Organizations have traditionally had a choice on how to power operations: Make the transition to cleaner energy, or continue business as usual. The decision to switch how companies power their operations is a bit of a gamble. It’s scary to try new things, and traditionally there are greater risks in trying new things than staying with a stable, if not perfect, status quo.
My prediction for 2023: We are entering an era where the choices of the past are no longer an option. Cheap, reliable fossil fuel generation is no longer a given. The choice instead is to actively pick your energy future, or be subject to volatile markets and an unpredictable climate.
Fossil fuels are unpredictable and volatile
This time last year, few people would have predicted Russia’s invasion of Ukraine and the profound, cascading energy crisis that followed. The conflict is accelerating energy trends already in motion, peeling back the assumption that fossil fuels are inherently more reliable than weather-dependent clean energy sources. It turns out, fossil fuels can be just as intermittent as clean energy sources such as wind and solar: If we have no gas, we have no gas.
The difference between the resilience of renewable energy and fossil fuels is a matter of infrastructure that ensures delivery when we need it — not the technology itself. The Ukrainian war is an acute invitation to decouple energy systems from global politics.
Companies are feeling the effects of gas price volatility, making it difficult to plan and budget for the future. Increasingly, long-term power purchase agreements (PPAs) from low-cost, reliable sources such as wind and solar are becoming a more attractive option for price certainty.
Of course, last year we saw higher prices for PPAs for the first time, due to supply chain disruptions and increased demand. But at the same time, there have been higher prices for incumbent energy resources. Together these indicate the unprecedented energy future we’re entering, and the increased value of investing in long-term stability.
Climate impacts are here
The past year was ravaged by climate disasters. Heat waves killed thousands, floods from glacial melts devastated Pakistan, and the energy crisis across Europe significantly raised the price of living, leaving some families with the choice of turning on the heat or purchasing food.
In the midst of these crises, headlines broke through illuminating the value of distributed energy resources keeping communities connected. When Hurricane Ian ravaged Florida’s grid this year, one town powered by solar energy was able to keep the lights on.
Increasingly, it appears that a failure to shore up a community’s energy resilience is leading to real health and safety impacts. Relying on past stability as an indication of the future is no longer an option, and those that fail to act now will be forced to respond when the unpredictable hits.
Solutions are here and incentives are flowing
While solar and wind have been cheaper on a levelized cost basis for several years, their intermittent nature capped the depth of decarbonization they could offer on their own. In the last year, we saw advances in other technologies, including geothermal and fusion, that fill out the suite of solutions needed to drive true decarbonization. In addition, more software and services are emerging to help companies and communities get closer to 24/7 carbon free energy, offering options for load shifting and back-up power solutions.
Meanwhile, federal climate policy is greasing the skids, offering attractive incentives to boost investment in key technologies and deployments to support companies and communities in the transition. These span from investment credit for zero carbon energy resources to supporting retooling factories to become more efficient. As a result, transitions that may have seemed prohibitively expensive may now have financial and technical support.
The time for “energy as usual” has passed. Organizations that want to thrive in the future must be proactive in choosing their energy future and take advantage of the solutions and incentives available to them. Those that don’t act may be caught flat-footed by the unpredictable energy future.