What’s Really Got the Attention of Utilities?  

June 2, 2015
New environmental regulation, no doubt, sets utilities on edge. But even with federal carbon dioxide rules pending, it now comes in second to a bigger disrupter — distributed generation.

New environmental regulation, no doubt, sets utilities on edge. But even with federal carbon dioxide rules pending, regulation comes in second to a bigger disrupter — distributed generation.

That’s the finding of DNV GL’s Second Annual Utility of the Future Pulse Survey released today at the Utility of the Future Leadership Forum in Washington, D.C.

When asked what policy or regulatory advances will impact the industry’s evolution most by 2020, utilities cited net metering and distributed generation  first (30 percent) followed by greenhouse gas emissions rules (22 percent).

Why so? Because rules are rules. But distributed generation (DG) is a wild card.

“The greenhouse gas rule will be a challenge, but at least it’s something they have control over in some regard once the rules are put in place, whereas for DG it’s a competitive issue — both an opportunity and in some cases also a threat,” said Jessica Harrison, author of a report and head of energy strategy, markets & policy development at DNV GL.

Distributed generation is a conundrum for utilities that goes beyond just figuring out fair payment under net metering. It’s a competitive challenge that can shake the core of the utility business model.

The customer is no longer a guaranteed asset for utilities. Competitors are vying to supply them with kilowatt-hours. And those competitors are getting bigger by adding services or partnering with others.

Vivant, for example, a company that offers home security and energy management, has added solar to its products. Comcast, the nation’s largest video, high-speed Internet and phone provider, has teamed with NRG Energy, the nation’s largest independent power producer — and a company whose CEO, David Crane, wants to shake up the traditional utility model.

That’s not to say utilities are passive about the rise of distributed generation. (Okay, some are.) Over 40 percent of the respondents said they plan a proactive strategy towards new entrants in the distributed generation space.  Some of the biggest utility players are partnering with DG companies or starting competitive DG arms of their own. Witness, for example, the partnerships to build microgrids between Commonwealth Edison and Anbaric or Central Hudson Gas & Electric and NRG Energy.

The DNV GL survey also revealed another disrupter, energy storage. More than half of those surveyed expect to offer energy storage by 2020, a significant rise since last year’s survey, Harrison said.

And in a question about new products that companies plan to offer, energy storage and home automation systems took the biggest leap since last year’s survey.

All of this change begs for new utility business models. And the utilty industry gets that. Over one-third of respondents ranked the need for new business models as the industry’s greatest challenge over the next five years. Interestingly, last year business models were a major concern for only 2 percent.

Where is energy efficiency in all of this change? Weirdly absent in the results. But not really, Harrison said.  It’s just that industry perception of energy efficiency — and its definition — are changing.

“I think it is still a priority for utilities. The change is that there are alternative means for solicitaing that energy efficiency from customers, using technologies like home automation,” she said. “Energy efficiency is still a priority, it is just morphing, slightly, into more options, more ways to reach customers.”

What do you see ahead for the utility business model? Share your thoughts on our LinkedIn Group, Energy Efficiency Markets.

About the Author

Elisa Wood | Editor-in-Chief

Elisa Wood is the editor and founder of EnergyChangemakers.com. She is co-founder and former editor of Microgrid Knowledge.