Energy Roundtable Q&A

As the energy industry—renewables, transmission and distribution, and oil and gas—continues to evolve, we spoke with four of our leaders in the energy market segment to discuss what they’re seeing in terms of trends, technology, challenges, and the future of the energy industry.

Question 1: What trends are you seeing in the energy industry today?

  • Doug Sullivan (Senior Associate, Northeast Environmental Department Manager): Right now, I’m noticing significant investment in transmission and distribution (T&D) systems for resilience and reliability. In New Jersey, PSE&G is planning to spend $12-$16 billion over the next five years in this critical infrastructure. Climate change and addressing the needs for lower emissions of greenhouse gases is another topic that continues to receive attention, along with renewables.
  • Peter Garvey (Vice President and Business Unit Manager): I agree, we are seeing a general trend toward renewables and also expect domestic energy production of all kinds to continue trending.
  • Joe Estrada (Energy Services Program Manager): Renewable energy and resilience are two major trends in energy. An increasing number of states, municipalities, and private corporations are setting renewable energy goals. As a result, we’re experiencing elevated activity in technologies like roof-top and ground-based solar, electric vehicle charging stations, energy storage, and off-shore wind. Additionally, grid resilience is driving a need toward improvements and modernization to the domestic power grid. A robust electric grid is necessary to protect our homes and critical security assets from severe weather events and security risks. The past two decades saw improvements to power generation through retirement of aging coal assets and construction of higher efficiency, cleaner natural gas coupled with the penetration of renewables. We’re now seeing a shift of utility investment into grid infrastructure improvement projects.
  • David Taylor (Vice President): We continue to see reliability upgrades, security enhancements and CapEx funding across transmission, substation, and distribution categories. The mid-Atlantic has one of the highest linear circuit miles of pipe type (wet cable versus dry cable) underground transmission lines in the country. For a variety of factors it is reasonable to expect more wet underground transmission line replacements/transitions to dry cable. Baltimore, Boston, Chicago, Washington, D.C., and Philadelphia are areas of the country that will likely trend this way over time. In terms of connectivity, we’re hearing utilities ask how they might leverage their existing touch points with clients for additional revenue streams. For example, they already have a direct relationship through billing processes, so how can this be leveraged to sell new or adjacency services not typically offered, such as IoT, all electric vehicle ride sharing, or electric vehicle charging station subscriptions? With the cost of capital at the lowest it’s been in decades, consolidation of regulated infrastructure across utilities will likely continue, i.e. gas, electric, water.

Question 2: What is the current state of the energy industry?

  • Sullivan: Utilities are investing in energy efficiency programs, energy storage and electric vehicles, wind, and the interconnection to address distributed energy resources. Many utilities have divested their old coal generation facilities and replaced with more efficient gas-fired generation (natural gas has been very inexpensive and is expected to remain that way for some time). We should see an increase in the amount of renewable energy produced and added to the grid.
  • Garvey: In off-shore wind (OSW) power generation, we expect the east coast plans to generally stay on track (potential delays at worst) and gain momentum. We are seeing some significant recruitment activity from OSW developers, which indicates intent to continue investment to startup the OSW industry in U.S.
  • Estrada: In 2008, about half of domestic power generation came from coal. Advances in technology led to a boom in natural gas production that yielded low gas pricing. This, in turn, led utilities to replace aging coal units with higher efficiency natural gas combined cycle units. The demand for lower cost natural gas has also resulted in investment into gas distribution pipelines. Renewable generation is also competing with fossil fuels as states and corporations adopt various green initiatives. The price of renewable generation has decreased in the past few years thanks to technological advancements and increased competition.
  • Taylor: Renewable energy sources are being considered and explored, but it all comes down to return on investment and regulatory drivers, including subsidies. Generation investment is being pulled back considerably in favor of investment in the poles and wires, which provide less risk and a more measured rate of return.

Question 3: How has the energy industry changed over the last 10 years?

