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Making a case for Utility Transformation

“I just returned from Houston and my friend got a message on her cell phone that the power was out at their house, but that it would be back on in 2 hours, so we kept playing tennis.  When she checked the app, she also showed me her car was only charged 80% but it was ok, because she was using her solar cells to charge it and it would be completed in 3 hours.  She smiled and said she sold $75 worth of power last month back to her retailer and it paid for lunch today.  She said her electricity bill now only includes a connection charge unless she does her clothes washing and baking on the same day.  I am calling my utility to see what they can provide.”[1]

Progress at the distribution level was sparse and sporadic until the term “Smart Grid” was coined sometime in the early 2000s. Then, it exploded. Smart Grid gave birth to new terms and technologies called distribution automation, energy storage, distributed energy, microgrids, smart homes, data analytics, and so on. In addition, state and federal mandates are influencing DER penetrations that are accelerating on a year-over-year basis. The classic electro-mechanical meter installed at the home is now being replaced by an electronic smart meter that has a lifetime of about 5-10 years. More electric cars are coming to the marketplace. The solar roof is coming, as are other new technologies such as nanogrids, which are integrating all the devices at the premises.

For the electric utility, this is a tough place to stand because everything under them is shifting. Distributed energy allows the customer to produce energy and either use it for themselves or sell it back to the utility. Storage allows anyone to store energy when it is plentiful, cheap, and release it when it is not. Microgrids allow a group of homes, offices or industries to ring-fence themselves and manage their own electric needs whether still connected to the electric grid or not. Electric vehicles are becoming more relevant, bringing a completely new type of load to the electric grid; a life-saver to the declining power consumption faced by most utilities. Homes and buildings are becoming smarter thereby allowing for the control of their consumption and generation if available. And lastly, a new genre of automaton is becoming available enabling improved sensing and control of everything in the grid and beyond-the-meter.

There are many questions that are getting asked. For example, how should the modern utility respond when these conditions exist:

  • DERs become more viable in terms of cost, performance, reliability and come with increased levels of dispatchability. 
  • The price of storage comes down to a level that when combined with DERs, allows customers, aggregators and/or the incumbent utility to deliver energy where needed and when needed along different parts of the energy value chain.
  • Distribution Automation supported by adequate communications and decision support mechanisms allows various stakeholders both within the utility and outside a full suite of situational awareness tools enabling the entire value chain to work as one entity.
  • Microgrids are formed when parts of the utility spin off into their own semi-independent entities and interact with the incumbent utility either during steady-state or emergency situations.
  • Electric transportation takes on critical mass in terms of percentage penetration requiring an extensive network of charging stations paralleling the existing gas station network in urban, suburban and rural territories.
  • Homes and buildings become truly smart with nanogrid-like controls performed in a cost-effective manner with increased level of automation, connecting over the Cloud and reducing the need for direct customer involvement.

Moving on from technical changes to the business model changes, how should the modern utility respond when these circumstances exist:

  • A New York REV-based (or similar) retail market is required to be established in their franchise territory, which in turn could force the distribution services portion of the utility to unbundle. 
  • Aggregators aggressively enter the marketplace and take customers away from the utility.

While this is not the entire set of scenarios that may appear on the utility’s horizon, this is a good enough subset that should be on the mind of every utility executive, personnel and, also, on the minds of every person who is involved in delivering products and services to the utility industry.

Over the last 10-15 years or so, as these technologies were being rolled out and maturing, the utility industry has stayed the same. Utilities are still for most intents and purposes regulated monopolies, designated as the franchise entity that will deliver power to the customer.

However, this is not sustainable in the long term. Key questions arise -

  • What is the role of the utility in the future?
  • Does the utility go by the wayside and cease to exist?  Or
  • Does the utility succeed, and if so in what form?

Transformation is not new, nor is it unique to the electric utility industry. It is not even an option. Examples from other industries have been provided showing both successes and failures. One only needs to look at historical companies like Kodak, Xerox, and AT&T/Ma Bell, all of whom did not transform in time, which ultimately led to either their demise or loss of market share. Utilities were immune to these changes for a long time, but if the events of the last 20+ years and the forecasted changes over the next couple of decades are any indication, it is all going to change.

Utilities need to learn from companies that have survived and thrived despite intense competition, to compete with the new and often much nimbler companies just appearing on the horizon. Utilities also need to learn from the mistakes of companies that did not survive to ensure they do not make the same mistakes

Dr. Vadari’s new book – Smart Grid Redefined: Transformation of the Electric Utility is a practical resource that guides professionals in the evolution of the Smart Grid and offers insight into distribution automation, storage, and microgrid. The book highlights the journey to a transformed electric utility, provides solid examples, and includes real-world case studies. Readers find guidance on new energy storage solutions and electric value chain disruptors. Professionals learn how to overcome challenges related to integrating supply and demand diversity.

The book explains how new technologies impact the day-to-day operations of a utility and how these technologies can transform the normal functioning of the utility. Discussions are provided about how a transformed utility can be a springboard to a smart city. Professionals will be able to apply the strategies defines in this resource to guide them to success in the field. This book provides the roadmap to the utility of the future and provides a vision for how utilities can thrive in their new environment.

 

[1] Case credit to Charles Filewych, CEO, Smart Grid Interconnect. Used here with permission

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