respond when necessary. During the summer of 2022, for example, the Electric Reliability Council of Texas (ERCOT) drew critically close to its constraints as renewable supply sagged, thermal plants tripped, and a heat wave caused a surge in consumer demand. When ERCOT simply asked customers to decrease their usage, usage rapidly fell by as much as 500 megawatts. 8 Providing incentives to customers could yield even more significant benefits. Some utilities offer discounted rates to mitigate costs for lower-income customers, who suffer disproportionately from rising energy bills. Options such as on-bill financing, in which utilities incur the up-front costs and are repaid over time via the customer’s bill, could also be provided to assist with the electrification of households and vehicles, particularly for lower- income households that might not be able to afford the up-front cost even if they would save money over the lifetime of the investment. Innovative products and services can provide options to help mitigate bill challenges. Utilities could provide digital tools to customers, allowing them to assess how different capital investments (such as the purchase of an electric vehicle) would affect their energy bills. Consumers could then manage usage or identify the rate design option that would minimize their bill. Utilities could also offer discounts to customers deploying distributed energy resources (DERs) such as local storage in instances when the DER’s function drives down utility costs. Similarly, governments and utilities could significantly ramp up their efforts to explain what it would take to transition the energy system and maintain it against rising climate challenges. Utilities could communicate the benefits of necessary reliability and resilience investments, which otherwise could go unnoticed by the customer. At the same time,
they could effectively communicate about the drivers of cost increases to help customers understand, prepare for, and adapt to changes. This is not a common muscle for utilities, which for decades have mostly connected with customers when asking them to pay a bill. Marketing and communications will be critical to future success. ACTION AREA 2 Strengthening supply chains to provide stable access to raw materials, components, and skilled labor A more orderly transition faces five potential sources of disruption: volume shortages; price volatility; political, social, or regulatory uncertainty; long lead times; and unreliable quality. Each reflects essential priorities that energy-sector executives would need to evaluate and master on the road to decarbonization. Business leaders and policy makers could mitigate some of the impact of these disruptions by securing the availability of raw materials, scaling up resilient manufacturing of key technologies, and developing and acquiring talent in a tight labor market. (For more detailed context, see sidebar “Strengthening supply chains.”) KEY PRIORITIES Secure availability of raw materials 1. Increase supply sources. Suppliers and miners of raw materials are already busy identifying sources for many of the components that will clearly be in demand. But they also will need to dramatically increase supply in several areas, including lithium for lithium-ion batteries. Lithium demand is expected to grow by at least 25 percent a year, 9 and new technologies such as direct lithium extraction offer enormous potential to help provide new sources of supply. 2. Use advanced analytics. Suppliers are also applying advanced analytics. One start-up company is using this method to identify entirely new deposits of critical metals in Greenland
8 Mitchell Ferman, “Texans asked to conserve energy to protect the power grid for the second time in a week,” Texas Tribune , July 13, 2022. 9 Marcelo Azevedo, Magdalena Baczyńska, Ken Hoffman, and Aleksandra Krauze, “Lithium mining: How new production technologies could fuel the global EV revolution,” McKinsey, April 12, 2022.
Accelerating the journey to net zero
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