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Electric Companies in a New World

The marketplace is changing, the business model is evolving, and hanging over everything are huge legacy investments.

CHICAGO — The marketplace is changing, the business model is evolving, and hanging over everything are huge legacy investments. Energy utilities from Pittsburgh to Chicago -- from Utah to Vermont to Germany -- are investing in new technologies, practices and relationships to meet these challenges, and an all-star line-up of industry professionals was there to talk about it all in the “Utilities in a New World” session at Empowering Customers & Cities 2016.

The rise of the microgrid

Anne Pramaggiore, President and CEO of ComEd (and event co-chair) touched on several topics important to her company, including promoting new legislation for a clean energy future, providing income assistance to needy customers, meeting zero emissions standards, and increasing the security and resiliency of the power grid.

While quick to emphasize that there are no panaceas, she firmly believes that markets are the key to meeting most of these challenges, and those markets must transform themselves from pipelines to platforms.

To that end ComEd has invested in new products, in a new online platform market, and is sharing more data than ever before with its customers.

A test case for this new way of doing business is in the new Bronzeville microgrid. Located in the Bronzeville neighborhood on Chicago’s south side, it is an attempt to revitalize a community through a new level of engagement and connectivity made possible through technology.

“I think there is something in the convergence of all these infrastructures,” Pramaggiore said. “I think an urban setting is a great place to find out what you can do with those convergences.”

The new microgrid has been made possible in part through a $4 million grant from the Department of Energy. Microgrids may someday be the key to a new, distributed energy model that will be at once more robust and more responsive than the current one.

ComEd’s Solar Spotlight program -- which introduces Chicagoland high school students to solar energy and promotes STEM careers -- was key to both building capacity and community outreach for the project. And now the Bronzeville microgrid, in connection with the existing Illinois Institute of Technology microgrid, is part of the first microgrid cluster in the world.

But for all the promise it shows, the project is still in its infancy. “We need some good policy in this area to get us moving,” Pramaggiore said.

The German dilemma

Thomas Birr has a new job as the Sr. VP for Innovation and Transformation at innogy. He was previously the Chief Strategy Officer for RWE, Germany’s second largest energy utility. 

His new company is a spin-off of the old, an attempt at radical innovation -- even if it comes at the price of disrupting the core business. Management at RWE realized they were a sector set on a series of stranded assets. Meanwhile, falling energy prices were killing the business.

“We needed a structural solution,” Birr said. innogy was the result. While quick to emphasize that creating the new company was not simply a method of isolating toxic assets, he acknowledged that asking RWE to do what innogy is attempting would be to ask a lot of workers to dig the graves of their own careers.

“We have to run companies where we say to our workers, do your best, sweat your assets, but you’re still going to be gone in ten years,” Birr said.

And what is innogy attempting? To embrace the influence of technology, to make the energy sector a part of the sharing economy, and to confront the impact of abundance. To answer the question: what will the business model look like when energy is essentially free?

Offering choices

“Technology will bring options to my customers,” Cindy Crane, President and CEO of Rocky Mountain Power said, “and if we don’t give options to them they will go someplace else, regulations or no regulations.”

One of those options is solar power. Rocky Mountain has begun a 20-megawatt utility-scale shared solar project. Users can subscribe, monitor their usage and even make cost comparisons, all online. The plant goes live in Jan. 2017 and will be fully subscribed.

Rocky Mountain is also partnering with cities like Salt Lake City and Park City, Utah, on another subscriber solar program. The aim is for both cities to be 100% net renewable by 2032.

While solar is growing, Crane said that the cheapest way to address load growth is through efficiency. To that end they have made $255 million in demand-side investment since 2009.

And since coal remains such a large piece of the energy puzzle, Rocky Mountain is pushing for a coal risk mitigation fund as a vital piece of STEP, Utah’s Sustainable Transportation and Energy legislation. The hope is to de-risk the coal fleet without putting pressure on rates.

Keep it simple

Mary Powell, President and CEO of Green Mountain Power worries that the energy sector is on the verge of requiring a government bailout that will make the financial sector bailouts of 2008 look small by comparison.

She insists there is enough time to address the industry’s challenges, but that time is running out. “How,” she asks, “do we leverage transmission to eliminate $400 million in expenses we might need to make?”

Powell sees Green Mountain Power having an advantage many utilities don’t: agility. They are small enough that they can try new things, initiate new programs, faster and more efficiently than some larger companies.

“I think the real transformation is going to happen when we make things incredibly simple for our customers, businesses and communities,” Powell said.

Generation gap

Agility, also, is part of how Duquesne Light Company plans to confront its many challenges, according to Richard Riazzi, company President and CEO.

“We have a flat management structure,” Riazzi said. “That gives us an advantage. We can move quickly. The downside is, we don’t have a lot of the investment dollars we need to innovate.”

To create that innovation, Duquesne Light is turning to a new influx of younger employees. For many years, the company simply didn’t need to do much hiring. But now, with many of the Baby Boomers on staff retiring, Millennials are starting to fill key positions, and bringing a new attitude with them.

“People are getting really excited about the technology,” Riazzi said, “and about the possibilities.”

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