Tune in to Energy in 30, hosted by Joan Collins and David Meisegeier. In this episode, a panel of our experts revisit their top predictions for 2023. You’ll hear from Justin Rodgers, vice president of energy business development, Mike Jung, founding executive director of the ICF Climate Center, and Meredith Derr, senior director of disaster management. Together, they discuss how their predictions regarding the effects of the Inflation Reduction Act (IRA) and Infrastructure Investment and Jobs Act (IIJA) aligned with the actual impacts on the energy industry in 2023.
Topics in today’s episode include:
- The influence of unforeseen global events on market instability and consumer confidence.
- The utilization of IRA and IIJA funding by local governments and nonprofits.
- Strategies and tactics employed by utilities to enhance customer engagement.
- Innovative approaches by GRIP programs in bundling stimulus funds.
- The importance of community partnerships in addressing spending law concerns and meeting priorities.
- The mandatory reporting of active loan opportunities in several states for utilities.
- The success seen by utility teams that collaborate and coordinate.
- Emphasis on holistic and strategic partnership-building for the upcoming round of grant funding.
Full transcript below:
Joan: Hello and welcome to Energy in 30. We'll use the next 30 minutes to explore how utilities and the industry are reacting to forces that are shaping new offerings for customers in order to meet decarbonization goals.
David: If you're a utility manager, consultant, technology provider, or just curious about energy, we hope to push your thinking about the changes that are happening in the energy industry with me, David Meisegeier.
Joan: And me, Joan Collins. Hi, David.
David: Hey, Joan. How are you today?
Joan: I'm doing really well. How are you?
David: I'm good. I'm glad that it's Friday. Happy for our weekend.
Joan: Yeah, I know. It's Friday and we are rolling into the new year; I can't believe we're already in December and wrapping up 2023.
David: It's gone by super fast.
Joan: It has. It's been like a blink, which leads me into what we're doing today, which I can't wait—I've been really looking forward to this for about the past six months. In January, we gathered a panel of experts at ICF to get their top predictions. If you remember, we had a big drum roll regarding the trends that we'd see in 2023 as a result of or related to the Inflation Reduction Act and the Infrastructure Investment and Jobs Act.
David: That's right. And on this episode, we are excited to revisit those predictions and see how we did. So, we welcome back from our January panel, Justin Rodgers, vice president of energy business development, and Mike Jung, who serves as the founding executive director of ICF's Climate Center.
And new to the panel, we're welcoming Meredith Derr, senior director at ICF, who—with her federal policy and program management experience—has a focus on critical infrastructure, specifically in the utility sector. You might notice today that Erica Larson is not on the panel, and that's because she's on maternity leave, but she provided feedback on the outcome of her predictions before she went out, and we will be sharing those along the way.
Joan: And we sent her so many congratulations, and I think, she was excited to share because of the predictions that she made.
So, here we go. Let's see how our experts did, and let's talk about the first category. So category one, drum roll, was grants, tax credits, and direct payments. And Mike, I think we're going to start with you, if that's OK, and your first prediction was really around it being kind of a mixed bag.
And I don't know if you've had a chance to go back and take a look at that, but you used a taxi analogy in your prediction. Would you like to go ahead and tackle that one?
Unforeseen world events inject market instability and impact consumer confidence
Mike: Yeah. Well, first, it's great to be back. Thanks for bringing us all back together again. And Meredith, welcome to the conversation. You're going to do great because I know that you and I have worked together and you have a great perspective on things. So, we're glad to have you in the conversation.
It has definitely been a mixed bag, but in ways that I think none of us could have necessarily have seen coming. World events certainly have continued to play an outsized role in how the implementation of the Inflation Reduction Act and the Bipartisan Infrastructure Law [also known as the Infrastructure Investment and Jobs Act] are taking place.
