The move away from centralized to distributed generation and towards a more customer-centric approach has been gathering momentum over the past years and is now taking root, particularly in the United States, which is very much at the forefront of these developments.
Home generation is rapidly increasing, promoted through feed-in tariffs and novel financing schemes from companies such as SolarCity, and regulatory proceedings such as the Reforming the Energy Vision in New York are under way. [Engerati-Distributed Energy Resource Markets Coming To New York] But it is ageing infrastructure that is the top concern of US utilities currently, along with maintaining reliability and meeting environmental regulation, Black & Veatch has found in its latest industry survey. With these concerns likely to be mirrored elsewhere, others in the top 5 are cybersecurity and the ageing workforce, notably ahead of issues such as long term investment and market structure.
Distributed generation challenge
80% of the utilities in the survey believe that distributed generation, particularly solar photovoltaic (PV), represents a serious challenge to their business. However, with nearly three-quarters reporting that they anticipate or are considering “behind-the-meter” and “distributed grid infrastructure” as potential new investment segments for their company, it appears they are embracing these technologies. Further two-thirds reported that they expect their level of renewable energy generation investments to increase over the next five years, while over a half believe that between 6-10% of all US power generation will come from distributed generation by 2020.
The utilities also see renewables combined with battery storage as the demand response trends that will most affect their business. Nearly two-thirds reported that they plan to increase their use of data over the next two to three years to measure consumption behaviour and other customer patterns. With this, more than half reported being on top of cybersecurity requirements with the North American Electric Reliability Corporation (NERC) Critical Infrastructure Protection (CIP) requirements set to become effective in April 2016. However, worryingly more than a quarter did not know how their utility was planning to manage the need for cybersecurity solutions.
On the regulatory front, the top issue for utilities over the next 5 years is a balanced regulatory treatment between utilities and consumers, followed by regulatory recognition and recovery of stranded assets. Around one-third also cited formula rates and the unbundling of utility services and rates as top practices.
Towards Utility 2.0
In its analysis of the survey data Black & Veatch concludes that the next-generation of electric utilities will be those entities that provide the logistics, transportation, security and billing services for millions of potential electric suppliers and buyers across the bulk power systems, distribution grids and microgrids.
The utility of the future also represents a key element of the Internet of Things where operations flow through robust communications networks and supercomputers crunch vast amounts of data in order to direct and redirect power flows based on weather, operating conditions and customer behaviour. The question is how we get there?
No group has a better understanding of the grid system and all the components that make reliable and safe electric service possible than electric utility leaders. Now is the time for them to take a hard look at customer trends, emerging technologies and the current regulatory framework as key inputs in developing a vision for the future, Black & Veatch suggests.