What is the “Utility of the Future”? What would today’s electric utilities look like in 2025 i.e. roughly 10 years from now?

Cleantech Forum – Insightful Answers to Insightful QuestionsCategory: smart gridWhat is the “Utility of the Future”? What would today’s electric utilities look like in 2025 i.e. roughly 10 years from now?
1 Answers
proton Staff answered 1 year ago

The electric utility business model is under pressure due to various factors including proliferation of distributed generation such as solar, availability of innovative financing mechanisms for consumers, falling prices of solar, batteries and other new technologies, customer churn and aging infrastructure. This phenomenon is observed in many markets around the world. While some utilities have begun to take small steps in the right direction, some others have made unfavorable policy changes and suffered customer backlash.
 
So what is role of the traditional utility going forward in an era where customers prefer to generate their own energy, store it in battery systems or their electric vehicles, optimize consumption based on preferences using algorithms in the cloud, sell energy if possible in the wholesale market or to their neighbors, monitor and control power flow from their mobile devices?
 
Utility of the Future: Let’s look at some possible outcomes using three scenarios: – short term, medium term and long term
 
Short-term: In the short term which is about 5 yrs, utilities would have
1) made policy changes to allow distributed resources to participate in the wholesale markets,
2) imposed some sort of fixed fee on customers for connecting to the grid or for using the wires to participate in the market,  
3) implemented Time of Use rates and a whole array of dynamic tariffs that customers would find difficult to sort through
4) deployed cloud applications for better a) customer relationship – engagement, outage management, quick restoration, detect theft b) predictive asset management c) forecasting and system management
 
But all this would result in a lot of confusion and frustration among all players because of unclear policies, implementation issues due to bad decision making for ex: not specifying which customers would be eligible to participate and which ones would be negatively affected or who would be grandfathered,  lack of common standards for new technologies resulting in IT/OT integration challenges and cybersecurity vulnerabilities. In short, lot of opportunities but lots of challenges.
 
Medium Term: In the mid term which is about 10 yrs, utilities would have
1) resolved many of the earlier issues with policies and implementation. All players would be more educated and informed about how to participate in a transactive energy economy
2) standardized specifications for internet of things devices; take advantage of grid edge computing and decision making instead of solely relying on centralized control systems
3) utilities and independent system operators share somewhat equal responsibility in managing the grid. The role of a Distribution System Operator (DSO) would be more clearly defined.
4) increased electricity demand due to electric cars, buses and other vehicles.
5)  use price as a single most important parameter to control supply and demand
6) grid become a market place and utilities sell many other hardware products – storage boxes, energy management devices, EV charging infrastructure, financing etc
 
So in the medium term we would see some maturity in the new business model and early traces of further disruption to come.
 
Long Term: In the long term which is about 20-25 years we would see
1) completely deregulated electric utility markets in many markets around the world. Customer can choose from many different service plans and pay as you go models also become mainstream.
2) energy bill is not a significant percentage of household expenditure and customers don’t think as much about energy optimization because software takes control of a lot of things automatically.
3) Many would have large solar systems on their roof and storage systems would be sold in home depots and other such stores OR customers would subscribe to a community energy service plan
4) large wind and solar would be coupled with energy storage and they become dispatchable resources. Wave energy would reach commercial scale.
5) role of utility in the residential market would be drastically reduced. Utilities would continue to serve the C&I customers.
6) Private companies or utilities themselves together with project financiers (no rate base) would stepin to finance and manage the distribution grid or community grid.
 
So in the long term a radical change in the role of a utility is expected. All the above 3 scenarios are only one set of possibilities. There are many other such possibilities and outcomes depend on a number of macro and micro economic factors. Yet it’s an interesting thought experiment I would encourage everyone to conduct.