The traditional utility market is evolving as utilities contend with increasing volatility and uncertainty brought about by a shift to renewables, new technology, legislation, and other developments. Utilities need to become smarter, more agile, and more flexible so they can strategically respond to the changing landscape.
Here’s a basic and generalized look at areas utilities are considering as they plan for the future.
Environment and environmental policies: Utilities must play a role in fighting climate change. Legislation at a country and global level is forcing utilities to reevaluate their business, particularly the environmental impact. This demand for clean energy will lead not only to a reduction in greenhouse gases, but also to improvements in energy efficiency, demand-side management, and an increased adoption of renewables. The pressure to reduce CO2 emissions also will likely speed change in other areas such as the move from coal-fueled power plants to renewables.
Renewable energy: Renewable energy adoption, especially solar and wind energy, will continue to rise as utilities look toward more sustainable resources. Meanwhile, the efficiency of renewable energy is improving and costs are decreasing. However, utilities still struggle to balance the variable nature of renewables and the challenge of integrating them with grid networks. Distributed generation—and associated technologies like power electronics—must continue to improve to support renewable growth.
Energy storage: Electrical energy storage systems (EESS), particularly large-scale batteries and conversion technology, are relatively new but gaining ground because they allow utilities to achieve more control of local energy production, squeeze more from generation assets and take advantage of the smart grid. They prevent waste by letting utilities generate and store energy and then use it as needed, integrate more variable renewable energy into the power grid, and increase reliability.
Technology: Technology will continue to develop. Analytics are expanding and improving, permitting utilities to wring the most out of the data that is coming from smart technologies. Utilities are better able to manage the grid with tools like advanced distribution management systems and data management systems.
Consumer behavior: Consumers are king in the new energy world. Technology and analytics provide visibility that lets them make smart decisions about how much energy they use and when. Utilities need to prepare for consumers increasingly wanting—and expecting—control over their energy usage.
Utilities no longer hold a monopoly. Consumers are increasingly empowered as they gain more options for receiving consumer-friendly, competitively priced power, in some cases allowing them to comparison shop for power or even choose to become prosumers or go off grid. This forces utilities to remain competitive both in pricing and services.
Pricing mechanisms: Pricing mechanisms, such as dynamic pricing or carbon markets, can influence the behavior of the biggest contributors of greenhouse gas emissions. A carbon tax is an effective tool to deter carbon-based fuel usage and support green energy projects if a market-determined carbon price is not high enough to entice utilities to use energy sources that are cleaner than current fossil fuel sources.
Role: By taking a holistic approach and combining all of the above, utilities can redefine their role. They can invent new business models, provide new services, and find new ways of fulfilling missions such as the balance of supply and demand. In a world where supply is less centralized, where it becomes variable (that’s the nature of renewables), and where demand can be more flexible, utilities can look for opportunities to harness this flexibility, aggregating distributed energy resources, buffering variation and providing not just electricity but services.
Utilities can prepare for the future by proactively addressing these challenges.