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Six Perspectives on the Fate of Utilities

Fate of Utilities

By Stephen Lacey and Andrew Mulherkar

Over the last year, Greentech Media’s coverage of the future of utilities has ramped up significantly. The coverage comes not because we’re obsessed with the demise of utilities, but because the utility industry itself is grappling with how to manage the ongoing surge in distributed energy. 

Expect a lot more on this topic as higher penetrations of efficiency and distributed energy start creating more conflict — and enormous opportunities for those positioned to take advantage. For now, here are some of our best recent pieces on the fate of utilities. The range of views represented is very diverse.

1. Energy analyst Chris Nelder asked whether utilities can survive the energy transition. After the Edison Electric Institute (EEI) published its landmark report on the future of the utility industry, Nelder wrote a piece questioning the survival of many power companies. Pointing to the falling costs of distributed generation and rising rates of demand response and efficiency participation, he concluded, “Some utilities will navigate the transformation successfully, while others will fight it tooth and nail until they die.”

2. Peter Kind, author of the EEI report, responded to Nelder’s analysis by countering that the utility industry will survive the energy transition with better regulatory policy. “They recognize the value that some of these resources can bring and, therefore, are leaders in deploying them and in adapting the electric grid to better integrate them,” wrote Kind. “What needs fixing is not the utility business model, but rather the regulatory model.”

3. Haresh Patel, CEO of Mercatus, illustrated why some believe the “utility is dead” because of distributed solar. Although those comments seem a little premature, Patel explained that “the majority of utilities we’ve spoken with seem to be in denial, akin to deer caught in the headlights” when it comes to solar — a statement that directly contradicts analysis from EEI. 

4. Does recent history provide any indication of the utility industry’s fate? Richard Caperton, managing director of energy at the Center for American Progress, believes so. In a recent episode of the Energy Gang, Caperton describes how a “death spiral” in the telecom industry may repeat itself in the electric system. We also covered his report on the telecom-utility connection here.

5. Greentech Media CEO Scott Clavenna also explored the utility-telecom comparison. He doesn’t believe that there’s as much to learn from the telecom experience as some claim. “It’s hard for me to imagine, despite plenty of writing on the topic, that consumers actually want more from an energy service provider other than the basics — lower prices and reliability.” 

6. As dire as the warnings sound, utilities aren’t out of options — and they’re certainly not at a point where they need to pull down their infrastructure. A brand-new coalition, America’s Power Plan, offered three ways to revise the “social compact between utilities, regulators and the public” and prepare the industry for when that does happen. With built-in flexibility, argued the authors, utilities can begin to reimagine their role in delivering electricity services.

greentech mediaGreentech Media (GTM) produces industry-leading news, research, and conferences in the business-to-business greentech market. Our coverage areas include solar, smart grid, energy efficiency, wind, and other non-incumbent energy markets. For more information, visit: greentechmedia.com , follow us on twitter: @greentechmedia, or like us on Facebook: facebook.com/greentechmedia.

Stephen Lacey's picture

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Discussions

Josh Nilsen's picture
Josh Nilsen on Oct 4, 2013 8:50 pm GMT

The connection between generation and distribution will unhinge.  We’ll still need utilities to get the electricity around, not so much on generating said electricity.

Utilities could also potentially become even larger than they are now.  The generation assets will go down but the distribution could skyrocket up to continent sized grids vs. the regional grids we have now.  Certain utilities that just refuse to adapt will die and become absorbed by others.

Bob Meinetz's picture
Bob Meinetz on Oct 4, 2013 10:39 pm GMT

Stephen, it’s comical to hear Haresh Patel, representing less than 1% of American power generation, declare that the other 99% is dead – and that its reps are “in denial, akin to deer caught in the headlights”.

Er, ok.

Hopefully the religious fervor of the Church of Renewables won’t distract him when his utility bill comes due, or he won’t be able to post these dramatic pronouncements.


Nathan Wilson's picture
Nathan Wilson on Oct 5, 2013 9:32 pm GMT

Renewable advocacy groups like America’s Power Plan like to throw out terms like “ built-in flexibility”.  The ugly truth is that when solar and wind are used in medium penetration (20-40%) of grid energy, a lot of flexible generation is required (much more than the US’s meager hydro can supply).  Batteries cannot compete in cost with fossil fuel, and there are no breakthroughs on the horizon that are likely to change this.  In other words, by demanding “flexible generation”, we are effectively demanding that utilities lock-in fossil fuel for the majority of our electricity.

We should instead demand that utilities stop using fossil fuel.  The same technologies that are required to used variable renewables in a 100% renewable grid can also be used to accomodate renewables in a nuclear-dominated grid.  Nuclear can be a bridge fuel to a renewable future, and it is certainly more of a bridge fuel to a non-fossil future than “flexible generation” could ever be.

We know from the solar industry statistics that ground-mounted utility-scale solar is half the price of rooftop.  And it is clear from recent advances in high temperature liquid metal batteries that utility-scale batteries will be cheaper than residential.  The emphasis on distributed generation is just a way to mislead the public about the economics of solar.  Putting solar on residential rooftops instead of at utility sites makes it cost more for society, increases the fossil fuel lock-in by impeding use of batteries, and economically ruines utilities by concealing the true cost and coat-tailing on pricing plans that were meant to incentivize efficiency and conservation (i.e. allocating fixed costs on a per kWh basis, instead of per house).

Mike V's picture
Mike V on Oct 6, 2013 1:13 am GMT

 

People need to get a grip on just how much energy is needed to replace fossil fuel. Counting all energy (electrical, heating, transportation, …) the average American uses about 250 kWh per day. The idea of generating and distributing this amount of energy without utilities and a national grid is ridiculous.

Paul O's picture
Paul O on Oct 6, 2013 9:52 pm GMT

This is a Fantasy, it would have been entertaining if politicians were not actually listening to and believing some of it.

Just to illustrate, what will the folks with distributed solar do at nights, at dawn, at dusk, in snow dark winter days, etc, if there were no utiliies?

Nathan Wilson's picture
Nathan Wilson on Oct 6, 2013 9:36 pm GMT

Josh, the problem is not that utilities are unwilling to adapt to a new roll transporting electricity instead of generating it (in fact, many have already done this in response to degulation – which was a big win for the merchant generators owning fossil fuel fired plants).

The problem is that government regulators have been giving-in to demands from solar energy lobbyist to create billing plans under which owners of rooftop solar do not have to pay utilities for services like power transmission, line maintainance, and energy time-shifting (e.g. “net-metering”). 

The common theme is that regulators are spending too much time listening to industry lobbyist (fossil fuel and renewable), and not enough time talking to the experts at the utility (about how to do what’s best for the general public).

Bob Meinetz's picture
Bob Meinetz on Oct 6, 2013 11:47 pm GMT

Quite right, Paul. I urge all people advocating distributed solar to give it a try sometime, 100% off the grid.To spread their wings, and fly.

There will always be rugged individualists (currently about 1 in 3,000 Americans) who are content to live that way, or do so out of necessity. Many rely on firing up diesel generators when the electricity runs out – more than a little extravagant from a pollution standpoint.

Most will be in for a rude awakening.

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