Published on January 31st, 2014 | by Giles Parkinson23
Why Traditional Utility Companies’ Days Are Numbered
Former head of US largest utility says regulations and business models will not change quick enough to save traditional utilities in face of solar.
Jim Rogers, the recently retired head of Duke Energy, the biggest utility in the US, has had some interesting things to say about the fate of the traditional utility, particularly with the proliferation of rooftop solar.
In an interview with Energy Biz Magazine, Rogers says there is no doubt that utilities are under fire from new technologies such as rooftop solar, and are in danger of losing customers to new players.
Indeed, if he were entering the industry now, that’s where he would want to be – in rooftop solar, attacking the market rather than defending it.
“The utility industry has been like the proverbial frog that’s been put in a pot of cold water, and the heat’s been turned up,” he said in the interview.
“And it’s been turned up slowly. The many challenges ahead are going to fundamentally change this industry.
“Leaders in this industry in the future are going to have to run to the problems that they see on the horizon, embrace the problems, and then try to convert the problems and challenges they see into opportunities to create value for their customers as well as their investors.”
This is not the first time he has said such a thing, though not quite as dramatically. Last year, Rogers warned that the progress in solar and storage would mean that customers may simply use the grid as a back-up some time in the future.’
Asked later in the interview what approach he would take if he were entering the industry now, Rogers initially replied that he would like to come back as David Crane, the CEO of NRG – the largest privately owned generator in the US – who has been extolling the virtue of solar and the transition that would likely create, and warning that customers were likely to disconnect from the grid if utilities did not evolve quickly enough
“Maybe I should take that back,” Roger added. “I would come into the industry as someone who is an attacker, not a defender. I’d want the solar on the rooftop. I’d want to run that.
“I’d want the ability to deploy new technologies that lead to productivity gains to the use of electricity in homes and businesses. I would go after the monopoly that I see weakened over the last 25 years.
“My goal would be to take customers away from utilities as fast as I could, because I think they’re vulnerable. Regulations will not be changed fast enough to protect them. The business model will not be changed fast enough.”
Rogers said all utilities should be making decisions based on the assumption that there will – some day – be a price on carbon. “Our industry needs to lead on environmental issues. We need to lead on productivity gains in the use of electricity. That’s a critical way for us to continue to reinvent ourselves as an industry.
Nuclear supporters may be cheered by his outlook for nuclear, which he said would be centred almost entirely around China, and the development of Chinese technology, including modular reactors.
“They will lead the world in the building and operating of new nuclear plants over the next 30 years.
“They will develop the supply chain and build nuclear plants in a modular fashion. We will have to change our rules and regulations and how we think about the Chinese. They’re going to bring us the nuclear technology to replace our existing plants at a lower cost and build new ones faster than we can.”