At the first of two 2013 MIT Energy Conference kick-off panels, industry experts discussed the future of the utility as we know it. Moderator Dr. Richard Schmalensee, an MIT Economics Professor, opened the discussion in front of the packed audience by stating the utility business is no longer viewed as boring as once it was. The ensuing debate may not have supported this notion, but it didn’t undermine it either.
Terry Boston, President and CEO of the mid Atlantic regional transmission organization PJM, was first to address the audience. He made a point of commenting on the integration of renewable energy into the grid, highlighting the good work Renewable Portfolio Standards have done and noting that, for the first time ever, natural gas beat out coal in their fuel auction, belying the impending fuel shift.
Next Bruce Braine, VP of Strategic Policy Analysis at American Electric Power (AEP), was called upon to comment on grid readiness for distributed renewable energy generation. He responded by stating that it’s a three-part question of economics: will cost of renewables continue to go down, will government subsidies and tax credits continue, and will rate structure move to a fixed variable design. After the economics are figured out, he believes the next step is moving to a smart grid, which will help facilitate multidirectional grid systems and advanced metering, important technologies that will support a dynamic two-way communication between users and generators. In his answer, Braine introduced a central theme of the discussion: Should or would a customer adjust usage if wholesale energy prices, ie spot prices, were totally transparent?
Lena Hansen, Principal at Next Generation Electricity Initiative at the Rocky Mountain Institute was next, providing two examples of signs of positive change among the utilities: the collaboration between Sacramento Municipal Utility District (SMUD) and San Diego Gas and Electric (SDG&E), and Austin Energy’s examination of rate tariff design with their Solar Tariff. In Hansen’s opinion, the SMUD and SDG&E collaboration is an early sign of development toward a viable future utility business model simply by the utililties’ openness to conversation which demonstrated a (relatively) proactive approach to innovation. She believes that collaboration among utilities will be key.
Brendan Endicott, Director of Advanced Demand Response at EnerNoc, rounded out the panel providing insight on business models for demand management, describing two key models: End-users who can reduce consumption when called upon by the grid operator and the integration of energy use into mobile technology. He also supported increased transparency of real-time, wholesale power prices.
Although the panel was keen on a business model that somehow incorporates a smarter way to align energy use with energy production, all panelists acknowledged the unrealistic expectations of a highly engaged end-user. Hansen commented that “Most of us don’t want to be day traders for $5 a day,” and that any sort of energy-use intelligence would have to be automated. Most panelists used the term “baby steps” to describe the reality of the near future. Dr. Schmalensee summarized the sentiment with his remarks on a utility’s ability to change: “Motion towards change is so slow. Glacial would be a kind term.”
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