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2018 STRATEGIC DIRECTIONS:

Electric Report

The New Energy Economy

The energy ecosystem is changing, driven by the advent of distributed clean energy, increased competition from new technologies and service providers, the evolving expectations of customers, and new opportunities for serving those customers. As the traditional business model changes, utilities are seeking new opportunities for revenue as they establish themselves as the “Preferred Energy Partner.”

But getting there is another story, requiring a comprehensive category of innovative products and services that will define the future of revenue generation in the energy space. Today, opportunities appear limitless, enabled by renewable technologies, enhanced connectivity behind/beyond the meter, and mobileoptimized products and services.

The questions that electric utilities should ask themselves are not new, but they are taking on a heightened sense of impact as utilities enter a more competitive retail market:

  • Do you have a clear roadmap for how your organization will grow earnings?
  • What is your strategy for addressing potential competition?
  • What are your existing market solutions lacking?
  • Is your organization well-positioned to explore new/alternative business models?
  • What value does your organization put on innovation?

The balance between highly reliable service and innovation products is an ever-present reality for both investor owned and municipal utilities. 

The answers are complex and multifaceted. Reliability and resilience still are the cornerstones of the industry and top of mind for all customer classes. Natural disasters regularly serve as compelling events and constant reminders of how delicate our critical infrastructure can be — not to mention the security-based risk, both cyber and physical that are constantly in the back of all our minds — in this hyper-connected world we live in.

There isn’t a technology “silver bullet” to remedy what the power industry is facing, but as traditional infrastructure is replaced or hardened and the Internet of Things (IoT) solutions residing at grid edge becomes closer to scalable reality, a final consideration tempers the pace of change - cost.

The balance, or tug of war, between highly reliable service and innovation products (that are costeffective and perceived as high value by both customers and regulators) is an ever-present reality for both investor-owned and municipal utilities. No one wants to see their electric bill increase, and many customers make rational decisions to install solar and batteries, and to participate in demand-side management or energy efficiency programs to mitigate these costs.

But as more customers move toward adopting distributed generation, the issue of who should bear the cost of maintaining central generation, transmission and distribution becomes an even greater debate. Most customers still rely on a traditional utility to serve at least a portion of their daily energy demand, and nearly all require their utility to serve as a provider of last resort.

This means very little critical infrastructure can truly be retired — quite the opposite really. As more advanced and emerging technology comes online, the grid must evolve to handle the changing load conditions with a level of intelligence not expected even a decade ago. This means that utility and regulators must work together to design the following rate structures that reward and mirror the cost associated with the time of demand: fixed charges that fairly reflect the level of service a customer requires; and incentives to support customers’ sustainability goals.

Hastened by the release of 2018's crop of electric vehicles, utilities need to ensure enough infrastructure (and grid activity) is available to support this growing network of vehicles — not only for today's fleets, but the fleets of tomorrow.

But the trick is to accomplish this without shifting undue burden to the utility, which relies heavily on the utility’s ability to change the very core of its business, becoming an agile market operator rather a highly regulated monopoly.

These themes, and many more, are explored in this year’s report including:

  • The Future of Energy

  • Integrating Renewables

  • Grid Mod Progresses, But Gaps Remain

  • Non-Traditional Clients Impact the Grid

  • Microgrids Enable Distributed Energy Resources

  • Energy Storage and Natural Gas

  • Energy Storage Electrifies Renewables

  • Utilities Work to Integrate Electric Vehicles

  • The New Power Grid

  • A New Approach to Capital

  • Combined Heat and Power Offers Opportunity

  • Construction Gets Innovative

Conclusion

Plunging costs of solar power and growing concerns of climate change are inspiring ranks of the largest private and Fortune 500 companies to pursue aggressive renewable energy goals for sustainability, cost effectiveness and resiliency. This has left utilities with the sobering question of whether to significantly invest in green infrastructure to keep these large customers or watch large, rate-paying customers defect, taking considerable revenues with them. In this industry, which has long been viewed as moving at a glacial pace, such pressures should be a pressing clarion call for engagement between utilities and the regulators whose constructs often lag behind advances in technology and customer expectations.

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