Is Utility 2.0 a Forecast or a Post-Mortem?

For the last six months, the energy news sphere (perhaps led by the Edison Electric Institute) has been rife with a discussion about the threat to the utility business from distributed energy like local solar, as their customers shift to getting their own power from nearby renewable resources.  Reports and news stories – e.g. “Adapt or Die” – suggest changes to the electric utility business model are imminent as power generation shifts from massive to medium scale and from remote to local.

For some utilities, this discussion is not a forecast, but a post-mortem.

Electric utilities have always built infrastructure (power lines, power plants, etc.) as long-term investments.  They relied on growing electricity demand and sales to help recoup the costs of new coal-fired power or (over budget) nuclear retrofits in the Midwest or new high-voltage power lines in the Northeast.  Utility commissions played along, allowing them cost recovery and generous returns on equity (10-11 percent) for new infrastructure. But hardware that seemed wise in the 1990s and 2000s is suddenly and rapidly being exposed as untimely and unnecessary.

Electricity demand has flattened (even fallen), thanks to energy efficiency legislation and economic stagnation. Customers are increasingly generating their own energy from renewable energy like solar, whose cost is falling by 10 percent or more per year. Not only is big infrastructure proving harder to pay off as revenues stagnate, it’s also increasingly irrelevant in a 21st century electricity system where power generation can be cost-effectively placed right on the roof.

via Is Utility 2.0 a Forecast or a Post-Mortem?.

Categories: Electricity, Energy