The US energy system will be transformed beyond recognition in the next quarter century, but the only certainties are that no one knows what it will look like and it will cost a lot of money.
Electricity’s future is about “disruptive technologies,” speakers including Secretary of Energy Steven Chu told the National Association of Regulatory Utility Commissioners (NARUC) and the Department of Energy’s National Electricity Forum Feb. 5-9 in Washington DC, and the power industry needs “partnerships” with state regulators to invest in the uncertain new era.
Needed spending could reach $2 trillion in the coming one to two decades, said Nicholas Akins, President and CEO of American Electric Power. Speakers agreed the resulting power system will probably be as different from today as an iPad is from a typewriter, but everyone wonders just who is going to pay for the transformation.
Some changes like better energy storage are expected. Chu said research has gotten storage cost down to about $350 a kilowatt-hour, and when it reaches $100, it will proliferate and allow much higher penetration of variable wind and solar resources.
Chu said some innovations are “right in front of us,” citing the use of cheap overnight power to chill water for daytime cooling at the Texas Medical Center in Houston.
But futurists like Thomas Frey of The DaVinci Institute and John Petersen of The Arlington Institute joined policymakers like Chu Senior Advisor Lauren Azar who see distributed generation, like solar roofing shingles, and microgrids that maximize local control as fundamentally changing the way people think about electricity.
David Crane, President and CEO of NRG Energy, said he expects new technology to effectively turn consumers into power sellers, with electric vehicles in the garage, solar on the roof and apps on the smart phone, so his company is moving from being a traditional generator to a “customer service model.”
LeRoy Nosbaum, President and CEO of Itron, said he sees “mass customization” of electricity supply, as consumers “want it their way.”
Whatever the Customer Wants. Which Is…?
But just what consumers want is a key unknown. State regulators from across the country told of varying consumer response to innovations such as smart meters. The debate, said Michigan Public Service Commissioner Greg White, is over “who wants to do their own, and who wants us to do it for them?”
With electricity bills averaging just 3-4% of disposable income, speakers said the price incentive for customers to take an active role in managing their power use is often missing. Electricity “is boring,” said Crane.
Or as Wyoming Consumer Advocate Bryce Freeman put it, all the new gadgets and apps are great, but, “Do customers really want their iPhones to talk to their toasters?”
A parallel concern is cost. Theodore Carver, Chairman,President and CEO of Edison International, said in southern California, wealthy residents can afford to buy solar panels, leaving those less well off with higher rates to cover the company’s fixed distribution costs. Other utility executives echoed that worry.
Show Me The Money
Speakers said state and federal energy regulators need to create conditions that will allow innovation to flourish and let markets create transformation in the most cost-effective way, not try to pick technology winners and losers.
Regulators warn that’s easier said than done – Daniel Yergin of IHS CERA said the energy industry is a “very long-term business” forced to make 40-year investments when no one can see more than a few years into the future. Regulators across the country vary widely in what they consider legitimate costs for non-traditional spending like efficiency.
Ralph Izzo, Chairman, President and CEO of PSEG, said he’d rather invest in building insulation and efficiency for long-term savings, but New Jersey regulators don’t allow the company to make a return on that. So instead, he will decide in the next few weeks whether to invest more than $1 billion in a new natural gas-fired generator.
Thomas Farrell, the Chairman, President and CEO of Dominion, said he foresees having to invest as much as $10 billion in the next few years in Virginia alone, just to meet new demand and environmental regulations. “Where is the money coming from to pay for all these new ideas?” he asked.
Photo Caption: US Energy Secretary Steven Chu.