We Still Need Utilities

The CEO of NRG, David Crane, was quoted at a recent industry conference as saying “…consumers don’t need the power industry at all.”  He was referring to NRG’s plans to bypass utilities by selling solar panels and small natural gas generators to home owners for self sufficient energy operations.  True, there will be disruptions to the utility business model.  But there’s an inaccuracy to his argument.  Natural gas pipelines are owned or managed by the power industry – entities that are classified as investor-owned utility (IOU), privately owned utility, municipal or rural cooperative utility – with varying degrees of regulatory oversight.  The NRG bypass business model is premised on safe, reliable, and cost-effective natural gas distribution grids managed by some of the very utilities they propose to disintermediate from consumers for electricity.

I’m all for microgrids, distributed energy resources (DER), and the concept of Transactive Energy to improve grid resiliency.   We can become prosumers of electricity rather than simply remaining consumers.  This ebook advises utilities how to position themselves to avoid disintermediation.  But the Smart Grid and its enabling technologies do not mean the end of electric or gas utilities.

What consumers don’t need (or necessarily want) is today’s power industry structure.  This is not rejection of the utility industry so much as recognition that a sole supplier reduces consumer choice and discourages innovation.  Competition can be a very healthy thing.  That was one of the critical motivations for the deregulation and divestiture of the Bell Telephone System.  Many utility leaders would agree that their organizations are slow to innovate.  Regulatory processes and organizational culture predispositions make utilities risk-averse in selecting new technologies or services.

But there is a very important role that utilities can play, if given the regulatory incentives to make changes.  Utilities could be the manager of customer-owned DER for self-sufficiency or participation in demand response (DR) programs, or the lessee of rooftops for solar panel placement and energy harvesting.    Managing these assets as aggregated entities would reduce overall costs and help deliver more resiliency for the entire grid, which in turn has significant economic and societal benefits.

Today’s wireless carriers have significant chunks of white space in their coverage maps for the USA – its not profitable to serve sparsely populated areas.  That’s why the US government had to step in with the Rural Electrification Administration to get electricity and telephony to some parts of rural America via government loan programs.

We need to consider the regulatory and legislative policies that must be crafted to allow or motivate utilities to offer more services and build more revenue streams to offset losses caused by customers going off grid and ensure that society in general can depend on a reliable and resilient grid.   Regulated utilities can play a critical role in management of all DER that is tied to the grid.   An “every man for himself” approach defeats the self-healing capabilities that grid resiliency must provide.

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