Laura Bowler
March 6, 2024
How utilities impact decarbonization plans
Sustainability-focused companies often think about how to decarbonize buildings. But major upgrades to these spaces often require updating the property’s electrical infrastructure, which means working with utilities. In this piece, our expert covers how utilities can impact building decarbonization plans and how to best engage with them to meet decarbonization timelines.
When companies first put together decarbonization plans, they typically focus on three things:
- What actions they need to take.
- When they need to start taking them.
- How much it will cost.
Laying out this information at a high level helps companies make key decisions about implementation, such as how to modify budgets for a particular year and what additional resources to hire.
However, unless companies have been through decarbonization efforts before, it can be difficult to gauge what executing a carbon reduction project really involves. In addition, some projects can involve external stakeholders who influence the cost and timing.
One example of this is utilities. Utilities can significantly impact the cost and timing of decarbonization plans when projects require energy-related infrastructure upgrades. Understanding how utilities can impact these projects and how to successfully engage with them to minimize these impacts is critical to the successful implementation of a decarbonization plan.
When do utilities get involved?
Companies interact with utilities whenever they need to make a significant change to the building’s energy-related infrastructure. This most often happens when companies:
- Upgrade old equipment, requiring new infrastructure to support new code-compliant equipment.
- Electrify a space or add additional equipment (like EV chargers), increasing load to the building’s existing infrastructure.
- Tie in new renewable energy resources, requiring new connections to the grid.
Infrastructure upgrades can vary from basic (panels) to complex upgrades (new transformer or substation). The more complex the upgrade, the more likely it is that the utility will need to be involved.
How do utilities impact a decarbonization plan?
Any upgrade requiring utility involvement typically comes with:
1) Extended timelines
- Utilities are heavily regulated and understaffed, and it’s not uncommon for companies to experience delays waiting for utility permission or installations.
- Although smaller upgrades (such as adding new service capability to the building) may only take a few months, large upgrades can result in significant delays (a year or more).
- Since these upgrades must be completed before the rest of the project can proceed, understanding this timing upfront is critical for planning the entire project.
2) Higher costs
- Small upgrades could cost as little as a few thousand dollars, but significant upgrades (like upgrading a transformer) could reach over $100,000 or more (depending on the size of the building).
- Utilities do not have a consistent way of passing on these charges to customers, particularly in cases where electrical infrastructure may be shared among multiple customers, so the amount a company pays may vary from project to project.
- Since large upgrades can dramatically increase the budget for a project, it’s important to understand any additional costs early on so projects can be appropriately planned for and funded.
Understanding these impacts early allows companies to better plan for required upgrades and achieve their decarbonization goals.
Utilities can significantly impact the cost and timing of decarbonization plans when projects require energy-related infrastructure upgrades. Understanding how utilities can impact these projects and how to successfully engage with them to minimize these impacts is critical to the successful implementation of a decarbonization plan.
So how do companies successfully engage with utilities?
1) Lay out the facts
First, gather as many facts as possible before reaching out to the utility. What types of upgrades will be needed at the facility? Who has responsibility for the equipment that needs to be upgraded? How have upgrades been handled in the past (if applicable)?
Next, define what information / action is needed from the utility. Does the utility just need to give permission to proceed? Is the utility going to be asked to contribute financially to the project? Is the utility responsible for the installation (or will this be handled by a third party)? What information does the utility need to make a decision on the project? Prepare as much supporting information as possible ahead of time and use this information to guide conversations.
2) Engage early and often
Once the preparation is done, establish contact with the utility as soon as possible. Where possible, identify a specific representative from the utility that can be the main point of contact for all engagement. This will help avoid repetitive discussions and inefficient communication.
In these discussions, discuss the project details, roles and responsibilities, required information, etc. In particular, be sure to discuss who will be paying for the upgrades and expected timing for any installations.
It is also important to discuss each group’s objectives for the decarbonization project. Utilities are typically focused on reducing their own operating costs and outage frequency and meeting their own targets / requirements. Where possible, frame the discussion around how specific building decarbonization plans can help utilities achieve their goals. As an illustration, a company that wants to upgrade their transformer could share how this could increase reliability and enable additional efficiency or electrification efforts to support the utility’s decarbonization plans. This will help ensure all parties are committed to the project and moving toward a common goal.
3) Capture lessons learned and update future plans
Document learnings from utility engagement to inform future decarbonization plans. For example, if the utility indicates that transformer upgrades are being scheduled two years out, make sure any requests for these types of upgrades are made as soon as possible to avoid delays on future buildings. Make sure there are no conflicts with existing targets. For instance, if a company plans to electrify a building by 2025, but needs a new transformer to do so, the target is unlikely to be met.
In addition, update any financial estimates with real utility costs to better analyze the business case for future upgrades. Capturing these lessons learned will help improve internal project planning and streamline future conversations with utilities.
What should companies do next?
Companies that need to do major energy-related upgrades should start engaging their local utility as soon as possible to identify potential delays or increases in cost. Proactive engagement is crucial for the successful implementation of decarbonization plans, paving the way for a seamless and effective transition towards more sustainable buildings.
Want to know more?
Laura Bowler
Manager
+1 734-890-6226