Before the Pandemic, Advanced Energy was Winning. Here’s What We Have to Do to Get Back in the Winner’s Circle.

Posted by Ryan Katofsky on Jun 4, 2020 1:28:10 PM

Advanced Energy on the move

The COVID-19 pandemic has been a tough time for the advanced energy industry, along with many others. With more than 600,000 jobs lost in the associated shutdown of the economy, the impact has been hard, and the difficulty of getting attention to it in Washington, D.C., even harder. But as states begin to open up, however slowly, and the focus of policymakers, state and federal, turns to jumpstarting economic activity, everyone who works in or cares about the transition to an advanced energy economy should take heart – and speak up.

Although the last few months have been challenging, we need to remember that the underlying trends that were in our favor before the pandemic will still be in our favor afterwards. When we look back on 2020, any setbacks will hopefully be seen as temporary. Here is a reminder of what advanced energy had going for it before the coronavirus coma:

  • Costs continue to fall, such that advanced energy is increasingly the least cost option available. In many places, the all-in cost for new renewable energy generation is now lower than the operating cost of some existing generation. The results from a recent El Paso Electric solicitation is the just the latest in the ongoing downward march of renewable energy costs. If you think about the evolution from incandescent bulbs to compact fluorescents to LEDs, that is emblematic of what is happening across the board with energy efficiency. Electric vehicles are next. They provide huge lifetime savings on fuel and maintenance costs and will soon achieve purchase price parity with internal combustion engine vehicles. With smart charging, they also drive down average electric rates for all customers by improving grid asset utilization.
  • We’re also seeing ever-improving performance and functionality, allowing customers to get more value from their investments in advanced energy. Utility investments in a more intelligent, flexible grid are enabling that functionality, which benefits all customers.
  • There’s growing customer interest in taking control of their energy use and costs, up to and including choosing the resources that meet their energy needs. 
  • Advanced energy is a source of a large number of high-quality jobs.
  • We’ve also got clear momentum, at least at the state level, and increasingly among utilities, for bold action on decarbonizing the energy system. “100% clean” is quickly becoming the standard for state energy policy; 14 states, D.C., and Puerto Rico have set goals of 100% clean or renewable energy. AEE helped pass 100% clean energy legislation in Virginia earlier this year, something that would have been inconceivable just a few years ago.

This is a powerful set of trends. Indeed, the attributes of advanced energy position the industry to be a pillar of the economic recovery to come in the weeks and months ahead. So what should we who are employed in or care about advanced energy do to make sure we get there? Here are some ideas:

  1. Tell policymakers that advanced energy is a source of good, local jobs. As of 2019, advanced energy employed 3.6 million workers in the United States, more than retail stores (3 million), twice as many as hotels and motels (1.7 million), and more than three times as many as the coal and oil industries combined (1 million). What’s more, employers surveyed last fall predicted 5% advanced energy job growth in 2020. But that was prior to the onset of COVID-19. Since then, nearly 600,000 advanced energy jobs have been lost, 17% of the total. But this is the effect of the coronavirus shutdown of the economy, not a function of the industry.

Fundamentally, advanced energy is a job creation engine. Based on estimates I made recently, if the U.S. advanced energy industry were to double in size by revenue, we would add about 1 million jobs. These jobs can be created all across the country, not just in the few states that happen to have coal, oil, or natural gas reserves. These jobs can scale quickly and they can also be targeted toward people hit especially hard, including those in low- and moderate-income communities.

  1. Tell policymakers that advanced energy saves customers money. Not only can we put people back to work, but advanced energy helps homes and businesses become more economically resilient by lowering energy costs. For families subject to stay-at-home orders, this can be particularly important as home energy use rises. 
  2. Tell policymakers not to give up on long-term goals. In some states, including New York, Pennsylvania and Connecticut, petitions were filed at state utility commissions requesting a halt to the collection of funds from utility customers to support demand side management and renewable energy programs. The argument is that these funds should stay in the pockets of customers, but we would argue that commissions should look for other options to provide rate relief, rather than hamstringing the programs that provide savings. Demand-size management measures, for instance, can provide several dollars of benefits for every dollar spent, not to mention that spending the money now can help keep people working where it is safe to do so.

Here, on the other hand, are examples of two states pressing forward: New York State, by far the hardest hit state in the country, included comprehensive siting reform in the budget it passed in early April, in order to address significant challenges with renewable energy project permitting. And the Massachusetts Department of Energy Resources recently issued an order doubling the state’s solar target, from 1,600 MW to 3,200 MW, while also increasing the incentive for public entity projects and creating a set-aside for low-income projects.

  1. Take this moment as an opportunity to innovate. Current constraints are forcing all industries to get creative. I’m convinced that this will lead to innovations that lower costs and improve product and service delivery, even after things return to normal. If you can see your doctor on FaceTime or Zoom, you should be able to do the same thing with, for example, solar assessments, energy audits, inspections, and even the installation of some energy efficiency measures, where a contractor can have materials delivered and then walk the homeowner through installation via video.
  2. Be prepared for people to kick us while we are down. Recently, a group called the New England Ratepayers Association filed a petition at FERC that, if granted, would end net metering as we know it. They’re asking FERC to declare that any electricity exported from behind a customer meter be subject to federal jurisdiction as a wholesale transaction and covered by PURPA or the Federal Power Act. This would have a direct impact on rooftop solar, but could also have implications for all distributed energy resources. (See AEE’s recent webinar on the topic.) My understanding is that this is not a new argument, but the timing of the petition doesn’t seem random.
  3. Look for evidence from the current health crisis that bolsters the case for utility regulatory reform. AEE has been making the case for a few years now that the utility business model, which has served us well for many years but is built on deploying large amounts of capital in long-lived assets, is increasingly out of step with where technology is taking us. We support an evolving role for utilities that provides them with other types of earnings opportunities beyond a return on capital. Michigan is one of several states that is exploring this, with its MI Power Grid process continuing to move forward, albeit by teleconference rather than in-person meetings. Demand shocks that drive down consumption or cause rapid shifts in consumption patterns, as the current pandemic is doing, with millions of people working from home instead of at the office, is exposing further issues with the cost-of-service business model. While utilities are taking appropriate steps to address near-term financial hardship among their customers, the cost-of-service model offers limited flexibility overall to respond to these types of changes. Rather, the better aligned the utility business model is with state policy goals and customer expectations, the more responsive it will be to change – and the better it will be for utilities, advanced energy companies and consumers alike.

To those of us steeped in the technologies, businesses, and economics of advanced energy, its value in customer savings, job creation, and economic growth is clear and compelling. But it’s up to us to make sure that this value does not get lost in the COVID-19 shuffle. Advanced energy can and should be a vital component of economic recovery, but it will be only if we speak up.

This blog post is based on remarks given at a virtual conference hosted by AEE state partner Michigan Energy Innovation Business Council in April.  

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Topics: 21st Century Electricity System, Advanced Energy Employment