Top 11 projections for 2012

Experts weigh in on the top challenges for the coming year

Published In: Intelligent Utility Magazine November/December 2011

Share/Save  

IT'S ONE THING FOR ME TO PROGNOSTICATE ABOUT 2012 industry trends using my own, admittedly somewhat murky crystal ball. A quick glance back at last year's Top 11 projections for 2011 shows I was right in 7 of 11 predictions, with only four being a little over-anticipatory in nature.
Electric vehicles did not, in fact, begin to push the limits of distribution transformers; intermittent renewable generators did not test the limits of stable, reliable power; energy storage is not yet front and center; and the jury's still out on venture capital and other industry investments.

So this year, I decided to widen the view. I asked 11 industry consultants, analysts and researchers to give me their top-of-mind answers-in only a few words or in as many as it took-to the following question: "What is the biggest issue facing our industry today?" I received both brief and lengthy answers, and each rang bells, identifying key issues that need to be addressed in 2012 . HERE IS WHAT THEY TOLD ME.ยป

Ralph Abbott
founder, Plexus Research, SAIC Energy, Environment & Infrastructure, LLC.

The problem? The progress in developing peak-sensitive rates that balance cost recovery, load shifting incentive, fairness, understandability and the many other facets of innovative rate design is negligible to almost undetectable. This is a huge challenge! The expected benefits of AMI and demand response are not being realized, except in tiny pilot projects.

Rate design is no walk in the park! Today utility rate designers are burdened with a multitude of social welfare and income redistribution objectives that confound pure cost-based rate-making. If we don't have simple, clearly understood time-of-use rates, how can we expect the consumer to respond or even participate, unless such rates are mandatory? And if the consumer cannot or does not participate, the expected demand response underpinning of many AMI justifications becomes a mere fairy tale!

Mark Gabriel
senior vice president, strategy and business process, enterprise management solutions, Black & Veatch Corp.

The No. 1 issue facing our industry today is dealing with pending regulations-the oft-cited "train wreck"- at the same time as managing rising customer expectations of service quality at a low cost during times of declining electricity consumption. This issue is not just about carbon, but rather how capacity will be met at a cost the public will tolerate.

The greatest challenge for the intelligent infrastructure in 2012 will be the deluge of data and the struggle to prove out the initial business cases which vastly overestimated the direct customer benefits (expecting end users to carry the proverbial benefit ball) and greatly underestimated the utility side benefits which ultimately will benefit customers. In order to prove the worth of the investments, utilities will have to make use of the mountains of information that are now flowing from smart technologies as they work to show prudency in the investments.

Ironically, the two challenges-proving the worth of smart grid investments (and not drowning in data) and meeting the overwhelming impact wrought by new regulations-meet at the juncture of intelligent infrastructure, as it represents one of the few ways our industry can better manage supply, demand, reliability, quality and security.

Stephanie Hamilton
smart grid R&D manager, global and regional solutions directorate, Brookhaven National Laboratory

I think the biggest issue is whether early smart grid deployments will receive cost recovery from regulators.

Patti Harper-Slaboszewicz
management consultant, Bass & Company

It is clear now to our industry that consumer opinions and experiences matter a great deal. Offering customers new products and personalized information is an appropriate path forward to show customers how the smart grid may benefit them. The customers are probably not interested in the effort it will take for utilities to successfully achieve this vision, but regulators and consumer advocates should take the time to understand the complexities that go into providing a secure and scalable customer platform.

Utility regulation in its present form remains cumbersome and expensive. Regulators should lead by example and require collaboration rather than continuing a system so dependent on contention and positioning. Technology advances are happening too fast to continue to regulate the industry this way. A recent example comes from the cellular world where we as consumers will now be informed when we are about to use up our minutes. Five years ago, that would have been great. Today, how many of us use our phone to talk?

 Doug Houseman
vice president of technology and innovations, EnerNex

Put up $5 million to create a 2,000-square-foot home that uses 5 MWh a year or less of electricity or equivalent, and does not have batteries (and overproduction of PV or wind does not count), and we will find people looking for better ways to build homes that use less energy and use more of their environment to a beneficial effect (earth-sheltered, roof overhangs, etc.), and then put the learnings into the building code.

