Extreme Heat Forces Commercial and Industrial Enterprises to Demand Diversified Energy Strategies

The world is breaking heat records daily, positing questions about which fuel sources are the most reliable for commercial and industrial companies. And Texas may be ground zero — a state overheating in the summer and freezing in the winter, stressing its grid and causing blackouts.

This summer, the heroes have been solar power and battery storage. Indeed, clean energy provides nearly a quarter of Texas’ electricity, making it a national leader. But this is happening in a state where fossil fuels dominate the economy and have more political leverage.

“Just because you had a firm contract in place didn’t mean that your gas was delivered,” says Robert Gee, President, Gee Strategies Group LLC, during a panel discussion hosted by the United States Energy Association. “So there was no certainty of receiving gas, even with a firm arrangement. We don’t want to go through another power outage where gas fails to deliver for a third winter season.”

Forbes reports that frozen wells and pipes in Texas caused gas production to fall by 45%.

And this summer, extreme heat is testing its system too. Reuters reports that the Electric Reliability Council of Texas said power use reached 80,828 megawatts (MW) at 6 p.m. in late June. That exceeds the grid’s previous record of 80,148 MW set on July 20, 2022.

How can distributed energy resources such as onsite generation, battery storage, and microgrids help the fight against weather extremes? It’s a way to alleviate strain on the primary grid while using clean energy and ensuring reliability. And utility regulators are laying the groundwork for continued growth, with California’s system operator calling distributed energy resources “absolutely critical.”

Take Portland, Oregon, which suffered a wildfire in 2021 that left 200,000 without power for a prolonged period: The Portland General Electric Company created a pilot project to deploy batteries. At the same time, its customers provide the onsite power generation and microgrids — potentially as much as 39 MW of capacity, enough to fuel 31,000 homes. The need is urgent as recent heatwaves have reached 116 degrees Fahrenheit — one that led to 500 deaths in that swath of the United States and Canada.

“A Texas grid supplied predominantly by wind, solar, and energy storage would perform better than the existing gas-led system — particularly if the state built new transmission connections with neighboring regions to share resources as weather systems move across the continent,” the Forbes story quotes Energy Innovation.

Texas teaches us that it is unwise to rely on one energy source. While distributed energy resources can operate independently of the primary grid, they can also be used as backup power — to kick on when the power turns off. Consumers could also send that electricity back to their utility and earn money. Utilities benefit as well by avoiding wear and tear on their grids.

Guidehouse Insights says the global shift from centralized to distributed assets is underway. In 2020, centralized generation totaled more than 200,000 MW, while decentralized generation came in at slightly less than 200,000 MW. The decentralized generation edged ahead of the centralized generation in capacity additions a year later. The differences will get even more pronounced: by 2030, decentralized generation will total more than 500,000 MW of capacity, while centralized generation will total about 280,000 MW.

Natural gas will remain a staple in the home-heating business and be used to firm up renewable resources. It makes up 40% of the electricity portfolio and has replaced coal because it releases about half the emissions when burned in a power plant. Moreover, heavy industry uses combined heat and power at its facilities — a technology that recycles wasted heat. That has a 90% efficiency rate — the total energy generated from each unit of fuel input. The waste heat from the natural gas engines is captured and reused.

Wind and solar make up 10%, although their outlook is much brighter because costs are nosediving. Nuclear energy makes up 19% of the country’s electricity composition while representing 60% of its carbon-free generation.

“We have the infrastructure to store and transport significant amounts of energy when consumers need it most — on those hottest and coldest days of the year,” says Richard Meyer, Vice President, Markets and Analysis, American Gas Association, during the energy panel. “That means that natural gas and the gas infrastructure will continue to be a vital part of our energy future, especially as we plan pathways towards decarbonization and even ambitious net-zero goals.”

It’s easy for policymakers to politicize energy shortages during extreme weather events. But the energy and environmental managers are interested in reliability and sustainability, meaning that utilities must maintain a diversified fuel strategy comprised of natural gas, renewables, and distributed energy resources.