Strategic Electrification: A Potential Pathway for Load Growth and Decarbonization

In Brief

Leading electrification technologies can enable the delivery of less carbon-intensive electricity supply and can be deployed as tools for reduced environmental impact and cost savings.

Local grid operators, utilities, energy suppliers, technology vendors and manufacturers should collaborate with focus and transparency to maximize the gains and minimize the impacts from strategic electrification.

Electric vehicle growth is expected to be the largest sector of strategic electrification. Vehicles and fleets with larger batteries can provide greater grid balancing services.

Headshot of William Tokash

What is strategic electrification? Why is it an important topic for clean energy stakeholders and how can they capitalize on this trend? In the interview below, William Tokash, a senior analyst for Navigant Research, provides some insights into his recent publication on the concept, and its future path of growth and technological development. Tokash leads the Energy as a Service Research at Navigant Research and publishes on a variety of different energy topics including distributed energy resource (DER) solutions, digital transformations and intelligent grid innovations. In this interview he discusses how the growth in electrification technologies is changing the way that energy sector stakeholders are making economic and environmental decisions. This transcript has been lightly edited.

CEFF: What was Navigant's impetus for this research publication on strategic electrification and how does this work fit into your organization's broader goals? Why this topic and why now?

Tokash: Strategic electrification refers to the multi-sector transformation from fossil-fueled technologies to electric-powered ones, in ways that can be more efficient and less carbon intensive. In this Strategy Insight, we began by defining technologies that comprise strategic electrification, which is often commonly referred to as beneficial electrification. These technologies include transport electrification; air source heat pumps for space heating, cooling and water heating; electric resistance hot water heaters; and industrial electrification solutions. These technologies have matured to the point where they can often be deployed cost-effectively as tools to lower customer costs and reduce environmental impacts—depending on local climate, rates and regulatory factors. They can also enable local grid operators to flexibly reduce the cost and carbon intensity of delivered energy.

CEFF: There is a lot of buzz in the industry about electrification and the internet of things (IoT). How is this report unique and which audience groups will benefit most from this guidance?

Tokash: Navigant Research’s focus on electrification closely aligns with the Electric Power Research Institute’s (EPRI) Beneficial Electrification Framework. This foundation includes transport electrification; air source heat pumps for space heating, cooling and water heating; electric resistance hot water heaters; and industrial electrification solutions. Navigant Research also includes solar and energy storage given that this technology can maximize the on-site use of solar to lower the carbon intensity of the energy supply.  

Navigant Research differs from EPRI in that we include a slightly narrower set of industrial electrification technologies. Navigant’s industrial solutions include electric infrared heaters for curing and drying various coatings, induction heating for surface treating and electric natural gas pipeline compression systems. These technologies often provide greater product quality, safety and cost benefits than natural gas alternatives. Electric fork trucks can also be included in an inventory of industrial electrification technologies.

In this Strategy Insight, Navigant focuses on how technology vendors, utilities and energy suppliers need to work together to offer more customer-facing financing options. There are first cost deployment challenges associated with strategic electrification that need collaboration to overcome. This is particularly important in the commercial and industrial sector.  Many energy users now seek financed solutions that can reduce energy use and greenhouse gas emissions without any capital expenditure.

Although IoT is synergistic with the delivery of strategic electrification technology, it is not the primary focus of this research. Those interested in learning more could benefit from reading Navigant Research's “IoT and the Future of Networked Energy” report.

CEFF: What actionable knowledge can a reader expect to walk away with?

Tokash: There are few clear-cut situations where the deployment of strategic electrification can serve as a grid policy panacea. The benefits from the implementation of strategic electrification globally will vary by climate zone, country and regional policy, and power market factors. Electric utilities, local grid operators, energy suppliers, technology vendors and policymakers need to work closely together. Through collaboration, they can optimize the benefits of strategic electrification and mitigate the risks and costs to customers and non-electric utilities as part of their deployment strategies and business models.  

