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March 30, 2016

The Utilities Model Is Transforming - Power To The Consumer

Posted by Ron Thompson (View Profile | View All Posts) at 7:05 AM

The Utilities Model Is Transforming - Power To The Consumer

Fact: The electrical grid in the United States experiences more blackouts than that of any other developed nation. Much of the physical equipment on our grids has aged to the point of obsolescence. And most industry experts would agree that the American utilities industry has reached a critical point. The message is clear: Update the infrastructure now or face serious consequences. At the same time, utilities are also experiencing a transformation to their business models (some of which, like the grids themselves, are more than 100 years old). Green energy sources, referred to as Distributed Energy Resources, are turning the centralized power generation and distribution model inside out.

The good news for the electrical grid in the United States is that for the first time in a long time, organizations and the government are coming together to make significant investments in infrastructure. Government subsidies such as the American Recovery & Reinvestment Act (ARRA) of 2009 have provided US$ 4.5 billion for use in grid upgrades. But, that's barely a drop in the bucket compared to the infrastructure investments of other countries. Still, such investments will not only improve and upgrade the physical infrastructure in the United States, but will also better enable and optimize a 'smart grid' that can recognize, circumvent, and even prevent problems before they occur. Ultimately, smart infrastructure will improve the reliability and resiliency of our power grid.

Importantly, the Smart Grid will interface with and benefit consumers via Smart Meters and Home Area Networks (HAN). HAN's, for example, have the potential to be highly advantageous to the consumer. Consumers will be able to see near real-time energy use information, but more importantly, be able to take advantage of 'time-of-use' pricing. For example, appliances that consume a lot of energy such as washers and driers and water heaters can automatically be set to operate during low-cost periods, reducing the cost to the consumer. This places control in the hands of the consumer. But the benefits of the smart grid and smart meter are not limited to just the consumer. True, the consumer will have more control over power usage with the ability to run high consumption appliances during low-cost energy periods, but utilities should also benefit through better asset utilization and power management by seeing real-time demand spikes and potential grid failures. The result is that the companies can prevent blackouts before they occur and optimize power generation based on actual demand.

Distributed energy resources, demand/response (DR), digital customer connections, net metering, and the Internet of Things are all here to stay. Business models have to adjust to survive in this rapidly evolving landscape. That's exactly why utilities are among the leaders in IoT adoption. It's the convergence of several factors driven by the need for optimization of a two-way information exchange, improved asset performance, optimized energy consumption, and more reliable and resilient energy supply. Even today, the IoT is helping to prevent outages caused by infrastructure failures, employing renewable sources, reducing carbon emissions, improving operational efficiency, and transforming the user experience.

The transformation is occurring because the fundamental business model is changing. Much like the impact that cellular technology had on the telecommunications industry 20 years ago, renewable energy and the smart grid are transforming utilities. Stringent regulations regarding carbon dioxide emissions and the mandatory employment of renewables into the energy portfolio are forcing new behaviors. The question remains whether most utilities, some more than a century old, have the ability to adjust and adapt quickly to the new and evolving world order of energy. 

The U.S. Energy Information Administration estimates that American consumers will use nonrenewable fuels to meet most of their energy needs through 2040. Granted, we are a very long way from an entire metropolitan area being serviced completely by 'green' energy. Today, roughly 10 percent of electric energy is generated from renewable sources. Although renewables will eventually become the lion's share of total power generation, it will take place incrementally over the next two to three decades. But that transformation, however slow it might seem, will be worth the wait.

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