Renewable energy continues to fall in price, offering both residential and commercial utility customers more opportunities to produce their own electricity inexpensively. That’s increasingly forcing the electric industry to rethink its strategies and push for regulatory reforms, found a new Black & Veatch report.
The report from the engineering and construction firm, 2018 Strategic Directions: Electric Report, delves into the issues facing the electric industry and how it’s addressing its changing customer base. The report surveyed industry leaders and found that 71 percent of utilities are concerned about the “utility death spiral” that could be caused if they don’t implement alternative energy solutions or if regulations aren’t changed allowing them to be more flexible.
“Utilities must be nimble in making changes that align with growing clean-energy mandates. Failing to do so could drive away sizable commercial and power-hungry industrial clients with the financial means to turn to renewables or distributed generation,” said Ed Walsh, President of Black & Veatch’s power business.
Indeed, companies including Google, Apple, as well as Walgreens and others are increasingly turning to renewable energy to power their operations. These companies are sometimes working with utilities to source renewable energy but also are investing in their own renewable energy sources, sometimes selling excess energy produced by their solar and wind farms back to the grid, challenging the traditional utility model in the US and around the world.
“Those defections from the grid inadvertently would make the system more expensive by spreading its fixed costs among fewer customers and adding to the network’s complexity,” Walsh writes in the report. “Making a meaningful difference would require profit-driven utilities and the regulators who monitor them to reinvent their dynamic. Utilities must successfully balance what they’re able to do in a bureaucratic framework with being agile enough to adjust to a changing energy landscape.”
The report also found some utility leaders’ thoughts on integrating clean energy are changing. In years past grid modernization and improvements were central to utility strategies to maintain a reliable electric grid. Now, to facilitate more renewable energy, 66 percent of responding utilities said utility-scale energy storage will be the best option for renewable integration. Only 41 percent thought grid improvements will be the best option.
Almost 40 percent of those surveyed also anticipated that the industry will suffer without updated regulatory models that deal with renewables growth for both residential and commercial customers.
“This concept of ‘new energy’ is impacting the industry from all angles,” said John Chevrette, President of Black & Veatch’s management consulting business. “There are many challenges ahead, but utilities that can recognize the challenge, and embrace innovation, will be able to deliver the products and services that will define the future of revenue generation in the energy space.”Tweet