Utility challenges of 2012: the list lengthens

Who will take up the gauntlet?

Kate Rowland | Dec 15, 2011

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We always seem to greet the end of the year with lists. Publications do it (both online and in print), organizations do it, and people do it. It's a a virtual cleaning of the closets, allowing us each one more opportunity to look at our treasures before we ring in the New Year.

And how do we ring in the New Year? By wiping the closet clean (but for those aforementioned treasures) and starting over again with ... you guessed it ... resolutions and more lists.

With this column, I'm doing both: looking back, and looking forward.

As I mentioned in an earlier column, "The challenges of 2012: utility insiders share their thoughts," I reached out to industry consultants, analysts and researchers and asked them one simple question: "What is the biggest issue facing our industry today?"

The November/December issue of Intelligent Utility magazine featured 11 of these answers in our "Top 11 projections for 2012."

At the Knowledge2011 Summit, I asked the same question to utility CIOs, and operations and customer service vice presidents, and their answers, for the most part, were closely aligned with those of the consultants, analysts and researchers. And we've received even more input from the industry since then on this question.

Sensus vice president David Elve expressed the need for quantifiable industry success stories. "In 2012, we need to express our success in terms which can be understood and appreciated by all stakeholders," he said. "Success stories with metrics such as millions of gallons of fuel not used, 100s of millions of miles not driven, reductions in durations of customer outages, employee injuries which have been avoided and millions of tons of carbon not emitted all due to smart grid implementations. We have also enabled more customer control of their energy consumption and additional billing/payment options."

Clint Wheelock, founder and president of Pike Research, told me this: "One of the biggest issues facing the utility industry is that regulatory reform is stuck in the mud at the state level, with very limited prospects for meaningful progress during the next year or two. Policy issues that were gaining momentum a few years ago have now slowed, and regulators are very much in 'wait and see' mode, hit by fears of disrupting a fragile economy and responding to an increasing level of consumer pushback.
"This regulatory timidity is happening at exactly the same time that smart grid infrastructure deployment - and specifically AMI - is hitting critical mass," he said.

"The very moment when potentially transformative applications are finally becoming technically possible (e.g., dynamic pricing), utilities and regulators are pulling back, putting key elements of the overall smart grid enterprise at risk.

"In the midst of this timidity, all eyes remain on a handful of pioneering smart grid utilities to see which models will be successful. The smart grid industry will very soon need to shift from deployment mode to application enablement, and the success of those early pionees will be critical in paving the way for a new wave of regulatory action and utility investment."

Jack Ellis, a regular contributor to the Intelligent Utility discussion, looked at the regulatory issue, as well. "I think the biggest challenges will be getting regulators and stakeholders to decide what they really want, and figuring out how to get there. Unlike Chris King [eMeter's chief regulatory officer, who commented in the earlier column], I'm not sure we need a vision, because there have been plenty of those offered over the years. Instead, it's a matter of deciding what's important, understanding what those choices mean, and then charting a path forward. For reasons I only think I understand, this seems to be orders of magnitude more difficult for electricity than it is for other energy commodities, like gasoline," Ellis said.

He continued: "One of the best examples of contradictory policies concerns affordability on the one hand, which implies prices need to be low, and energy efficiency, which suggests energy is scarce and should be more expensive. There's no doubt cheap energy undermines the economic motivation for energy efficiency, so we effectively tax all consumers to subsidize a variety of efficiency measures in the hope we can reduce consumption and also keep costs low. Is this cost-effective? I'm not sure. Is it effective? I really haven't seen proof. Is it more sensible than allowing the price of electricity to reflect marginal cost and separately pushing appliance manufacturers to build better products? This latter approach has apparently had some impact in the market for automobiles.

"Someone at Enron once famously declared that electricity was the most volatile commodity on earth. That's only partly correct. It's also the most politically charged commodity in the U.S. And perhaps therein lies our problem."

Brian Sheets, CEO of Skyron Systems, submitted a cogent argument for the three-legged stool of strategy, standardization and installation. Because of its length, I'm unable to share it within this column, but you can find it by scrolling down to the comments here.

Gentlemen and ladies, the gauntlet has been thrown down. If we can identify the most important challenges of 2012, we can move to surmount them. I'm interested in your thoughts and comments. Which arguments do you agree with? Which do you take issue with? Let's hear your thoughts here.

Kate Rowland
Editor-in-chief, Intelligent Utility magazine
krowland@energycentral.com

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Comments

How do we communicate with consumers?

The electric sector remains regulated, and thus many aspects of it remain political as noted above by Jack Ellis. Among many important infrastructure initiatives is smart grid and advanced meter deployment. But consumers (who are voters) can become confused. As a result, the effectiveness of smart grid communications is important. We (DEFG) are conducting a survey on this topic and we invite interested professionals to participate through January 6th.

Here is the link: http://www.surveymonkey.com/s/DEFG_Survey.

All participants receive a copy of the results. Contact me if you have any questions: Nat Treadway, 713-729-6244 ior ntreadway@defgllc.com.

Shifting Sand

The utility industry needs to be aware of the shifting sand under its feet.  No industry is immune to change, and change is really the only constant.  Some of the latest examples to learn from, Research in Motion and the fall of the Blackberry from market grace.  They had proven products with a very wide acceptance, but they are now under pressure to simply survive.  The lesson learned here is that change will happen quickly once unleashed; will the industry be ready?   

 

Another recent example to learn from is in the solar panel industry and the fall out of major manufacturing players around the world when the markets were confronted with inexpensive panels made in China.  This is of particular note since it is much closer to home for the industry.  The lesson learned here is that others outside of the industry are looking to get a piece of the revenue pie and it is on a global front not just a local view. 

 

My projection is: as the personal computer drove the information industry, so will the smart meter drive our next recovery.  Its full impact on our lives and how we use and buy energy has not yet been fully realized.  Its impact will be profound on our basic living standards and will be felt around the world.  One simply has to look at the conversations going on around the world on the energy blogs.

 

Richard G. Pate

Pate & Associates, Principal

 rgpate@pateassociates.com 

 www.pateassociates.com 

 

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