Clean Power

Published on August 15th, 2014 | by Roy L Hales


The Portrait Of An Industry At The Crossroads

August 15th, 2014 by  

Originally Published in the ECOreport

Courtesy Black & Veatch

Courtesy Black & Veatch

Black & Veatch polled 576 industry participants for its “2014 Strategic Directions: US Electric Industry.” At one point they referred to it as the portrait of an industry at the crossroads.

Perhaps the biggest challenge to electric utilities today is the fundamental threat to their business model posed by distributed generation,” said John Chevrette, President of Black & Veatch Management Consulting, in the introductory video. “When I say distributed generation I’m talking about plants other than or sources of electric power other than large centralized power plants. These could be distributed gas powered generators out in communities. It could also be rooftop solar facilities.”

Courtesy Black & Veatch

The participants in Black & Veatch’s survey described a recovering industry. 42.6% were recovering slowly, but not back to historic levels. Another 32.1% said business was flat or declining. Only 5.8% claim to be “growing significantly” and to have “surpassed historic growth rates.

This may be something to remember the next time you talk about the disruptive effect of rooftop solar.

The participants in Black & Veatch’s survey were asked to ranks the most important issues to them, on a scale of 1 to 5. The top ten scored relatively close together.

Courtesy Black & Veatch

The biggest issue was reliability, which scored 4.64 overall.

“Environmental regulation” was next, at 4.50.

Many are closely watching to see if state and federal regulators will fully place air and water challenges in the midst of the broader climate change discussion, while carefully balancing the cost of requiring new environmental technology on a recovering U.S. economy,” Black & Veatch explained.

Their next concern, at 4.31, is “economic regulation.”

It is interesting to note that two of their other issues are related to natural gas. This was the “preferred option” of the new technologies coming online.

Half of the respondents said they were replacing their coal and nuclear facilities with natural gas.

11.4% said this provides “fast response to back-up intermittent renewables.”

They were very clear about what was needed to integrate these new variable energy sources. Only about 27% called for a Smart grid and 42% said upgrades to the transmission system. Almost two thirds answered that energy storage was needed, yet only a third were doing anything about this.

Though a substantial number of those had not progressed beyond a feasibility study, more than 70% of respondents believe there is even a stronger need for energy storage to meet peak energy requirements. The underlying message: energy storage is coming.

Courtesy Black & Veatch

Given the press that the “net metering wars” have received, it is interesting to note that less than 46% of utilities think of net metering as something that hurts them financially.

One of the most intriguing chapters – from a green perspective – is called “Flipping the Distributed Energy Equation.” Instead of reacting to solar, Black & Veatch lay out a plan by which their customers can seize the opportunities:

  1. Assess technical and economic DG potential within the service territory
  2. Analyze customer load profiles and rate structures to determine who can benefit most from DG
  3. Identify locations on the distribution system where DG provides net benefits to the grid
  4. Restructure customer rates to remove cross-subsidies and compensate DG customers fairly for benefits to the grid
  5. Implement location-based incentives to encourage DG adoption in the right places
  6. Develop proactive transmission and distribution plans to accommodate DG growth

Black & Veatch is encouraging utilities to participate in the development and financing of solar. They have taken some of their leading utility customers through the first four steps of this process.

“These clients understand that when customers can adopt DG and receive fair compensation while avoiding negative impacts on non-DG customers, everyone wins.”

A similar approach is already working in Europe, where Germany’s four leading utilities have already founded renewable arms.

Courtesy Black & Veatch

The key question, from a renewable perspective, is:

  • Will utilities entering the solar arena be funded by their ratepayers? (i.e.-  are they rate based?)
  • Or will they found a totally  independent arm, that competes with existing solar installers on an equal playing field?

Chevrette looks at this from another perspective:

“One of the bigger concerns with respect to distributed generation is the idea that every Kilowatt that’s produced and consumed off the electric grid by a third party or by a consumer is a Kilowatt that the utility is no longer selling or being compensated for. And yet the utility still carries the burden for operating, maintaining, and upgrading the vast majority of infrastructure that’s used to transmit and distribute electricity.”

Black &Veatch’s “2014 Strategic Directions: US Electric Industry” looks at a great many issues. 

With extreme weather events becoming common, it is interesting to note that 56.9% were updating emergency response plans and another 44.2% were identifying critical assets. Only 22.5% were not felt the issue was not

Close to 70% of respondents believe that in the next five years their company will face challenges because of workforce retirements. There is also a lack of qualified staff to replace them. The most crucial sectors are power engineers and management.