I think, from a geopolitical perspective, we knew that the Ukraine war was going to be a slog. It continues to have effects on energy prices out there in the marketplace. I don't think anyone saw the Israeli war and the Palestinian situation flaring up in the way that it is right now. And that continues to inject instability into commodity prices, into supply chains, and just into the overall psyche—that sense of confidence and stability that consumers have, that businesses feel. So, those are macro factors in all of this.
I would say that from a grants perspective, as I recall, I made this prediction that we would see direct pay, which is a provision that affects nonprofits, like municipal- and cooperatively owned utilities. It puts them in a position to take advantage of tax credits that used to only be applicable to investor-owned utilities. I made the prediction that that was going to be a great levelizer. I would say that anecdotally, it's still taking a while to unfold. These utilities are small, by and large.
Municipal- and cooperative-owned utilities are relatively small. Generally, they are wires companies and they have not been built to be asset owners and operators from a generation perspective. So, it's taking a while for them to really wrap their heads around what it might mean for them to own and operate generation facilities that feed into their distribution infrastructure. But what I am hearing anecdotally is that it is changing the game, in terms of the competitive landscape.
Previously, they would work through third parties that would assemble owners that were able to take advantage of those tax credits and then they would do a power purchase agreement [PPA] from those consortiums. From what I'm hearing anecdotally, out there in the marketplace, those are becoming more competitive because they will have to be, because now they're going to be competing against these smaller utilities owning and operating their own resources. That's a welcome effect, I think.
Lower prices and more competition generally is a good thing, and I think we're starting to see the beginnings of that out there in the competitive PPA landscape for these smaller utilities.
Another area that I didn't see coming was how competitive the workforce situation was going to become. There simply aren't enough electricians and installers and tradespeople to do all the work that's going to be necessary to rebuild all the infrastructure, much less build new infrastructure.
And so I know having talked with some of these smaller utilities that they'd like to get into the asset-owning business maybe of owning and operating generation, but they can't do it until they find the workforce that can take care of those facilities, maintain them, and operate them. Those workers are in high demand, which is a good thing. The solution to high demand is high demand, right?
Joan: So why don't we move on to Justin. David, do you want to tackle that one?
David: So Justin, you were predicting that utilities will be caught off guard with the amount of funding not going directly to them, although it would be hitting their customers. What would you say the outcome of that is?
Local governments and nonprofits utilizing IRA, IIJA funding
Justin: Yeah. Well, I think, look—first and foremost, it's a good thing I'm not a professional fortune teller. I don't think I really got this one necessarily right. I think it was more that because there's a lot of money from IRA and IIJA going to entities other than utility, going to nonprofits from solar, for instance, which the EPA [Environmental Protection Agency] still, as of now, I believe, has not made the award announcements for those projects. A lot of money is going to local governments and counties through some of the other funding opportunities as well.
And, I thought that that would be further along, I guess, than where we are right now, in terms of some of those awards coming out or those projects being identified. I don't think utilities were caught “off guard,” so to speak, I think they were very focused on specific things, which is probably right. One is in the world that I'm in with utility programs, one of the worlds with utility programs. Utilities were very focused on the IRA HOMES [rebate] and HERO [Home Energy Renovation Opportunity] programs coming to state energy offices as well. They should be, as we see some state energy offices begin to build their plans and look to submit to DOE [Department of Energy] for that funding.
And then I think we also saw a lot of utilities focused on DERs [distributed energy resources] and the proliferation of DERs within their community and becoming more of an active contributor or taking more of an active role in that. We see that through a lot of the GRIP [Grid Resilience and Innovation Partnerships] projects that were funded through the last round as well. So, I would give myself probably a D for this one, if I'm being generous, for myself, but it's been an interesting year nonetheless.
Mike: Justin, I think you're being too hard on yourself. I think that if you look at the numbers, I mean, U.S. solar installations went up by like 53%, I think. New highs! It was like 32 gigs of capacity coming on for solar. And we know that a lot of that wasn't utility-owned and -operated. It was stuff that was going onto rooftops. It was stuff that was outside of their system.
