Navigant Research Blog

For Utilities, New Technology Brings Promise and Pain

— January 15, 2014

The double-edged sword of technology is on full view in the electric utility industry today.  Conservation voltage reduction (CVR) and demand response (DR) programs are helping utilities reduce load and adapt to the effects of distributed generation (DG) on the grid – but what about replacing the revenue “lost” through DG?  Distribution automation (DA) can improve reliability and reduce outage times, but it also comes at a price.  The need for resiliency in the face of increasingly severe storms is adding further stresses to utility industry bottom lines.  Meanwhile, big data is both exciting in its potential and intimidating in its volume.  “May you live in interesting times” is often called a Chinese curse, and indeed, these are interesting times.

A glance at the jam-packed program for the electric utility industry confab DistribuTECH, to be held in San Antonio from January 28 through the 30, highlights just how critical new technology is to the industry.  The presence of exhibitors like Verizon, AT&T, Oracle, Accenture, and Waterfall Security Solutions, to name just a few, demonstrate just how important new communications, information technology, and cyber security have become.  Transmission and distribution may be the nuts and bolts, but the other smart grid technologies are clearly top of mind for utility executives.

Progress and Possibility

The show boasts 15 tracks and 74 panel discussions, as well as 5 mega sessions, including “Lessons Learned From Superstorm Sandy,” “Chapter 2:  What Happens to Smart Grid Initiatives After DOE Funding,” and “A Global Look at Smart Grid’s Progress and Future.”

More than 9,500 attendees participated in DistribuTECH 2013, held in San Diego last January, up 15% from the year before.  This year more than 400 companies will be exhibiting their products and services.  In conjunction with the conference, Utility University will offer in-depth courses for utility execs on topics ranging from communications and customer strategies to system integration and standards.

International buyers will also be on hand; DistribuTECH organizer Pennwell Corporation announced last July that the trade show is one of 26 selected to participate in the U.S. Department of Commerce’s 2014 International Buyer Program (IBP).  The show will feature an International Trade Center onsite where foreign buyers can meet and negotiate with sellers, obtain assistance identifying potential business partners, and efficiently navigate the exhibition floor.

Six Navigant Research analysts from the Smart Utility program will be at DistribuTECH this year:  myself (richelle.elberg@navigant.com), Kris Torvik (kristoffer.torvik@navigant.com), Neil Strother (neil.strother@navigant.com), Jim McCray (james.mccray@navigant.com), Brett Feldman (brett.feldman@navigant.com), and Lauren Callaway (lauren.callaway@navigant.com).  Feel free to reach out to our Smart Utility team to arrange for briefings; see you in San Antonio!

 

2014 Will Be a Memorable Year for Cleantech

— January 13, 2014

Is January 13 too early to call 2014 a year to remember?

We have recently published our fifth annual white paper, Smart Utilities: 10 Trends to Watch in 2014 and Beyond.  The free white paper, more than past editions, details the massive transformations facing utilities and their business models.  Things are just so different now!

Navigant Research offers another peek into the future with our webinar, The Year Ahead in Cleantech, on Tuesday, January 14 at 2 p.m. Eastern Standard Time.  I have dramatically titled the Smart Utilities section of the webinar, Everything You Know is Wrong.  Perhaps that’s overly dramatic, but so much is changing, it’s not far off.  Key trends that will be discussed include:

  • Distributed generation begins to rock utilities’ world: Utility business model are likely to change, perhaps dramatically, as they suffer the one-two punch of reduced energy revenue and increased payouts to distributed generators
  • Solar power generation’s impact on distribution grids will be enormous: Some governments have aggressively supported residential solar generation while others have not –  What happens in either case?
  • New grid-balancing technologies that deal with distributed inputs can make granular, automated decisions that enable utilities to run grids more efficiently while remaining within mandated voltage ranges
  • Energy efficiency may happen in our lifetimes: We have detected signs of life in the home energy market during 2013, with some encouraging pilot programs that may foretell new life for HEM, the forever stepchild of cleantech
  • Utilities are changing their view of the smart grid: We observed some interesting behavior changes during 2013, among both utilities and the vendors that sell to them
  • Smart grid applications continue their rise: Navigant Research has recently completed an examination of Smart Grid IT, and this seminar will discuss some of the leading applications

These topics and more are examined in the white paper.  Many of these issues are by no means resolved, nor is there any clear path to resolution.  But the time to start thinking about these issues, and how they will affect your business, is now.

For more, join us for The Year Ahead in Cleantech, which will also feature discussions on Smart Transportation and Smart Energy.  Click here to register.

 

In 2014, Utilities Must Adapt or Retreat

— January 8, 2014

In 2013, the majority of utilities could still afford to keep their head in the sand, ignoring the crisis presented by distributed renewable generation to their bottom line now and in the future.  In 2014, this will not be the case.  Electricity sales of centralized utilities will continue to decline because of continued investment in energy efficiency and onsite distributed renewable energy generation from both residential and commercial and industrial customers.  This erosion of electricity sales will cause utilities to recover their costs by adding fees and/or increasing rates, which will increase the cost of utility-delivered power.  As a result, the economics of distributed generation will potentially be even more attractive to end users, further accelerating the deployment of renewables.  This is the utility death spiral.

As covered in Navigant Research’s report, Distributed Solar Energy Generation, distributed solar PV deployments in particular will continue to accelerate, including in nontraditional markets such as the southeastern United States.  The low cost of electricity in the Southeast has hampered wider adoption compared to the West Coast and Northeast, where high-cost retail electricity rates have made renewables more attractive.  In conjunction with falling renewable technology costs and incentives reduction on the horizon, many customers are making their moves, presenting a great opportunity for forward-thinking utilities in both the residential and commercial markets.

Adaptive Action

Meanwhile, financing has made solar PV available for little to no money down.  Advanced module-level power electronics – as covered in Navigant Research’s report, Microinverters and DC Optimizers – are bringing more rooftops into the fold and increasing the overall energy harvest.

Those utilities that have grasped this threat are taking action to adapt to the changing market environment in the following ways:

  • Taking their case to the public utility commission and requesting fees on those customers with onsite renewables
  • Limiting net energy metering (the ability to send power back to the grid and be compensated at retail rates)
  • Getting into the distributed generation business themselves

Some utilities are doing these things in conjunction.  Utilities have many of the most important components that are required to make the latter option feasible, including a captive customer base, generally high trust among their customers, access to low-cost capital, and solid expertise in operations and maintenance and customer service.  Taking this plunge is no easy decision for companies that are traditionally slow-moving.  But there are few other options.  Utilities may have noticed the writing on the wall during the past few years, but 2014 is the year they will have to do something about it – or it will be too late.

 

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