Fluctuating Electricity Supply and Demand Requires Distribution Co-ops be Steady but Agile
August 2, 2022
The electricity sector no longer lives on a one-way street: U.S. consumers are fundamentally reshaping the electric power industry by demanding clean energy and widely adopting grid-edge technologies. The combination is transforming power supply business models, from generation through distribution.
For local electric distribution cooperatives, that means once predictable consumer electricity demand patterns might soon fluctuate - and more frequently. At the same time, co-ops are also finding that supply-side generation is becoming less flexible given the growth and inherent ebbs and flow of variable renewable sources like wind and solar.
We are going through a period of rapid technological change and the manner in which electric cooperatives have operated in the past will need to change. To successfully navigate the energy future and ensure they remain indispensable community partners for generations to come, co-ops will need to be increasingly nimble and laser-focused on the unique local needs of their consumer-members.— Teri Viswanath, lead power, energy and water economist, CoBank
What Consumers Want
From record-setting heat waves to extreme cold snaps and unusually powerful storms, consumers today are much more exposed to the shortcomings of the legacy grid. And their time without power due to outages has dramatically increased. Five years ago, the average American was without power for four hours per year. Today that’s doubled, as the average annual outage time has swelled to eight hours.
It comes as no surprise, then, that reliability is now chief among consumers’ requirements, along with affordability and environmental sustainability. These three primary drivers together are propelling renewables, and consumers are hastening upstream change. While renewable energy sources currently account for 20% of the U.S. generation mix, by 2035 they could make up 40%.
The historically centralized, one-directional power generation system is also rapidly transforming in response to the emerging technologies consumers are adopting. Rooftop solar panels, residential battery storage, smart thermostats and other connected home devices are creating a two-way flow of energy between suppliers and consumers.
On top of the mix of disruptive forces local cooperatives will have to navigate is electric vehicle adoption, which has now reached a critical tipping point. If the U.S. follows the global trend, 25% of new car sales will be electric by 2025, several years ahead of the consensus timeline estimates. Individual household demand for electricity could increase by 50% based on the charging requirements of a single EV.
The ground is shifting because of the choices consumers are making. And local cooperatives, which sit at the middle of changes occurring both upstream and downstream, will need to adapt to manage those changes successfully.
Communication and alignment with consumer-members has never been more important. The ability to be nimble in order to quickly adapt to the evolving needs of members will enable cooperatives to cement their positions as invaluable partners to their customers and communities.
Teri Viswanath is CoBank’s lead economist for power, energy and water. CoBank electric distribution professionals, including Viswanath and the Beacon Strategic Planning team, have been meeting with cooperative customers across the country and discussing strategies for navigating energy transition.
Disclaimer: The information provided in this report is not intended to be investment, tax, or legal advice and should not be relied upon by recipients for such purposes. The information contained in this report has been compiled from what CoBank regards as reliable sources. However, CoBank does not make any representation or warranty regarding the content, and disclaims any responsibility for the information, materials, third-party opinions, and data included in this report. In no event will CoBank be liable for any decision made or actions taken by any person or persons relying on the information contained in this report.
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