A new report from the market research giant J.D. Power indicates that U.S. utilities are seeking new avenues for growth in an era of flat energy demand, renewable energy and new energy technologies. The challenges are many, but the solutions offer businesses and other ratepayers new opportunities to participate in the low carbon economy of the future.
Less room for 20th century fuels in a 21st century world
Utilities are on the front lines of the battle between fossil fuels and the simple march of time.
Up until the end of the 20th century, America’s vast coal, oil and natural gas resources powered it into a position of global leadership.
With almost one-fifth of the 21st century already peeling off into history, energy technology has sprinted into a future characterized by wind and solar resources, energy storage, smart grid technology and small scale, distributed electricity generation.
Energy efficiency is also an important part of the picture. Energy efficiency covers a vast array of advanced technology, from building elements, lighting and consumer appliances to industrial and manufacturing processes.
Combined with distributed wind and solar resources, an upward swing in energy efficiency leads to economic growth without a consequent increase in demand for electricity from the grid.
The result is a perfect storm of irrelevancy for the nation’s aging stock of fossil fuel power plants and distribution networks.
That’s especially clear in the case of coal, where the economics favor natural gas and renewable energy as an alternative to upgrading old power plants.
Natural gas power plants are also beginning to fade into the background as the cost of wind and solar continues to drop. A corollary to that trend is the expense involved in reducing risk for older gas distribution and storage facilities, as illustrated by recent large-scale disasters in California and Massachusetts.
In addition, new grid management tools are also making it possible to integrate more wind and solar while minimizing the expense of energy storage facilities. Despite President Trump’s pro-coal rhetoric, the US Department of Energy is pressing forward with a major grid modernization initiative that anticipates more wind and solar, and less fossil fuels.
Fine tuning electricity rates
As the name of the new report indicates, J.D. Power has sorted through all of these variables from the perspective of utilities and customer satisfaction.
As the report discusses, the utility sector is facing flattening demand along with “a volatile regulatory environment, digital transformation, and a spate of recent safety lapses” among other challenges.
The data-driven report, titled “2019 Utilities Industry Outlook,” identifies several emerging solutions.
One major development impacting ratepayers is the adoption of new time-of-use rate schedules. These schedules are a more fine-tuned version of the peak demand rates that utilities charge to commercial customers.
J.D. Power advises that utilities following the time-of-use pathway should pursue it in a holistic way:
…We have found that when pricing options are forced on electric utility customers, they respond with significantly lower customer satisfaction scores. However, when these programs are implemented as part of a broader environmental initiative, complete with proactive communications and price guarantee for one year, satisfaction can actually improve.
Under 20th century energy technology, time-of-use schedules would be more stick than carrot. With the current crop of distributed renewable energy, energy storage and smart controls, ratepayers now have more tools to help shift their loads and avoid higher charges.
Showcasing new energy technologies
Another significant finding is the high level of awareness about solar power, indicating that distributed renewable energy is firmly in the mainstream:
…Ultimately, we’re seeing that 43 percent of electric utility customers nationally are considering solar power, with the highest concentration of them located in Hawaii, Vermont, New Mexico, Oregon, and California.
The report finds that cost is the biggest obstacle among customers not considering solar. That barrier is beginning to fall away with the advent of new financial instruments and blockchain-enabled software. In particular, businesses should be on the lookout for new opportunities to trade or sell their rooftop solar kilowatt-hours.
The J.D. Power report also notes several other opportunities that utilities are beginning to offer.
One relates to flat demand. In order to create new revenue streams, some utilities are beginning to promote appliance sales with rebate offers, along with delivery and service contracts. Utilities are beginning to engage with connected devices and digital transactions, too. That could provide businesses with a cost-effective pathway for upgrading appliances and fixtures.
The community engagement area also provides new opportunities to showcase renewable energy technologies. J.D. Power notes increasing evidence that community engagement is a strong driver of customer satisfaction for utilities, with energy efficiency initiatives among the stronger elements.
Another technology-related finding of interest to commercial ratepayers is the electric vehicle market. In this area, J.D. Power suggests that utilities are behind the curve:
Surprisingly, despite the obvious push into products and services designed to spark new revenue streams, electric utilities have so far not been particularly aggressive in their embrace of electric vehicles (EVs) as a potential source of new demand.
That’s another opportunity for ratepayers. Electric vehicles are, in effect, mobile energy storage devices. Businesses that electrify their fleet vehicles have an opportunity to reduce their exposure to high time-of-use rates. EVs can be charged at night when rates are low, and they can be used as an extra source of electricity during high-rate hours.
Riding high on renewable energy
As for safety and aging infrastructure issues, that’s where things get complicated. The new report underscores that the electrical grid can be implicated in wildfires and other disasters, renewable energy or not. The intensification of climate impacts — especially drought-related impacts — is leading to an increase in risk, requiring stepped-up investment in new equipment and hazard mitigation.
All in all, though, the main takeaway is a good outlook for businesses that are looking for new opportunities to raise their green profile and achieve bottom line benefits in 2019.
These issues and more will probably play a feature role during J.D. Power’s upcoming Utility Client Conference in February, so stay tuned for more.
Photo: Solar panel installation, Oregon Department of Transportation/Flickr.