CEFF: Are there any parallel industries or movements that could help accelerate the growth in electrification?

Tokash: I mentioned EPRI’s beneficial electrification framework as a related effort. The Regulatory Assistance Project (RAP) is also focused on capacity development and awareness. Both organizations promote the consideration of strategic electrification technologies by policymakers.

CEFF: How can energy sector stakeholders achieve synergies with these opportunities?

Tokash: Electric grid operation and regulation is complex. This complexity requires stakeholders to work locally to consider how strategic electrification can be implemented in a meaningful way without unintended consequences. A recent decision by U.S. utilities to publicly support continued incentives for electric vehicles (EVs) is a good demonstration of how this can be accomplished.

CEFF: The report concludes that industry verticals will move towards strategic electrification at varied rates. EV charging optimization is poised as the leader of the pack. Could you expand on what research led you to this prediction?

Tokash: Navigant Research anticipates that the growth of EVs will continue. U.S. utilities increasingly see EV charging needs as a significant long-term load growth opportunity. These factors will drive utilities over time to support vehicle charging solutions that properly manage EV charging impacts to the local grid.

The potential size of the charging needs for EVs in terms of new kWh sales is much larger than the other customer-focused residential and commercial strategic electrification technologies. The chart below is taken from the report. It demonstrates the growth of the EV market as compared to other forms of strategic electrification currently forecasted by Navigant Research.

Graph of Select Electrification Technology Revenue, World Markets: 2018-2027
Select Electrification Technology Revenue, World Markets: 2018-2027

CEFF: As a follow-up question, what are some examples of business vendors that are leading this charge? Does the report include strategy guidance for vendors wishing to maximize on this opportunity?

Tokash: One good example is Southern Company’s Smart Neighborhoods Program in the U.S. Southern Company’s Alabama Power subsidiary is providing distributed energy resources (DER) as part of a residential home construction development. These include solar, battery energy storage and smart home technologies. These DERs will be aggregated to optimize the local grid and improve resiliency. Each home will also be built with high-efficiency heat pumps, further decreasing grid reliance.

Another good utility example is the integration of grid-interactive water heaters by Great River Energy, a generation and transmission company with more than 2.8 GW of generation.  They serve 28 member cooperatives in rural Minnesota and North Dakota. Great River Energy has 110,000 electric resistance water heaters installed in residences that provide two separate grid storage services. One service provides customer savings through price arbitrage. This is accomplished by charging the heaters overnight when there are low electricity prices and limiting day time use. The second program is a demand-response program that uses the electric resistance water heaters to curtail use during times of peak demand. This happens in four- to six-hour blocks up to 30 times per year. Both programs report strong residential customer satisfaction.

CEFF: The report concludes with some guidance for stakeholders going forward. In particular you mention that DER technology stakeholders need to work together to benefit from and support strategic electrification. Are you able to provide some concrete examples of what this looks like?

Tokash: One good area for focus would be load growth generated from charging needs for vehicle electrification and electric vehicle fleets. By working together, these stakeholders can maximize the opportunity and minimize the grid impacts. Electric buses are an interesting segment due primarily to their vehicle use pattern and large size of their batteries. The larger the fleet battery capacity, the higher the capacity at which an EV may be able to provide grid service when the vehicles are not in use. Electric school bus fleets may be particularly well suited due to their long downtimes during school hours. Their batteries can also provide grid services in the evenings when they are off duty.

CEFF: What other guidance is complementary to this piece?  Do you plan to have a follow-up or is there any other research you would recommend to readers who wish to learn more?

Tokash: Navigant Research recently released a new market forecast report that looks at residential heating and cooling technologies titled “Residential Heating and Cooling Innovations.” In addition to our Strategy Insight and other research, the reader can look to the work that EPRI and RAP are doing on opportunities for strategic electrification growth.

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Photo and graph courtesy of Navigant Research.