The problem is not energy policy, but the unwillingness to put teeth in the policy we have. Want higher efficiency? Tax the daylights out of gasoline and non-EnergyStar refrigerators. Tax low-efficiency air conditioners and furnaces. Increase property taxes for old air conditioners and furnaces that do not have the level of efficiency that is needed. Then turn around and use the tax money to offer low-interest loans for top efficiency replacements. Move the EnergyStar bar every five years (some have not moved in more than two decades).

We have lots of goals that Congress has passed and the president has signed into law. Now they need funding and teeth.

Charles W. Newton
owner, Newton-Evans Research Company

The first thing that hits me squarely as the most important issue facing the electric utility industry is uncertainty over four things.

First, uncertainty over the lack of a long-term energy policy (or even a statement of goals and the means to reach these goals).

Second, a lack of clarity for a national regulatory approach to transmission policy (wherein federal, state, local and environmental concerns can be worked through in less than a year or so). This will surely have a positive effect on grid integration of renewables.

Third, a need for federal provision of underwriting for smart grid and infrastructure redevelopment programs during uncertain economic times. I believe a key to utility confidence in investing more in infrastructure and automation is the recovery of their industrial (and, to a lesser extent, commercial) customer base.

Fourth, there is a need for utilities to think outside the box to grow their business without having to rely on basic price hikes. That is, the industry needs to realize what great opportunities are out there for participating in evolving segments.

I believe there are multiple issues confronting the industry. There are different issues in different regions of the country, and issues vary among the different utility types (IOUs vs. Munis vs. Co-ops).

Richard G. Pate
principal, Pate & Associates

The issue of public expectations for smart grid technologies being set higher than utilities are capable of delivering anytime in the near future is the biggest challenge facing utilities in 2012. This will play out in outage restorations that take as long if not longer than before, as well as utilities not being able to deploy PEV infrastructure to meet market demand. These high-expectation failures will surface in public utility commission meetings as utilities try to get funding for the new technologies. The end customers will have not seen immediate tangible benefits, and they will push back against the rate increases for the technologies.

Howard A. Scott
managing director, Cognyst Advisors

I would say that because the federal government has not clearly defined the direction that's needed for the smart grid, the country is being split into "haves" and "have nots." The "haves" are utilities that have already started down the path to a smart grid and can offer their customers the benefits that it brings, whereas the "have nots" cannot. Recent state regulatory action only exacerbates this problem, making it more difficult for the "have nots" to move to a smart grid. The only solution is for the federal government to set this direction.

Dr. Zarko Sumic
vice president distinguished analyst, energy and utilities, Gartner Industry Advisory Services

The biggest issue facing the industry today is a lack of alignment of national energy policy, regulatory framework and utility business model.

Ken Van Meter
principal, energy and cyber security program, Booz Allen Hamilton

To me, the one issue that stands out is the lack of meaningful efforts and funding to develop, scale and implement storage in the grid at generation, transmission, distribution and end-user locations. Nothing has the potential to change the game so much as efficient, cost-effective storage, and yet the investment in it is small compared with things like smart meters, which don't have anywhere near the current and future impact.

Storage is also critical to the implementation and integration of virtually all alternative energy sources, especially those such as wind and solar that can never be continuous on their own, to microgrids, and to electric vehicles.

"One word, Benjamin - Storage."

Rob Wilhite
global director/senior vice president, management and operations consulting, KEMA

Utility executives I speak to are concerned about the current period of reduced load growth in their regulated markets due to the economic malaise, which impacts their ability to seek regulatory cost recovery on a number of investment fronts.

However, the more important consideration is how they apply new innovation and new business models today, as they seek value creation for their stakeholders when the economic recovery eventually does surface. Therefore, there is a need to revisit approaches that failed and succeeded in the past, as well as what is currently working in markets that are still exhibiting strong growth today (e.g., Brazil, China, India).

We will be exploring this topic throughout 2012 in our "Out the Door" column. If you would like to contribute your thoughts, please e-mail krowland@energycentral.com

 

 

 

 

 

Related Topics