A farewell to ... utilities?

Pathways to obsolescence, considered

Phil Carson | Feb 15, 2012


So I'm staring out the window, watching a bank of clouds roll the latest storm down from the Front Range to the high plains in Denver, wondering what my daily column will be about, with a blank page in front of me. Two hours are left in a day shortened by multiple interviews. Sword dangling overhead, etc.

I've filled enough columns banging utilities over the head with one admonition or another, knowing they're not really listening. Utility personnel may be listening, even interested, but no discernible changes are likely to result from my braying or even from real utility battles with, say, a city exploring municipalization or a campus building a microgrid. Nor will anything change soon with regulators, the ostensible gatekeepers of change.

Not being cynical, just realistic. But where does that leave the conversation?

American ingenuity, technology and self-sufficiency. Everyone's always crying for solutions, well, those three drivers will aid in the utilities' slide into also-ran status. Believe me, if utilities are exploring every avenue they can in terms of their morphing business case, their strategy  and the technologies and processes to get there, it's about holding together an unwieldy enterprise that is fast losing cachet among end-users.

So this column is about taking matters into one's own hands, which increasingly will become both the solution for homeowners and small businesses as well as the bane of utilities, particularly the investor-owned utilities. Why present this to a utility audience? Ponder that.

Then ponder this. I begin with energy efficiency in my home, so that I waste little to none of a precious resource. Then I manage my use so that's wise, effective and efficient. Then I add solar panels and produce my own power. If this arrangement is optimal, my utility buys back my surplus. If my system goes down, I rely on personal energy storage. If all else fails, I use my utility as a rare backup.

Trust me, I've done the math for my own home. Due to the current cost of solar panels and my home's orientation to optimal solar reception, the numbers don't quite add up. Personally, I don't have the location to fully exploit solar panels and I'm a tad shy of the necessary capital. So, my neighbors  and I band together for a neighborhood solar array and neighborhood storage. Pockets like that begin to grow and interconnect. Meanwhile, the college campus and hospital in my town invest in establishing microgrids for a similar level of self-sufficiency. Those pockets grow. Then my town, which cannot afford municipalization in the traditional sense, aggregates its own energy resources, perhaps even all the individual, neighborhood and community resources, and cuts a new deal with the local utility.

The twin drivers of change will be economics and environmental issues. Americans will want control over the energy variable that could cloud their ability to prosper and despite the backward-looking troglodytes who believe otherwise, the vast majority of Americans have already embraced the notion that our air and water are a global community asset that must be protected or we face expensive and deadly consequences. Conceptually, fossil fuels versus renewable energy isn't even worth discussing, except as one is phased out and the other is phased in. Lots of adventures and unknowns along the way? Of course.

Nothing earth-shattering here. All this is already going on, whether you like it or not, with or without utility approval or involvement. In some cases, a utility and a breakaway customer may maintain a symbiotic relationship. In other cases, it'll be a hostile breakup. Symbiosis would be considered the new metric for "success" by a utility, whereas hostile breakups just shatter a service territory into so many shards of glass, no longer useful or functional in any meaningful way.

Meanwhile, utilities will continue to shoot themselves in the foot, abusing the capital investment-cost recovery cycle, dumping the cost of big mistakes on their ratepayers, discouraging self-sufficiency because it conflicts with their business model, creating resentment and, in the end, motivating Americans to pursue their own solutions. It's already beginning to dawn on Americans that certain variables in their lives, such as energy costs, are beyond their control—until now.

Third parties will assist wherever they can, from domestic residential solar to neighborhood and community-level projects that largely cut the cord to centralized power. More nimble companies will figure out how profit from de-centralization. Having lost the upper  hand, having alienated their customers, having been too slow to really build an alternative business model, utilities will fade into the background of the energy equation, devolving into a diminishing role as a backup power provider of last resort. Meanwhile, the large commercial and industrial users continue their own march to self-sufficiency, creating a pincer movement that squeezes utilities further down the path to obsolescence.    

In my view, none of this is original or very future-oriented thinking, nor cynical. The only remaining question is: how long before these trends dominate and make the present-day arrangements utterly unrecognizable?

Now I'm staring out the window again, and the horizon is slightly more obscured as the clouds roll a bit lower, a bit closer. I can't quite see the outlines of the mountains on the horizon anymore. When you look directly into an oncoming cloud, it can be difficult to judge its trajectory and speed. So all I can say is that this brief mental exercise simply reflects what's already happening and as these developments gain ground they'll make moot much of the power industry's conversation with itself. I just can't say how long that'll take. I'd guess it could be within a generation, less than two.

Phil Carson
Intelligent Utility Daily


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Add a kicker

Excellent article, except that your conclusion leaves the utility leadership yawning and back to business as usual.  I'd like to see you develop the conclusion further with multiple scenarios. leading to the same end, but achieved in less than a decade, not a generation or two. Several conditions might bring this about: (1) Energy crises resulting in skyrocketing energy prices (perhaps precipitated by Iran cutting off shipments of fuel to Europe). (2) Technology breakthroughs, e.g.  solar roofing shingles, storage, distributed generation.  (3) Just enough tangible support to kick start microgrids for proof-of-concept (as you know microgrids received zero dollars from the $4B+Obama stimulus grants)... plus several more. The cumulative potential may be compelling and send a more serious message to utilities and regulators.

Best regards,

Lester J. Larsen, Jr.
Larsen Consulting International

Thanks, let's consider

Constructive thoughts, thanks.

Let's examine them. Utility executives have proven fairly impervious to developments outside their control, so I think I properly acknowledged that they're not listening to me.

An oil embargo against Europe might or might not have any affect on global oil prices, which if they spiked, would possibly impact utilities by boosting electric vehicle sales, but not so much electricity prices. Solar panel costs already are dropping and yes, solar siding and shingles would give uptake a huge boost, same with small-scale energy storage, which would go hand-in-hand with solar. With our enlightened friends in Congress, don't expect any support for microgrids or any non-fossil fuel subsidies for the foreseeable future. Look to the military and enlightened organizations such as the University of California San Diego for microgrid innovation.

But all this strikes me as obvious and glaring trends. Unless someone actually uses a rod on utility leadership and regulators, they won't see the edifice crumble until the tremors indicate it's too late.

That said, I see some utility examples of progress in action. I won't mention specifics to keep my phone from ringing off the hook.

Meanwhile, individual Americans and enlightened groups will lead the way and at a certain point, knowledge will spread, prices will fall and change will happen. Probably just as utilities turn to dynamic pricing and customer segmentation......

Regards, Phil Carson