Utilities Seek New Identity, Different Revenue Sources in Post-Carbon Economy
From rebranding themselves as “partners” in energy delivery, to renovating legacy infrastructure to accommodate electric vehicle charging, to redirecting into the business of “smart” homes, microgrids, and energy storage, utilities are working overtime to reinvent themselves for a post-carbon world.
The title of a speech at the recent DistribuTech conference by Terence Donnelly, president and COO of Chicago-area utility ComEd, said it all, reports Greentech Media: “We are Not in the Utility Business Anymore.”
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“It isn’t enough to provide a service that’s merely useful,” he said. “We will need to be more to our customers, communities, and stakeholders,” at a time when “our world is changing faster than ever. I think we all feel that change in our bones.”
Paul Hinnenkamp, executive vice-president and COO of New Orleans-based Entergy, echoed Donnelly’s sense of the need for an urgent rewiring of a utility’s raison d’etre. “If this business is going to be disrupted, why don’t we disrupt it ourselves, and be wildly successful doing so?” he asked participants.
As a starting position, writes Greentech, Hinnenkamp recommended that “utilities think of themselves as more than electricity providers,” functioning as suppliers, rather than partners and treating their users as customers, rather than ratepayers by delivering the services they desire.
“How to deliver this vision remains to be seen,” Greentech adds, noting that “if encouraging customers to take advantage of rebates for efficient light bulbs is hard enough for some utilities, an upsell to a suite of home energy services will be even more difficult.”
(Reporter Julian Spector observes that a recent, still-unfolding scandal around Entergy’s approval process for a wildly unpopular gas plant it intends to build outside New Orleans will hardly find citizens there putting out the welcome mat.)
But Greentech points to a series of emerging trends that will “make for a more natural entry point into the home,” like smart residential devices that will “synchronize energy usage with grid price signals”. Those technologies might well open up an opportunity for utilities to “take on a greater role in managing the complexity of dynamic energy rates on behalf of customers”.
And “there’s an even more natural fit with electric vehicles,” whose successful market penetration “requires capital investment in electrical charging infrastructure,” Greentech notes. “If old-school utilities know how to do anything, it’s build infrastructure and deliver electricity.” Which means the rise of EVs could drive new revenue for utilities, as long as competitive market rules don’t become a barrier.
As to models for “newfangled”, non-utilitarian utilities, ComEd’s Bronzeville microgrid might fit the bill as a “resilient community hub for electric mobility, ridesharing, and STEM education.”
Less “newfangled” is an industry-wide rethink of the role of energy efficiency programs in shaping the future of the utility business. “Electricity demand has been largely flat in the U.S. for the past 10 years, in no small part due to electricity efficiency programs funded by utility customers in nearly all states,” analysts write in another recent Greentech Media report. “These programs, in turn, have had a ripple effect on investment across the sector, with impacts on the future of generation, transmission, and distribution system decisions.”
Now it is the programs themselves that are up for retooling, and possibly retirement, with “regional trends [being] a notable variable.”
In the southern U.S., where energy efficiency programs are still thin on the ground, there is still “potential for energy efficiency gains both in terms of spending and savings,” Greentech notes. The question is whether utilities will step up and seize the opportunity.
The Northeast, California, and the Pacific Northwest, by contrast, “have long been leaders on efficiency, with the highest funding levels and biggest savings.” In those jurisdictions, utilities will be asking whether cost-effective savings are tapped out, or whether they can “reap new crops of low-cost efficiency technologies and services”.
The declining cost of electricity generation is also becoming a challenge for some U.S. energy efficiency programs, Greentech states. On the other hand, “more renewable resources could also mean that a new priority for energy efficiency program designs could be to help integrate wind and solar.”