Can An Old Utility Learn New Tricks?
Originally posted at ilsr.org.
American electric utilities are creations of the 20th century, depending heavily on their protected monopolies to deliver economical electricity. But the growth in energy efficiency, cost-effective distributed energy like solar, and sophisticated tools for energy management (like smartphone apps) have introduced many competitive pressures.
Can we expect electric utilities to embrace the energy system of the future?
Arnie Arnesen interviewed ILSR’s Director of Democratic Energy John Farrell on WNHN’s The Attitude in March 2015, seeking an answer to this question.
Electric Utilities Play by the (Old) Rules
Arnie and John discussed the hesitance of utilities to embrace innovation and new, clean technology. In many states, utilities are fighting back against clean, local energy by fighting rules like net metering and proposing taxes and fees on solar producers.
John suggested that we can’t expect better if the rules of the system remain mired in the 20th century.
Utilities have been given monopolies and the charge of delivering reliable, affordable power. They’ve done that job effectively, to the exclusion of anything else, and the decades of inertia make it hard for utilities to change.
John shared an anecdote from his recent trip to Tucson, where a utility employee noted that their conservative institution doesn’t innovate, doesn’t do “beta tests.” The utility in question gets 80% of its electricity from coal, despite being in the sunniest climate in the United States.
The utilities are reluctant to change because the old rules meant they made money from the old habits: selling more energy and building more (dirty) power plants. But what many utilities don’t realize is that change isn’t optional, because the old way can’t be profitable anymore.
What’s the New System?
Electric utilities are used to having centralized control over the grid system, but it’s a monopoly that no longer makes sense. We no longer need to concentrate capital to build power plants because they can be built on rooftops and parking lots and open fields wherever there’s sun and wind. But we do need a facilitator to make sure that the grid infrastructure—the valuable network connecting all of these energy producers—can allow electric customers to transact with each other (perhaps instead of the utility).
It’s sometimes called “energy democracy.”
How do we Change the Rules?
Utilities will have to operate under new rules to move from centralized utility control to energy democracy. These rules will get them out of the business of selling electricity or building power plants and into the business of operating a public network for electricity system participants to transact with each other: a market.
Several states are already piloting these concepts, from Maine to California to New York. The basic premise is that the utility monopoly must be broken up, but primarily its monopoly over the distribution system—the network of poles and wires serving our neighborhoods. It’s on this network that innovation will be unleashed by customers with rooftop solar, electric vehicles, energy efficiency, and energy storage. But only if the electric utility doesn’t get in the way.
This article originally posted at ilsr.org. For timely updates, follow John Farrell on Twitter or get the Democratic Energy weekly update.
Photo credit: Guillaume Maciel via Flickr (CC BY-NC-ND 2.0 license)
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So utilities would now operate like ISP’s.
Unfortunately in my area I have a ‘choice’ of one land-line phone company, one ‘cable’ company, one water supply company, one water treatment (sewage) company, one refuse disposal company, one natural gas company, and one electric company.
I choose to not use the land-line company, and have a satellite TV system. I am going to get rid of either the gas or the electric company in the next few years, and possibly I will disconnect from both of them.
I am required by local laws (as I currently live in a city) to have the refuse picked up even if I recycle everything, and they require any occupied house to have a water and sewage connection.
Those things are not yet combined into my ‘taxes’ but the difference is only in the wording. I could see where the electric company could get the same ‘preference’ and end up in a similar place in my budget.
Yes, The current situation is like the ISP also owning it’s own version of the internet. Utilities need to be restricted to just concentrating on delivery rather than producing.
In effect, copy the UK’s national Grid for America.
Utilities are not going to change. Nor will they act as ISPs. It’s going to be a bloody war for a while. Here is how it will play out. Utilities will attempt to charge more than they are worth. Home owners will install batteries and go off grid saving themselves money. Utilities will shrink until they notice they can reclaim those that have gone off grid by simply managing their existing networks properly. Some CEOs though will have nothing to do with this and instead sell their assets for quarterly profits. In the end the industry is in for a huge shakeup much like the train robber barons of old.
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We already see what some of them do. EON divested its struggling coal business and split in two. The new business will provide services to customers and proclaims that they embrace green practices. The learned what tune to sing. ( and how to hide their failures and losses )
Its what businesses always do when they are going down. Sell assets, spin out losing biz, etc.
one must be very careful with analogies; they often lead to incorrect conclusions. The American grid is not like the internet in many technical ways.
It is true that technology changes society. The American grid is considered the greatest engineering boon to mankind; it has saved more lives and enriched others. It was formed on these axioms: safe, ubiquitous, affordable and reliable. Movements such as the rural electrification effort and engineering society codes addressed these goals. By it nature, it must have strict central control, or gigawatts will kill and destroy. This led to the abuses which creep into large “eternal” organizations, the utilities and their supportive mega corporations.
Ma Bell, a network based on relays, was destroyed by the transistor and chip. Within a decade after the break up, America lost the Western Electric interchangeability standards. The fiber optic big pipes changed society again. The ensuing chaos led to the dot. com market crash, multi billion dollar corporations which never earned a dime of revenue.
The grid is being destroyed, obstructively due to climate change, but from this article, primarily a hatred of big business and spin. The competing green technologies are inferior, and thus far more costly than the coal/ nuke base loaded grid. But a democracy has the right to commit suicide. Thus an isolated off- grid power generation should be legalized. It will evolve only for gated communities, the wealthy elite. This is common in other nations. The grid is old; failures will occur due to dead ended equipment. The result will be a weakened mix of isolated mini grids, incapable of networking. A roof top solar unit, or wind gen in PA will never feed NY city.
The old line utilities failed under the technical requirements of nuclear power. A reorganization occurred but our intellectual expertise died off. The new nukes will experience massive screw ups, E.g. Fukushima type events.
Times will get interesting, and painful.
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