I think ComEd [Commonwealth Edison Company] put out numbers showing that they had, I think, close to 50,000 rooftop solar installations going into their service territory last year, and you compare that to 837 in the year 2016. We're changing orders of magnitudes in terms of what's happening at the grid edge, and I don't think that anyone saw it coming that fast and that furious. I give you a higher grade, Justin.
Justin: I appreciate it. I don't know if they were caught off-guard or maybe our infrastructure isn't necessarily there for it yet, but that's fair. Thank you, Michael.
Joan: Justin, another area that you predicted was around customer engagement. You thought that perhaps that would accelerate.
Justin: And I think that's direction... Oh, sorry, Joan.
Joan: No, I was just... Do you still agree or still think that's the case when you look back at what happened?
Utilities improve customer engagement strategies and tactics
Justin: Yeah, I think that was directionally correct. Anecdotally for us, we've seen utilities across the U.S. procuring more marketing services, including and I think specifically strategies and tactics that have traditionally been more in the B2B realm versus in a monopolistic environment. So that would be stuff like account-based marketing to drive economic growth, either in terms of retaining customers they currently have so they don't lose those big C&I [commercial and industrial] customers or bringing more C&I customers within their territory.
And then additionally, the more advanced MarTech (marketing technology) work that utilities are going after our solutions, an increased interest there. And then, I think, secondly, if you look at the projects DOE funded through GRIP [Grid Resilience and Innovation Program] program, first, I think Meredith can talk more to this potentially, but community benefits was a huge focus area of interest and engaging with disadvantaged community specifically. And then second, many applications—I mean, not all of them, but a lot of them—focused on enabling customers and engaging customers to help manage the grid flexibly.
PECO had a really cool project that got awarded in Southeastern Pennsylvania. As part of that, they're establishing a forum for continuous feedback and dialogue on the project with disadvantaged communities on an ongoing basis, which I think is really great.
Joan: Justin, you introduced a new acronym, GRIP. We haven't talked about that.
GRIP Programs package stimulus funds together in creative ways
Mike: Oh, the Grid Resilience and Innovation Program, I think, is what that stands for. That's a Department of Energy initiative that is a program that pulls together several different pots of money out of the Inflation Reduction Act and Bipartisan Infrastructure Law, I believe, that aims it into something that utilities can apply for multiple pots through one application. I think it's a good example of the U.S. Department of Energy being nimble and being creative.
Because the last thing I think we want is to build new silos, where if you're wanting to implement some new infrastructure or innovation, you have to do five different applications to five different pots of funding. I feel like U.S. DOE has learned a lot of lessons from the American Recovery and Reinvestment Act, ARRA 2009 stimulus, and really found good ways to package these things together in a way that is more user-friendly.
David: That's cool.
Joan: Very cool.
David: So Meredith, you got called out by Justin too. Do you want to weigh in on that?
Community partnerships critical to address spending law concerns and meet priorities
Meredith: I did, absolutely. So it's interesting when you look at the scoring criteria for these projects. Community benefits was only worth 20% of the weighting. But across the board and what we saw DOE select, by far it was the impact on disadvantaged communities, it was the partnerships with community benefits organizations that were really called out as the highlights of these projects. And I think that that's critical not only to meet the overarching priorities of the Bipartisan Infrastructure Law and the Inflation Reduction Act, but to address a lot of the real concerns.
So Mike talked about labor shortages and that being a constraint. Looking at one of the areas of community benefits plans, being that utilities have to put thought and investment into developing a qualified workforce. And looking at training and apprenticeship programs is really going to be critical as we see just the scale of these programs continuing to grow to make sure that there are the labor resources to keep up with that.
David: All right, and I think the next one we're going to do is an Erica prediction where Meredith will answer on her behalf. But the prediction was that with the influx of federal funding, we would see utility commissions pushing their utilities to pursue opportunities so that some of the benefits would be recognized by their constituents and communities. So Meredith, how did we do there?
