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.”
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.
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.
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:
- Assess technical and economic DG potential within the service territory
- Analyze customer load profiles and rate structures to determine who can benefit most from DG
- Identify locations on the distribution system where DG provides net benefits to the grid
- Restructure customer rates to remove cross-subsidies and compensate DG customers fairly for benefits to the grid
- Implement location-based incentives to encourage DG adoption in the right places
- 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.
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: http://bv.com/reports/electric