Despite the uncertainties surrounding drastic changes in the utility industry, a group of utility executives expressed optimism for the future of the grid, their businesses, and innovative technology at a roundtable at the recent Empowering Customers & Cities executive energy conference in Chicago.
Ten representatives from various utilities from across the nation shared their struggles, ideas and predictions with Dominic Thasarathar, Autodesk strategist, and Martin Rosenberg, editor-in-chief of the Energy Times, moderators of the discussion.
From changing regulatory models, to developments behind the meter, to the continued rise of distributed energy resources, electric utilities are faced with a barrage of change. In such a dynamic environment, the need to master not just efficient delivery of electricity infrastructure, but make the right decisions about what infrastructure to build, and how to wield that infrastructure for the greatest benefit, has never been more important.
Utilities are unique in that they have an obligation to serve, “which is unlike any other industry,” Philip Moeller said. Moeller is executive vice president, Business Operations and Regulatory Affairs, at Edison Electric Institute and former commissioner at the U.S. Federal Energy Regulatory Commission.
“All of us, whether you are a vendor supplying the industry or you are one of the utilities in the room: We all have an interest in trying to move forward to make our customers’ lives better with the technology and resources they want,” said Greg Bollom, assistant vice president of Energy Planning at Madison Gas & Electric. “But getting to where we need to be involves a very complicated transition process, and I think all of us need to work together to try to find a way to make that work for everybody.”
The term disruptive has been used a lot more often in the utility industry recently. Disruptive means “relating to or noting a new product, service, or idea that radically changes an industry or business strategy, especially by creating a new market and disrupting an existing one” the Wisconsin executive said. In describing utilities, Bollom said “We have to look at ourselves as the disrupted and we’re trying to deal with and understand the disruptors.”
Disruption to a small extent has happened in all industries as well as in the utility industry. But now is different, according to one utility executive in attendance from a Southeastern utility who asked not to be named. “If you go back and look at energy efficiency and demand response that occurred in the 80s and 90s, that was regulatory, legislative type-driven change. This evolution is different in that it’s technology-, cost- and customer-driven,” he said.
As disruptors have entered the scene, general concerns about the role of the power grid have been raised across the industry. Will the grid still be important? Will it be obsolete? Many on the roundtable agreed that the grid was not going away. Many see the grid as becoming a platform, particularly at the distribution level, to deliver the services that customers want.
And expansion of the grid is needed.
Another representative from a national utility said that his utility still needs to make capital additions: “We are adding 50,000 customers a year, and they will need reliability. So we feel obligated to build the intelligent grid and serve those customers. I don’t think we can sit by and say we’re not going to do this because there’s remote chance that those assets are going to become stranded.”
That coming complexity of the infrastructure, however, has left utilities struggling with finding the right people with the right skillsets to help them advance their businesses technologically to serve the new utility customer. Thasarathar posed the question: “What kind of people do you need for this technologically driven infrastructure? Do you have enough of the right people?”
“We need the kind of people we can’t hire and keep,” said Gary Brinkworth, director of Enterprise Research & Technology Innovations at Tennessee Valley Authority. “I’m an engineer so I can say this: We need less engineers; we need more data scientists. The problem is we can’t attract and retain those data scientists, we might be able to attract them long enough for them to learn something, but then they leave for higher paying job.”
One executive said that he didn’t believe academia can produce what we need. “It’s going take such a combination of skills. You need an accountant, a financial analyst, a marketer, an engineer, a regulator and an innovator. All of those skillsets rolled into one,” he said. “The only way you get that is to grow it.”
Many utilities have added “innovation teams” to their companies to try to train and retain bright, innovative employees.
“I would add that innovators like to innovate. Even in our utility, we may be innovative, but it’s slow and for a lot of people who want to do that, it’s too slow. So the opportunities to innovate more quickly are enticing outside of the traditional utility model,” said a director from one of the utilities represented. “Slow regulation, those are good things in some ways, but for those who do have that drive to be involved in exciting innovations, it’s hard to find that. In a utility, when an idea is offered up, there’s often a ‘No,’ or ‘Not yet,’ or ‘Maybe in five years,’ and that quickly turns them away.”
Whether the regulatory process is working well and allowing innovation is a matter of some debate. Most utility executives agreed that to a point the process helps protect consumers and business, but technological innovations and the changing customer have moved too quickly for the changes needed at the regulatory level.
“I really think our sloppy regulation over the decades worked in terms of rate structures, but it didn’t fully reflect system costs, most of it being figured on the volumetric side. But we can’t get away with that anymore,” said Moeller, EEI. “If we want proper investment in the distribution side and to empower customers to use what the future grid will enable, we need to get that aligned correctly, and it’s going to take time and it’s going to be controversial. People will oppose it, but if we can get a better alignment of the fixed costs for the customers, as opposed to being on the volumetric side, I think we have a great future.”
Bollom, of MGE, mentioned his frustration with the system. “What I get frustrated by is our inability to move the regulators at the same pace. Government is designed to not make change fast. We are regulated at an even slower pace,” he said. “It’s hard for our young people who really want to change the world. “
A couple of the utility representatives agreed that technology providers could help with the regulatory situation. Answering Thasarathar, Bollom said “Be there for regulators, and I would say to be there without us with our regulators because it’s important for them to hear from somebody other than the regulated. For me, I can’t think of anything more important than to help communicate that message.”
Technology and the Future
First and foremost, the utility executives asked that new products and services be interoperable.
“Don’t ignore the operational side,” said the Southeastern utility executive. “Because you are getting everybody developing all these systems, they have got to communicate to be self-secure. If you have all of these little pieces that can’t communicate, it’s easy for the system to break.
He also agreed that technology should help utilities meet customers’ needs and wants.
“Given the opportunity, we’re going to come up with some innovative ways to work with our customers,” Bollom said. “Customers want to know that they’re getting good deal, and that they’re doing the right thing. If it’s a homeowner, they want to feel that they are environmentally responsible, that they are being as efficient as they can, that it’s a good deal. If they are a business, they also want to demonstrate to their retail customers that they are responsible businesses.”
As a result, Bollom said he is looking for technology that is in-home and in-business that interacts directly with the customer.
Utilities will need to change with their customers. “We’re going to be different, we’re going to have to be more nimble, we are going to have to be more responsive,” said Brinkworth of TVA. “It’s going to take a responsiveness that we haven’t had to exhibit.”
So utilities are not necessarily all looking at the change as disruptive, but are examining and analyzing regulation, technology, and customer demands to take advantage of the opportunities to make their futures.
The path is difficult – but must be traversed.
“I wouldn’t say it’s a smooth freeway,” Bollom said. “It’s more of a rough gravel road with a lot of potholes, and we need to find a way to navigate that in a way that works for all of us and I think we can help each other if we talk to each other along the way.”