Cleantech Market Intelligence
The Case for Utilities
Long-time electric utility employees must be feeling a bit like Rodney Dangerfield these days. No respect. Seems like everybody thinks they can be a utility now. All you need is a big wad of cash so you can buy and sell energy. That makes you a utility. Or at least that’s the take from a popular article making the rounds, “Google is on the way to quietly becoming an electric utility.”
Not so fast.
Google is on the way to becoming an energy trader. Whether or not that’s a good thing is debatable. Here in Texas, our Wild West deregulated energy market even allows multilevel marketing (MLM) companies to sell energy. At our house we’ve had more offers to sell electricity than cosmetics. Thankfully I live in a cooperative area so I have a valid excuse to politely decline. I have yet to understand how MLMs add competitive impetus to a market that already has the likes of TXU, Reliant, and Green Mountain Energy fighting for the same customers.
The point is: trading energy is not the same as being a utility. Utilities do some incredibly complex things that really are life or death. I was on the Big Island of Hawaii in 1992 when a thunderstorm knocked out all power to Hilo, including all traffic lights. For reasons that I do not understand, all drivers that day assumed that the absence of traffic lights means the same thing as a green light. Life or death situation.
The Hard Stuff
Utilities do the really difficult work, like balancing grids. Here at Navigant Research we have a thriving Smart Energy program that covers renewable energy. But as any reader of our coverage knows, there is more to smart energy than simply feeding it into the grid. Too much power can destabilize the grid, resulting in over-voltage events. Utilities have to predict and manage distributed inputs to keep grids stable. Would you rather have a market economist or an electrical engineer solving that problem for your neighborhood? How about for your factory?
At the other extreme, utilities ensure that grids meet their minimum power requirements, the base load. What happens to solar inputs if we have a repeat of 1816, the Year without a Summer? We will look to utilities to keep the lights on, although energy traders could indeed have a role. Again looking at my home state of Texas, we have remarkable wind generation capacity, but that capacity is usually absent on the hottest days of the year, when winds are calm in the Panhandle. Such situations often require the grid balancers at ERCOT to find extra energy somewhere, often on expensive spot markets.
Don’t get me wrong, there is a role for energy trading and an important one. The future of utilities is somewhat unclear, and market disciplines for buying and selling energy could have a positive economic impact for many parties. However, we still need the handful of people who understand how electrons actually flow, the line workers who will climb a utility pole in a thunderstorm, and the load planners who look at long-range weather forecasts and make sure that the grid is always sufficiently energized.
Will we ever be completely off the grid so that there is nothing to balance? It’s hard to imagine. If nothing else, the absence of a grid would seem to make energy trading incredibly complex!