Several states require utilities to demonstrate and report on active loan opportunities
Meredith: So I think if we're going to stick with that grading system, Erica got an A. So it's really exciting to be here on her behalf to share in the credit for her predictions, but certainly she was spot-on here. Across the board, we're seeing utility commissions have expectations for periodic reporting requirements or particularly have requirements in rate cases that demonstrate that utilities are taking advantage of and actively pursuing grant and loan opportunities to offset the costs to their rate payers.
What Erica has been tracking so far are a couple handful of states across the country, and specifically the District of Columbia, Maryland, Michigan, Minnesota, Missouri, North Carolina, South Carolina, and Virginia have all opened dockets where they're either currently requiring or looking into requiring utilities to be reporting on the funding that they're pursuing.
So it's very important that these utilities do, especially as we're going into the second year of funding, make sure that they're taking advantage of the opportunities that are in front of them because it's just becoming an expectation and ultimately a requirement.
Mike: And I don't know about you guys, but that's suspicious because, I mean, there's no way that she could have guessed that that may lead to exactly that. I think she left suitcases of cash in these different states and made it happen. I'm skeptical.
David: And for those that weren't counting under your fingers, that's nine states. So that's pretty impressive. Wow.
Mike: And not just any old nine states, these are like precedent-setting kinds of states. They're leaders in what they're doing. But no, all jokes aside—I think Erica had her finger on the pulse of understanding that it wasn't enough for these kinds of projects to be technically successful; they needed to succeed in a visible way that was tangible to the communities that the utilities serve. Full credit to Erica for seeing this coming.
Joan: Absolutely. So when we look at category one, David, if you and I were grading it, what are we giving the panel?
David: I'd give a B.
Joan: That's what I thought.
Mike: David, when you started saying “sss,” I thought you were going to say C, and I was like, oh, no, I don't know if I can live with myself with a C, but I'll take a B.
David: I was going between a C and a B, but I was like, you know what? It was so hard to predict any of this stuff.
Joan: This is the point.
David: The fact that we got some of it right puts us up into the B category. Yeah.
Joan: I mean, even a plus (B+).
Justin: Erica pulled us up.
Mike: Yes, she definitely bent the curve.
David: Yeah, but I think you all got some parts that were correct. So I'd give it a solid B now that I reflect on it.
Joan: Agreed. Let's see how we did with category two. All right. This is my favorite area. I think it's just so fun. What we are looking at were resiliency, grid mods, and an industry in flux.
Utilities teams that collaborate and coordinate see success
David: So yes, Justin, this first one goes to you, and your prediction was that utilities who will be most successful over the next five to seven years while this funding is coming out will be those that really have reorganized themselves to better coordinate across their departments. So not be so siloed, but look pervasively as how an organization they can take advantage of some of the funding out there. So how did we do?
Justin: Well, I think my prediction was a five-year prediction, so maybe I'm a little safe in my forecasting abilities here. And I will again ask Meredith to weigh in on this, but I think that we are seeing more and more collaboration across utility teams as they look at getting some of this funding coming out of IRA and IIJA, specifically around the GRIP programs, but elsewhere.
So if you look at a lot of the GRIP projects that were awarded, there was a lot of cross-service or cross-discipline projects, really combining resiliency with demand response, for instance, or demand response and flexible load with customer affordability and more integration between customer programs and the distribution planning side of the house. And we're seeing, I think, more and more of that come up in even conversations with what we're having with utilities where that connection between customer programs and the planning side of the supply side is becoming closer and closer.
So I think, generally, directionally right for me on this, though I give myself a lot longer than a year or two to prove this prediction true, I think. We'll see how it goes, but I think generally everything's going in a direction that was anticipated.
Joan: OK. So David and I are putting it on our calendar. We'll come back to you in another five years.
Justin: Five years.
Mike: Five years from now, we're going to be doing hologram podcasts where we show it virtually. Who knows what the future holds?
Joan: Or AI will just step in and we won't even need to.
