The Future of Electric Utilities, Part II

by Bob Shively, Enerdynamics’ President and Lead Instuctor

As discussed in The Future of Electric Utilities, Part I, long-time electric industry expert Peter Fox-Penner describes in his recent book Smart Power two possible models for the future utility. His views are very similar to visions Enerdynamics’ instructors frequently discuss when questions of the future arise in our courses.

The first model is the Smart Integrator.  As described by Fox-Penner, “The Smart
Integrator (SI) is a utility that operates the power grid and its information and control systems but does not actually own or sell the power delivered by the grid” (Peter Fox-Penner, Smart Power, p. 175).

Under this model, the utility’s mission will be to effectively run two networks: 1) an electric T&D network that delivers electricity from both centralized and distributed sources, keeps everything in balance with loads, and allows consumers to shift usage in response to price signals, plus 2) an information network that communicates with generators, meters, and price-responsive appliances to send information and control signals, and to collect data tracking each source’s supply and/or consumption.  In this model, the utility company will be similar to an internet service provider that gets paid for building and running a reliable network but does not provide the “content” or services that consumers use the network to obtain.  In this model, services are provided by third-party competitive retailers separate and distinct from the utility.

The second model is the Energy Services Utility.  Again, as described by Fox-Penner, “The mission of the Energy Services Utility (ESU) is to provide lowest-cost energy services to its customers – light, heat, cooling, computer-hours, and the dozens of other things we get from power each day” (Ibid, p. 189). In essence the ESU provides the network described above plus the energy services that are delivered along the network.

So, will competing technologies completely replace the need for the utility? That seems highly unlikely since it would be a huge stretch to think we’ll go to generating all our needs with self-contained equipment in our home.  We will need the network for reliability and to obtain cheaper supplies when someone else can do it cheaper than we can.

Then is the utility destined to go the way of the traditional phone company serving a smaller and smaller base of customers while trying to build revenue by selling new services in competition with non-regulated providers?  This is certainly a risk for utilities that try to implement the Energy Services Utility model.  Their management needs to think long and hard about whether their company culture can deliver services more effectively than non-regulated retailing entities.

The alternative is to focus on the network. The future of the electric utility is murky, but one thing is clear.  Someone will need to run the dual electric delivery/information highway network to enable the future “energy web.”  And the current electric utility appears uniquely suited to this task.

About Enerdynamics

Enerdynamics was formed in 1995 to meet the growing demand for timely, dynamic and effective business training in the gas and electric industries. Our comprehensive education programs are focused on teaching you and your employees the business of energy. And because we have a firm grasp of what's happening in our industry on both a national and international scale, we can help you make sense of a world that often makes no sense at all.
This entry was posted in Electricity and tagged , , , , , , , , , . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s