Preparing for a renewable future - How utility firms can mitigate and manage climate change-related risks using digital technologies
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Preparing for a renewable future How utility firms can mitigate and manage climate change-related risks using digital technologies
Abstract
As utilities become increasingly aware of the threat they pose to the environment,
they need to rapidly shift focus to climate change to make the world a safer place
for future generations. This means reducing investment in fossil fuels, improving
grid resiliency and tapping renewable energy. According to the International Energy
Agency, for the world to hit net-zero emissions targets by 2050, grid investments need
to triple to $2.2 trillion by 2030¹. This requires building a robust risk mitigation strategy
through digitalization and artificial intelligence, along with increasing renewable
energy use in the total power production. This paper focuses on how utilities can
reduce their impact on climate change and enable sustainable electricity generation
from clean renewable sources leveraging digital technologies, to build a carbon
neutral future.
Adapting to climate change: Key
risks for electric utility companies
Electric utility companies deal with an abundance of inherent risks because of the hazards
associated with power generation and distribution. Electric utilities contribute to climate change
by emitting hazardous substances as a by-product of electricity generation. Burning fossil fuels,
which today accounts for 65% of power generation, leads to the release of toxic combustion gases
into the atmosphere. Nuclear power generates radioactive waste materials that can remain in the
environment for a long period. Climate change heavily affects the businesses of utilities. Firms need
to actively manage climate change-related risks to mitigate environmental disasters, boost vegetation
management, and reduce emissions. Failure to manage such risks not only results in significant
financial liability but also hampers customer experience. For instance, in January 2019, PG&E filed for
bankruptcy and paid out $25.5 billion to resolve its wildfire-related liabilities. In fact, it is expected
to spend $11.7 billion on strategies to mitigate wildfire risk between 2019 and 2022². One of the
key reasons for wildfires is the snowballing demand for electricity due to rising global temperatures.
The US Energy Information Administration predicts that the consumption of electricity in the United
States will increase by 1.6% in 2021³. The increased demand for power for cooling, as well as the
decreased demand for power for heating, combined with the demand for reduced dependency on
electricity generated from thermal power plants, are pushing organizations to identify risks related to
climate change such as alteration in precipitation and wind speed and rising sea levels. For instance,
rising carbon dioxide levels have increased cloudiness, affecting the availability of solar radiation for
solar power systems. On the other hand, changing wind speed has affected the potential of wind
[1] The International Energy Agency; World Energy Outlook 2020; October 2020; https://www.iea.org/reports/world-energy-outlook-2020/
achieving-net-zero-emissions-by-2050#abstract; Accessed on March 4, 2021.
[2] Utility Dive; Wildfires pushed PG&E into bankruptcy. Should other utilities be worried?; November 19, 2020; https://www.utilitydive.com/
news/wildfires-pushed-pge-into-bankruptcy-should-other-utilities-be-worried/588435/; Accessed on March 4, 2021.
[3] US Energy Information Administration; Short-Term Energy Outlook; April 6, 2021; https://www.eia.gov/outlooks/steo/report/electricity.
php#:~:text=Winter%20Fuels%20Outlooks-,Electricity,after%20falling%203.8%25%20in%202020.&text=EIA%20expects%20retail%20
sales%20of,%25%20; Accessed March 4, 2021.
2 Tata Consultancy Servicespower. Floods and storms can possibly damage large parts of a power utility infrastructure, resulting
in outages and blackouts. In August 2020, more than two million people were left without power
due to tropical storm Isaias⁴. In fact, in 2020, western parts of the Unites States were in the grips of a
climate change-induced megadrought⁵.
What utilities need is a two-pronged risk mitigation strategy, one that helps proactively identify and
minimize climate-related risks while ensuring environmental sustainability.
Mitigating the risk: Shifting to
renewable energy
IIn recent years, power companies have moved towards sustainable or green energy as a risk
mitigation strategy. Leveraging green energy is crucial to reducing fuel costs, environmental
emissions, and improving compliance. The United States leads the world in investment in renewable
energy, followed by Germany, China, France and Spain⁶. In the United States, California is one of the
first states to pass an executive order to achieve carbon neutrality by 2045⁷, and utility companies
in the state have drawn out their plans to meet this objective. For example, Southern California
Edison has published its Pathway 2045 program⁸, with a well laid-out approach to achieve carbon
neutrality. This requires a complete shift to renewable energy focusing on solar and wind generation,
investment in the grid, electrification of transportation and buildings, and sequestration of the
remaining carbon. California has encouraged consumers to install photovoltaic or solar energy units
on their rooftops by providing associated tax breaks. These innovative shifts will empower utilities to
drive greater efficiency and improve potential for energy savings.
Manage the risk: Leverage
digital technologies
Renewable energy is the future. To accelerate the move to a fully de-carbonized world relying on
renewable energy alone, utilities need to make efficient use of digital technologies. Virtual power
plants (VPPs) would become mainstream in the near future, where residential solar units plus storage
would be connected to the grid. Excess energy produced by the rooftop solar systems would be
stored in batteries and can be used during the evenings when the sun is not shining. Excess energy
can be sold to the grid during peak demand times. Utilities like AGL of Australia are among early
adopters that have deployed real-time energy balancing platforms with home battery orchestration
for their residential energy storage systems⁹.