Mike: Oh, I want to see what the AI predicts. That's going to be an interesting episode.
David: Meredith, you were trying to get a word in.
Holistic and strategic partnership-building highlighted for next round of grant funding
Meredith: No, thanks. So just to echo, Justin, I think certainly within utility, we were seeing that holistic approach to a project. You weren't competitive if you just took a stack of deferred maintenance projects and tried to put them into a grant. But even going a step further, DOE really had a focus on projects that crossed one entity. So partnerships that were multiple entities working together, things that benefited communities that went across state lines, and also projects that really set a framework to be replicated by others within their region or other regions across the country.
So certainly that, first and foremost, working internally across the utility, but that strategic and meaningful partnership building really came across in the projects that were selected and is even more strongly highlighted in the criteria for the next round of funding for these grants.
David: That's fascinating. I'm all for repeatability, so that's really cool to hear.
Mike: Yeah. Enough with pilots already. Let's just rinse and repeat. Let's scale.
David: Yes. Joan, you're next.
The grid is the most direct way to decarbonize an economy quickly, sustainably, and reliably
Joan: Any other comments on that or do we want to go on to the next prediction? Okay, we're moving forward. OK, so the next one was Mike's. Mike, you talked a lot about this idea of putting a lot of eggs in one basket, being the grid, which on one hand is good since it's the straightest shot to clean energy, you said. But you also noted that it's dependent on a lot of things like climate, weather, disaster, cyber, domestic care.
You went through a list. You went on to talk about how we need to do a good job of connecting those dots between these things like supporting infrastructure, like broadband communication, and investments, and grid modernization, and technologies, etc. I think it'd be really interesting to see how you feel about this now.
Mike: How do I feel about it now? On the one hand, I'm excited. I'm really invigorated because I do believe that the grid, the power grid, is the straightest shot we have towards decarbonizing this economy quickly and sustainably and reliably. If you asked me three years ago even, can we get it done, the economics would've been harder. It would've required some sacrifice in order to decarbonize at the rate and at the scale that we need to.
But today, because prices have fallen in wind and solar and distributed energy resources, battery technologies are becoming more economic and electric vehicles and heat pumps are hitting price points that make them the obvious option, not just the green option, I'm optimistic. I think we can do it. We have the tools, we have the direction, and we have the policy environment that the market can thrive in a decarbonizing United States economy. So on that one hand, I'm really optimistic.
On the other hand, I think we're starting to see the real-world constraints and challenges that happen when you put all your eggs into one basket. I mentioned before, workforce. We're running into the hard limits of how fast can we train a workforce that is largely at this point aging. The silver tsunami is real. People are retiring from the electric industry workforce faster than they're coming in in many places. So we need to get on that and we need to really engage a younger generation into building the future economy.
Supply chain. Heat pumps and EVs are great, but they require a supply chain to be built up very quickly, overnight really, in order for us to reach the scale that demand is asking for. And so again, the answer to high prices is high prices. But sometimes it hurts. I placed an order for a heat pump. It took six months before it could arrive on our shores and get installed, and then it took me another month for the installation company to get around to rolling the truck. It needs to be faster.
It needs to be more user-friendly in that way. That said, I think the way that the legislation was structured in terms of getting cross-functional capabilities, a longer list of eligible kinds of investment types into these projects, and then the way the U.S. DOE has structured programs like GRIP to be interdisciplinary and cross-cutting all bode really well. I think we're doing a good job, I would say, in terms of not reinforcing existing silos, but indeed punching through and creating cross-cutting themes that led us to even more and get more out of the infrastructure that we're building now.
Joan: That's great to hear.
David: We're running out of time, so I'm going to just jump to the last prediction, which was Erica's, and that's that there will be more pressure on states around building electrification. And she predicted that at least one state will further enable building electrification or break down barriers between electrification and energy efficiency.
Joan: We tried to get that state out of her in January and she wouldn't tell.