The most accurate depiction of this report is the document itself, which you can access for free through this link:

Check out our new 93-page EV report, based on over 2,000 surveys collected from EV drivers in 49 of 50 US states, 26 European countries, and 9 Canadian provinces.

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About the Author

is the President of Cortes Community Radio , CKTZ 89.5 FM, where he has hosted a half hour program since 2014, and editor of the the ECOreport, a website dedicated to exploring how our lifestyle choices and technologies affect the West Coast of North America. He writes for both writes for both Clean Technica and PlanetSave on Important Media. He is a research junkie who has written over 1,600 since he was first published in 1982. Roy lives on Cortes Island, BC, Canada.

  • I only read the post. Did not watch the video and did not read the BV report. I’m confused. The post is a bit scattershot. There’s some things concerning utilities on the one hand and other things concerning utilities on the other. That’s what I got out of this. It may be essential to break the BV report summary/review into several blog posts, where each post focusses on one issue. Ending with a recap post. The BV report seems like an essential read.

    Here’s an interview from Midwest Energy News, one of my favorite blogs. The interview is between MEN and a former utility regulator and lawyer. He basically says the issues is with us humans and all our stupid self interests, not so much technology and engineering. That was paraphrasing his words. So pretty much in agreement with what the BV report is saying with the list of concerns utilities have going forward: reliability, environment (CO2 emissions), etc.

    “A New Vision for Utilities”

    • eveee

      One of my favorites also. It remains to be seen if the utilities can accept distributed energy or whether they continue to fight it. Further, the role utilities play is changing. Utlilities are monopolies. They should not be allowed to compete in the distributed energy market which is open. We need a non monopoly model. Ideally, we would have a publicly owned transmission system, like a superhighway, operated for the common good, and we could have competition in generation. The deregulation of utilities has resulted in neglect of the transmission system and overcapacity and stranded centralized power plant assets. The problem is that if the utility sell the idea of more demand to the PUC, they can justify a guaranteed rate of return on their investment. That model is broken. That model is actually accelerating the utility death spiral. Some say a utility cannot go broke. Thats wrong. If O and M is high, and consumption is low, the utilities can get in a cash-flow crunch. They wind up with a too high amortization bill and are forced to try to sell the assets. Guess what. No takers. If the crunch is bad enough, they declare bankruptcy. The PUC may not bail out all utilities.

      • eveee, nicely said. It’s a crazy world we live in. I’ve stayed away from specific technology and looked at it like this: 1) climate change acceleration (reduce CO2 global levels), 2) straighten out policy with thorough problem definition, 3) land, water and air impacts of a technology/process throughout project cycle, and 4) may the best plan win. Our country is so big and our energy needs so great, there has to be a balance between government and private sector. With 310 million and counting in the country, it’s best to plan ahead. Your analogy of superhighway is apt. HIghways were a government paid for build. Of course private contractors built the highways. However, this infrastructure spurred much of our country’s private sector growth. I sometimes feel like many don’t understand stuff like this.

        • Matt

          Interstate system was original fund as a way to move the military around quickly if needed. The was expanded because of economic impact. Now falling down, because to few in confess have the will to tell their votes it cost money to maintain those free road that they and business us.

      • IMPOed

        Utilities Are Monopolies, they also refuse to spend one thin dime they don’t have to, to maintain and distribute power to the multitudes,,
        Privatizing profits and socializing losses is how the game is played.
        The only advances we make are through government programs, as broken as it is,,,

        • eveee

          Lets push for public grids, then. Did you know that up til now, Texas was its own grid, cut off from the rest of the states? That the grid is divided into many ISOs that do not always cooperate with one another? That the way ISOs run is different in different regions? That states disagree on how energy works and that blocks progress in making the grid better? That private ownership and deregulation left the grid badly in need of updating? All because we don’t have a national grid. We have a hodge podge. Its time to get new millennia and get rid of the Model T we have now.

          • IMPOed

            Absolutely, the job creation would be phenomenal, it could be a technological masterpiece with all states providing and distributing power with renewables and other means as necessary, also encourage personal homeowner supply, all new construction to have ample supply to satisfy there own needs plus inject unneeded power back into the grid,, but we have war machines to build for police departments and countries to invade,, :>( forgive me, forever the “optimist” of our government!

          • JamesWimberley

            Ground has still not been broken on the giant Tres Amigas interconnect (link), the key facility for creating a national US grid.

  • vensonata

    If I held stock in utilities I would definitely be selling and moving to safer places about now…or yesterday.

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