Vast Majority of Utility Stakeholders Expect a Major Shift in Business Models Because of Distributed Energy
Today, Navigant (NCI) and Public Utilities Fortnightly (PUF) released “State & Future of the Power Industry”, a special report exploring the current status as well as the future of the electric utility industry. The report signals change is coming, and while 90% of utility stakeholders say that distributed energy resources (DER) will force a shift in utility business models, they are split (50-50) on the timing of this shift.
The report presents findings from a PUF reader survey of 366 utility industry insiders on the future of electricity, summarizes “off-the-record” conversations held by PUF editor Steve Mitnick with utility leaders about electricity’s future, and includes perspectives from experts within Navigant’s Global Energy segment on where they see the industry shifting and evolving.
“This study points to several forces that will continue to transform the way utilities do business. Although DER is already growing faster than central station generation this year in North America, this trend varies by region as the policy approach, regulation, market dynamics, and structure differ,” said Jan Vrins, leader of Navigant’s Global Energy segment. “North American utilities are at various stages of integrating distributed generation, demand response, energy efficiency, electric vehicles, and energy storage. Many are unprepared for the dynamic impact these resources will have on integrated resource planning and current grid operations. Since there is no one-size-fits-all approach, Navigant has developed a flexible playbook that helps a utility develop an integrated DER strategy and approach, based on its maturity level and the market in which it operates.”
Although more than half of survey respondents believe the role of regulated utilities would not undergo significant change in providing services to customers within the decade, most recognize that advances in technology and changing customer demands present new opportunities and challenges. These findings suggest a more conservative approach by utilities, with 70% of respondents indicating that a utility’s ability to provide reliable power is still the most important role, significantly ahead of affordable and green power.
Additional key findings from the survey include:
Solar Photovoltaic (PV) (70%), energy efficiency (42%), demand response (40%) and energy storage (39%), were named as the most prevalent DER solutions in terms of capacity by 2025.
More than 90% of survey respondents believe that the growth of DER will force a major shift in utility business models.
Almost 50% of industry respondents pointed to a supportive regulatory environment as the most important tipping point for moving aggressively into owning and operating DER.
Almost 50% of the survey participants believe that by 2025 there will be five or more states to adopt a distribution-level system operator model.
Over 80% of the respondents believe that residential and commercial customers’ demand for choice and control will change moderately (50%) or substantially (33%).
Emerging customer engagement channels that respondents believe will be most widely used to deliver value to customers are: apps (55%), behavioral & analytical demand-side management (38%) and integrated
energy services platforms (37%).
Survey findings point to an increasing threat of cyberattacks, as a result of increased connectivity on both sides of the meter:
55% of the respondents expect there will be one or two serious electric service disruptions in the coming years.
30% expect there will be several serious service disruptions in the coming years.
“While utility stakeholders voice widespread consensus that the industry is facing profound change and advances in technology and changing customer demands present new opportunities and challenges, the lack of urgency to change the services offered to customers that surfaced in this report is concerning,” added Vrins. “Providing reliable, safe, and affordable power are table stakes, and utilities must evolve their business models to include sustainable, intelligent, and distributed elements of the energy cloud in order to serve their customers and protect shareholder value.”