. As the momentum for COP27 picks up, and the US industry earnestly look forward to mobilizing the $369 billion IRA spend, it is imperative that the bottom-up efforts at the rank-and-file get the necessary boost in firepower to accelerate the energy transition.

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