David: So Meredith, how'd we do?
Meredith: Well, Erica is spot on again. And I guess since I'm in New Jersey, fitting that I'm the one reporting out here. So the New Jersey Board of Public Utilities issued an order giving guidance that what they want to see in the utility's upcoming DSM [demand side management] plans is building electrification. In their last order, they had put off anything on this. But now, over the next three years, they're really specifically endorsing fuel-switching and asking utilities to emphasize building electrification in homes using delivered fuel and gas utilities.
They're being allowed to promote hybrid gas and electric heating systems and district geothermal heating. So she was correct. New Jersey came out and has that push towards electrification.
Mike: Thank you, Erica, for bringing up the curve once again.
Joan: I don't know. I think everyone was pretty on point on that category.
David: Yeah, this one we did much better on.
Joan: But what about new kickers? Let's just open it up as we close out here. What are we missing? What's new? What's coming around the bend in 2024 that our audience should be watching for
2024 will be the year we see action happen
Mike: The next round of GRIP grants. The Grid Resilience and Innovation Program is already opened up, and we are starting to see the rules coming out of Treasury with regard to tax credit qualifications and whatnot. So a lot of what was in legislation is now finally being promulgated into regulation.
And so I think we're going to see an acceleration of things getting built, things getting bought, things getting deployed, and things decarbonizing across America. I think that's going to become faster and faster. So my next prediction for this next year is that the rubber is going to meet the road more and more.
Joan: Oh, I love it.
Justin: I don't disagree with Michael. I think that as we've seen and continue to see, it's more and more virtual power plant projects are going to be enabled in market from utilities. A continuation of what we saw from the recently announced GRIP Projects too is building electrification or beneficial electrification in general is going to continue to take off.
And then I think that we're going to see more and more around gas utilities thinking about renewable natural gas and hydrogen. Not gas utilities necessarily, but I think the fourth thing I would say is I think we're going to see much more geothermal activity coming up, specifically network geothermal.
David: Cool. And Meredith, what do you see?
Meredith: So Mike and Justin have touched a lot on the technical components and merits of what projects are going to be. I think the real differentiators when it comes to what gets funded is going to continue to be community benefits and specifically quantifiable community benefits. So demonstrating a measurable impact to disadvantaged communities, being able to articulate a specific number of jobs that will be created by a particular project, and having those meaningful partnerships, and actually have community benefits agreements executed, not just letters of support.
What we've seen for this year's GRIP funding opportunity announcement is the introduction of the community benefits-specific budget. So that really underscores the importance of carving out an investment for these considerations within the budget of the overall technical solution.
David: So important. Amazing. Well, thank you all, Mike, Justin, Meredith. These predictions were so hard to do in the beginning of the year. I think we did pretty good. Hearing what you're expecting to see next year sounds pretty spot on and insightful. So, thank you all for being on our show again.
Mike: It's been a pleasure. Meredith, for a rookie, you were like MVP. So that was awesome. I'm sure Erica is cooking up her next batch of predictions, which are all going to be A+ again, I'm guessing, with the way she's going. She's batting a thousand. But it's a pleasure. Thanks for bringing us together, and I'm really excited about the work that's happening and the work that ICF is a part of.
We just released a big report on how we're doing in terms of the Inflation Reduction Act and what we need to do in order to meet our goals across decarbonizing this economy. And I think that this is all coming together. The stars are aligning. It's great to be a part of it.
Joan: It really is.
David: Awesome. And if you've enjoyed this conversation as much as we have, we'd sure appreciate you liking, sharing, and even subscribing to our podcast.
Joan: And I just, again, reiterate that I've been in the industry a while and this truly is the most exciting time, and it's so fun to engage with all of you around this. And we're just so looking forward to moving into the new year 2024. We thank you for listening to this podcast. And actually, David, we're moving into our 20th episode in January, which is just... Yeah, such fantastic conversations, and we look forward to all of you joining us for the next episode of Energy in 30.