[4] The Wall Street Journal; Tropical Storm Isaias Leaves One Dead, Two Million Homes Without Power in New York, New Jersey;
August 4, 2020; https://www.wsj.com/articles/tropical-storm-isaias-knocks-out-power-to-350-000-new-jersey-households-
11596562611#:~:text=Akane%20Otani,-Biography&text=A%20man%20was%20killed%20by,Isaias%20barreled%20through%20the%20
region; Accessed on June 21, 2021.
[5] Energy News Network; Study: Western U.S. in grips of climate change-induced megadrought; https://energynews.us/digests/study-
western-u-s-in-grips-of-climate-change-induced-megadrought/; Accessed on June 21, 2021.
[6] NS Energy; Profiling the top five countries for renewable energy investment; May 7, 2021; https://www.nsenergybusiness.com/features/
top-countries-renewable-energy-investment/1
[7] Executive Department State of California; Executive order B-55-18 to achieve carbon neutrality; September 10, 2018; https://www.
ca.gov/archive/gov39/wp-content/uploads/2018/09/9.10.18-Executive-Order.pdf
[8] Edison International; Going Neutral Pathway 2045; https://www.edison.com/home/our-perspective/pathway-2045.html;
Accessed April 14, 2021.
[9] AGL; AGL completes installation of 1000th battery in Virtual Power Plant; September 26, 2019; https://www.agl.com.au/about-agl/media-
centre/asx%20and%20media%20releases/2019/september/agl-completes-installation-of-1000th-battery-in-virtual-power-plant
Tata Consultancy Services 3Utilities spend millions of dollars every year to manage the vegetation surrounding electrical
equipment, as a stray tree branch that touches an electric line could trigger a fire. Utilities are
exploring a combination of artificial intelligence and machine vision technologies for vegetation
management and wildfire prevention. Unmanned aerial vehicles such as drones take photos of the
transmission and distribution equipment and surrounding areas. AI/ML technology is used to analyze
images captured by drones across thousands of miles of utility infrastructure and identify areas of
vegetation that are of high risk of wildfire within seconds10.
Blockchain11 is a promising technology that provides a platform for producers and consumers to sell
electricity to each other in a decentralized model, often enabling customers who produce renewable
energy to trade excess energy. This was experimented in New York through an initiative called
TransActive Grid, where homes and businesses fitted with solar panels and smart meters sold spare
electricity to each other using blockchain technology12. Austrian utility firm Wien Energie is exploring
blockchain-based energy trading with other utilities. German utility Innogy is running a blockchain-
based pilot for billing autonomous electric vehicle charging stations. Blockhain has the potential to
completely revolutionize the renewable energy space, once it is fully adopted by mainline utilities.
Another technology that is being researched for adoption in hybrid renewable energy systems (RES)
is augmented and virtual reality (AR/VR)13. In a hybrid RES, two or more renewable sources, for
instance, solar panels and wind turbines, are combined. More research is needed in this nascent field,
to identify the optimized production of energy from various sources depending on the season of the
year or the time of the day. AR/VR enables researchers to virtually conduct experiments on top of a
wind turbine, without leaving their offices.
Stepping into the future:
Becoming an advocate for
climate change action
There is an urgent need to shift from short-term risk management to long-term industrial
sustainability. This requires cultivating resilience in power systems by understanding the grid
vulnerability and focusing on developing specific competencies across power generation,
transmission, and distribution. Upgrading the electric utility model is no small task. It requires taking
a stepwise approach to move from a current monopolistic model, which is the norm in most parts of
the world, to a competitive model while tapping clean energy based on lead time, availability, initial
capital costs, and investment reversibility. As federal governments pass stringent laws for cleaning up
electricity, utilities will be better able to access clean energy while becoming advocates for climate
change action.
[11] Wildfires; September 11, 2020; https://www.wsj.com/articles/california-utilities-hope-drones-ai-will-lower-risk-of-future-
wildfires-11599816601; Accessed June 21, 2021.
[12] Reuters; In New York, neighbors trading solar energy electrify community; March 30, 2017; https://www.reuters.com/article/us-energy-
usa-blockchain/in-new-york-neighbors-trading-solar-energy-electrify-community-idUSKBN171003
[13] ScienceDirect; Role of immersive visualization tools in renewable energy system development; November 2019; https://www.
sciencedirect.com/science/article/abs/pii/S1364032119305714
4 Tata Consultancy ServicesAbout the author
Asha Chacko George
Asha Chacko George is a Business Relationship Manager
for Utilities at TCS. In her 22 years of IT experience, she has
executed a wide variety of digital transformational programs
across various areas such as customer experience, information
security, content management, application development, and
data conversion for multiple Fortune 500 customers across the world. She
earned her Master’s degree in Business Administration from Missouri State
University, United States and her Bachelor’s degree in Computer Science
and Engineering from University of Kerala, Thiruvananthapuram, India. In
addition, she has multiple professional certifications including Six Sigma Black
Belt, Certified Information Systems Security Professional (CISSP), Project
Management Professional (PMP), The Open Group Architecture Framework
(TOGAF), and Scaled Agile Framework (SAFe). Asha is passionate about
technological innovations that helps to build a sustainable future. She lives in
California, USA.
To know more
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