When it comes to wildfire risk, sourcing can play a key role in mitigating the potential for disaster. In recent years, the number of wildfires in California has increased significantly, with many igniting on days that don’t have red flag warnings. This is an immediate concern to be addressed by utilities companies considering that 2022 has been the driest year the area has been in the past 127 years. This significant trend is likely to continue, making it even more critical for utility providers operating in high-fire risk areas to take steps to reduce the potential for ignition. However, creating a comprehensive strategy and plan to minimize fire potential is not a one-step process. Instead, efforts should be focused on implementing a new, multi-step sourcing approach that:
- Ramps up the volume of available resources to complete projects in unprecedented time frames.
- Negotiates unit pricing contracts with partners to support 2022 goals.
- Unitizes vegetation management, transmission pole replacement, overhead system hardening, and other projects to optimize costs.
- Develops a long-term sourcing strategy for undergrounding program and creating deep and lasting partnerships.
Reduce Potential Wildfires
One way that electricity providers can reduce the potential for wildfire damage is by investing in enhanced vegetation management programs. These programs focus on removing trees and other vegetation that pose a high risk of igniting fires and can involve advanced technologies, like drones, to identify areas with a high risk for wildfires.
Plan 2022
1,800
Miles targeted
~ 365,000
Trees targeted
80%
Targeting of our work on the top 20% highest risk circuits
Benefits of EVM work
Reduces potential for ignitions
Improves customer reliability
Our recent success with an electric provider enabled them to ramp up crews rapidly and in unprecedented volume to meet commitments to its community despite shortages of qualified labor. Early in our partnership, Arroyo Strategy helped to rapidly develop and conduct unit price RFP for tree-trimming partners and strategically negotiated labor rates that supported the mass scaling of pre-inspectors. As the multi-year program matured, it enabled the client
to control costs by shifting to a defined scope approach and meet budget challenges. This program enabled the completion of large trenches of work within budget constraints and massive scaling to meet risk-mitigation targets for this project. With a strategy for effective source and right-sizing to ensure a pool of qualified, scalable, and safe partners, the client was able to nearly double annual tree-work and pre-inspection spend.
Undergrounding Distribution Powerlines
As the best long-term solution, utilities are investing in undergrounding projects. This helps prevent wildfires from igniting, as there is no longer a pathway for sparks to travel from the powerlines to the ground, resulting in nearly
a 99% reduction in the risk of a fire igniting. One electric provider has set the ambitious, yet necessary, goal to underground 10,000 miles of powerlines. By 2026, this provider aims to have nearly one-third of this goal met. However, to effectively and successfully complete this project, they have needed to rethink their sourcing to drive down the price of undergrounding from $3.75 million per mile to $2.5 million by 2026. Creative sourcing solutions will be the key to achieving this goal.
Increase in annual
volume from 2021-2022
<est. ~ $650 M
in 2022 spend
Increase in annual
volume from 2021-2026
<$250 M in 2021 to est.
~ $3B/year in 2026
Drive Cost Predictability and Control
At the heart of these strategies to mitigate wildfire risk is a focus on driving cost predictability and control. Strategic sourcing solutions are instrumental in these efforts. For example, utilities can move away from time and equipment-based billing for non-emergency work. This type of billing can often lead to higher costs, as businesses are charged for the time it takes to complete a task, regardless of whether it could have been completed more quickly. Instead, companies should focus on value-based billing, which charges based on the results achieved. This type of billing can help ensure that businesses are only paying for the work that is being done rather than for the time it takes to complete the work. At the same time, having a right-sized pool of reliable and safe contractors can ensure they can meet evolving needs.
Building an effective sourcing strategy contributes to effective wildfire mitigation. Below are several ways that sourcing can shape strategy and empower businesses:
- Competitively priced products and services that maximize your buying power and mitigate risk.
- The correct number and mix of safe, qualified, and scalable partners can deliver quality work while meeting responsibility and sustainability goals.
- Establishing contracts and purchasing vehicles that are easy to administer that protect your interests.
- Get actionable insight into mitigating potential and ongoing market risks, leveraging opportunities, and implementing recommendations.
- Allow space and flexibility in your sourcing strategy to create opportunity for innovation over the program’s lifetime.
Mitigating wildfire is a collaborative effort between utility providers and sourcing partners. It’s also important to note that these efforts don’t always provide immediate results. This means that finding the right sourcing partners will help to build long-term strategies for success.
