Utilities the world over are in something of a catch 22 situation.
On the one hand they are under pressures to invest in new technologies to drive towards a digital, distributed and decarbonised future. On the other they are facing uncertain and changing revenues as customers become prosumers and defect from the grid and new service opportunities are developed.
Exacerbating this situation is that most customers will rely on their utility to serve at least a portion of their daily energy demand, and nearly all require it to serve as a provider of last resort. Hence, there is little, if any, of their infrastructure that can be retired.
Responses to this issue clearly must be sought with regulators – but in the meantime, and as they will in the future, utilities continue to have a primary focus on “meeting fundamental obligations”, according to Black & Veatch’s 2018 ‘Strategic Directions: Electric Report’.
The wide-ranging report, which among other themes discusses the issue of how the maintaining of the network should be funded, found that the top three critical issues facing the industry are, as they have for the past five years, reliability, cybersecurity and ageing infrastructure. Long-term investment and economic regulation round out the top five.
In addition, more than half of the respondents to the survey considered it likely that third-parties would be entering the market to provide alternative energy solutions to customers.
The report comments that this and other changes seem to be placing traditional electricity utilities at a crossroads, either adapting or entering the ‘utility death spiral’. Indeed, almost a quarter of the respondents believe utilities have already begun feeling the effects of this death spiral, while another 61% believe that if they haven’t already, they will within the next 10 years.
Utility capital planning
The report, which was based on input from more than 300 utility, municipal, commercial and community stakeholders, dives into three topical issues that will impact the delivery of the future ‘reconfigured and enhanced’ grid.
At the heart of utility transformation is its capital spend and the report argues that a new approach is needed. Historically, capital allocation has focused primarily on replacing aging infrastructure. Today, the game has changed, from the partial and unpredictable generation of distributed resources to the influx of new technologies such as microgrids, electric vehicles and energy storage.
Utilities should develop a working model of the market and the players in it for themselves to assist with predicting what may happen, and then align their capital allocation strategies to support those predicted outcomes and assumptions. The goal should be to introduce specificity into the capital allocation decisions within the context of those predictions.
Examples of capital deployment offered include entering a new market sector or geography, such as Enel has done with the Enernoc acquisition and investment in drone mapper Raptor Maps, or upgrading the physical and technological infrastructure to enable the emerging new energy marketplace.
Combined heat and power opportunities
The benefits of combined heat and power (CHP) are known, and the technology is recognised as having great potential to improve large industrial process efficiencies while contributing to grid resilience. Interest in CHP is growing for a variety of reasons, including low natural gas prices and an ageing fleet of industrial equipment, and also it has emerged as an important potential component of microgrids providing local grid security in the event of catastrophic power outages.
According to the report, by improving total process efficiencies and potentially dispatching additional electrical energy, CHP can improve domestic energy security, reduce carbon dioxide emissions, increase energy efficiency and lower facility operating costs. Under the right circumstances, these benefits help build a strong case to press forward with CHP development.
However, misperceptions remain, and the perception of the overall value of CHP by policymakers, planners and others is still a work in progress. Nevertheless, the technologies that underlie CHP opportunities will continue to evolve and the future looks bright for more CHP development.
From drones to sensors
With the changes the sector is undergoing, electric utilities are awakening to the power of innovation, from deploying drones to relying on robotics and implementing outside-the-box construction practices such as lean construction or using 3D printing or location-sensing devices such as GPS, the report states.
In the survey, one-third of respondents acknowledged that construction innovation over the next half decade will not only be expected but becomes the new norm as utilities tactically work to fix or replace their aging infrastructure. A similar percentage believed that acceptance of forward-thinking approaches will become common.
Notably among this group, almost half reported their utility’s approach as innovative in building out infrastructure, while an additional 15% rated themselves a step higher at ‘very innovative’.
As technology continues to reign supreme, with the shift to decentralised, digital grids and the broadening appeal of increasingly affordable solar power systems, power suppliers no longer have the luxury of resisting change, the report concludes.
“Now more than ever, the rapidly changing energy landscape demands agility by utilities, and those that resist innovation do so at their own peril.”