  • Sullivan: We’ve seen an increase in availability of natural gas, cyber-security concerns, renewables, competition, and the cost of running nuclear plants stressed by low gas prices.
  • Estrada: Ten years ago, the U.S. was heavily reliant on coal for energy production. The abundance of domestic coal as a natural resource made the fuel a very inexpensive option relative to other fuels. Our nation was powered by coal since the early 20th century. However, due to the gas boom of the 2010s and our focus toward lowering carbon emissions, coal-based generation has experienced a significant decrease and was rapidly displaced by lower carbon emitting natural gas and renewables.
  • Taylor: Energy infrastructure has aged and in many instances is at or past its expected life span. We are in the early stages of a once every multi-generation upgrade to existing energy infrastructure. In some respects, over the past 10 years, utilities have become similar to professional management companies by reducing inhouse staff and outsourcing service needs as much as possible. This allows them to slow down and accelerate expenditures much faster than with the same staffing levels in-house. Load growth (limited) and/or movement (due to distributed energy sources) are requiring new poles and wires and in some cases making others less relevant.

Question 4: Where do you see the future of the energy industry in 10, 15, 20 years?

  • Sullivan: With the way things are heading now, I foresee a clean energy transition.
  • Garvey: I predict we’ll be seeing more domestic, more renewables, and more storage.
  • Estrada: I believe we will see a more rapidly increasing penetration of renewables into our grid. Renewable electricity costs will continue to decrease with growing demand. Today, many renewable energy projects only make sense through subsidies. However, the drop in technology cost will eventually offset the tax credits and will ultimately compete with traditional forms of energy on their own. The industry is making advancements in energy storage technology, paving the way in overcoming one of the biggest challenges behind wider scale solar farm buildouts. In addition, we are learning a substantial amount from our European counterparts, making off-shore wind more attractive relative to other forms of generation.
  • Taylor: I believe we will see a few themes over the next decade. First, energy companies will be owned by other entities or vice versa where power or gas is a value-added item coupled with other services. Think, one provider offering power, gas, water, internet, and telecommunications as a bundle or a la carte. Fewer firms will own the energy infrastructure that the commodities travel across/through, with the energy infrastructure being the sought-after item as it provides the highway and connection points. Second, energy companies will begin to aggregate services and connection points that allow them to bill clients for services beyond the transport and delivery of commodities. For example, energy companies will team with/own artificial intelligence and IoT firms to provide services that allow their customers to connect to, acquire, or use fleet vehicles, on-demand electric vehicles, appliances, and smart home products, which can provide consistent revenue sources.

Question 5: How do you see artificial intelligence (AI) influencing the energy industry?

  • Sullivan: It seems like utilities have increased their use of technology to help run their systems, monitor performance, and view consumer habits, including their use of energy. Additionally, advanced metering is becoming more widespread, and this helps utilities and customers manage their use of energy more efficiently.
  • Garvey: One area is likely to be management and enhancement of electric vehicle charging  infrastructure. There is great crossover potential with 5G.
  • Estrada: As electric vehicles become more common, we can leverage the power of information to better manage our energy resources. As more individuals purchase electric vehicles, we can learn from their patterns to optimize the grid at a macro level. Think of an electric vehicle as a mobile battery. On a daily basis, we can count on an individual to commute to work in the morning and return home in the evening. If we apply this concept to thousands or tens of thousands electric vehicles all following a predictable routine, we can determine the locations of these ‘mini-batteries’ with a high level of confidence. Through pattern learning and recognition, we can eventually understand where electric ‘reservoirs’ exist to optimize our grid through allocation of this energy to a demand center or to offset a decrease in solar generation as clouds pass overhead. Similar concepts are currently being applied to electric bus depots. Because the busses run on a pre-determined schedule, a depot of fully charged commercial vehicles could be thought of as a large battery center to be discharged as demand increases without impacting transportation service.
  • Taylor: I can see AI influencing the energy industry in a material way over time, say five to 10 years. For example, as IoT devices become more ubiquitous, I can see AI driving where new investment of infrastructure is needed for security, optimized maintenance plans, and even identifying ways to map back to the utilities for additional revenue streams.

Question 6: How do you see the trend of a resilient and sustainable network influencing energy clients’ spend?

  • Sullivan: As I previously mentioned, utilities are spending significant sums of money to make their systems more resilient, they are investing in energy efficiency programs and addressing issues associated with climate change.
  • Garvey: Power infrastructure needs investment to ensure resilience and adaptability towards renewables and energy storage.
  • Taylor: The provision of a resilient and sustainable energy infrastructure network is a requirement for national security and societal functioning as we know it.  Accordingly, I envision resilience and readiness items will continue to get attention and influence how our energy clients spend going forward.
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  • Joe Estrada
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  • David Taylor Jr.
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