This article is sponsored by Prologis.
The modern electric grid has been the invisible backbone of many of our lives for more than a century. Yet this historically one-way highway of electricity struggles to balance reliability and affordability with today’s increasing demands.
With energy consumption expected to surge 50 percent globally by 2040, clean electricity will be an important source for powering our fleet vehicles, smart buildings and other electrification technologies. To meet this surging demand, and with 70 percent of transmission lines approaching the end of their typical 50-to-80-year lifecycle, now is the time for smarter, resilient infrastructure that can adapt to a dynamic, decentralized energy landscape.
The makeup of a modern grid
In response to rapidly growing demand and changing public policy, utilities are rethinking how they design the electric grid to accommodate distributed generation and bidirectional energy flow. The shift from centralized to distributed energy resources (DERs) is as revolutionary as the shift to clean power itself. Power no longer moves in a predictable linear flow from power plants to consumers — today’s grid uses real-time operational adjustments and advanced grid management to account for energy generation from multiple points on the distribution grid.
To manage complexity, innovations such as smart grids and artificial intelligence play a crucial role in forecasting energy demand and optimizing grid operations. Utilities are also working to safeguard energy infrastructure against potential cyber threats and natural disasters that affect reliability while supporting grid digitization efforts. And reliability remains paramount. The U.S. averaged roughly 9,600 power outages annually between 2015 and 2020, more than twice the average from the previous five years.
The modernization of our current electric grid must be a joint effort between the private and public sectors. Demand growth and technologies are rapidly evolving — making collaboration between utilities, business leaders, regulators and policymakers vital to this transition.
Investment in the modern grid
There’s no doubt that the transition to a clean energy economy requires significant investment. Research firm BloombergNEF (BNEF) projects at least $21.4 trillion needs to be invested in the electricity grid by 2050 to attain global zero-emissions goals. Utilities are already putting significant dollars into upgrading the grid. Edison Electric Institute-member utilities forecast capital investments of almost $160 billion for 2023, versus roughly $155 billion in 2022. These estimates align with industry trends of the past decade and are expected to continue.
While utilities bear much of the responsibility for modernizing the grid, the future of energy is not their responsibility alone. In October 2023, the federal government announced up to $3.5 billion for 58 projects across 44 states to strengthen electric grid resilience and reliability. These projects will tap into more than $8 billion in federal and private investments as part of the Grid Resilience and Innovation Partnerships (GRIP) Program.
The U.S. federal government is strides ahead of other democratic governments in supporting innovation and infrastructure related to clean energy. The Inflation Reduction Act (IRA) provides $369 billion in tax credits, grants and other support. Other policies, such as the Infrastructure Investment and Jobs Act (IIJA) and Creating Helpful Incentives to Produce Semiconductors (CHIPS) Act, are similarly accelerating clean energy adoption across the country.
In 2023, more than $1.7 trillion is expected to fund renewables, electric vehicles, nuclear power, grids, storage, heat pumps and other clean technologies. Another telling statistic is that 94 percent of the projects in the United States’ interconnection queues are renewable or energy storage projects.
The responsibility of our efforts to transition to clean energy cannot lie with the public sector alone. As we move from one-way centralized energy toward two-way distributed energy, the private sector must also play a significant role in the transition by increasing reliance on renewable sources to meet energy demands.
How business can lead in the energy transition
While legislation such as the IRA may grab headlines, private investment also plays a critical role in the energy transition. To respond to customer demand, government regulation, technological advancements and a desire to progress on sustainability goals, companies today are investing unprecedented capital in solar, energy storage, zero-emissions transportation and more.
As business leaders, we are pivotal in accelerating the energy transition already underway. The transition is unlikely to happen without increased participation from companies globally to reduce or eliminate their own greenhouse gas emissions.
There are two key elements to support a successful transition. First, it’s important to recognize that the greater a company’s global reach and energy demands, the more significant its potential impact on the growth of onsite renewable generation and energy storage. Increasingly, enterprise companies are leveraging their scale and global footprints to take advantage of new technologies and help create the grid of the future.
“Modernizing today’s power grid to enable two-way power flows will unlock more reliable and affordable outcomes for our clean energy future,” Prologis Global Head of Utilities and Storage Vibhu Kaushik recently explained. “This benefits businesses in a big way because they can electrify their building and mobility needs faster, resulting in increased operational efficiency, cost savings and reduced emissions by using more sustainable onsite generation.”
Companies are joining together to help push advancements as well. Joint partnerships such as the ZeroGrid Initiative can drive broad corporate action for the advancement of electric sector transformation that will address the decarbonization and reliability challenges we face today.
The second important element is strategy. Companies need to set an enterprise-level decarbonization strategy and ensure individual teams align their business practices to the decarbonization goal. Business leaders should consider the internal changes needed to help teams understand the changing environment and ensure their company is set up to successfully identify and meet customer needs.
While core sustainability goals apply worldwide, the specific steps to carry them out often vary by geography. Operational excellence teams can play a key role in supporting the accelerating change management needed to achieve alignment across the enterprise.
At Prologis, we have made great progress by assigning utility customer account managers who serve as our primary entry point for faster clean energy deployment that supports both our customers’ and our own sustainability goals.
“Our strategic partnership allows me to better strategize and advise on the best decisions for the account, helping Prologis add value to their customers throughout the PG&E territory,” explained John Storm, strategic account manager for Pacific Gas & Electric Company.
Perhaps the biggest ingredient for success in this transition in a company is leadership. Senior leaders play a huge role in communicating the “why” and “how” of a company’s decarbonization strategy and goals. To achieve buy-in, frontline employees need to understand how decarbonization ties to the company’s strategy and future success.
A transition underway: What comes next?
The energy transition is here and already at the operational core for utilities and forward-looking companies. Renewables are the fastest-growing energy source, with projections showing the share of U.S. power generation from renewables more than doubling by 2050. It is projected that 81 percent to 95 percent of new electric-generating capacity added from 2022 to 2050 will be powered by zero-carbon technologies, including solar and storage.
There are many reasons to be optimistic. The road ahead has its challenges, but I’m inspired by the progress I see in both public and private sectors. Advances in technology, growing consumer awareness and demand, and commitment from businesses, utilities and governments give me confidence that we can deliver the clean energy economy future generations deserve.
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