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The Widening Technological Divide

Increased business and regulatory challenges have utilities lagging in investments to meet energy demand a decade from now.

Fortnightly Magazine - April 2005

moving through Congress until stalled with the rest of the 2003 Energy Policy Act legislation. However, to be relevant to the needs of the new century, these standards will need to move beyond the traditional "keep the lights on" level of reliability to reflect the more stringent requirements of the digital economy. Today, the inability of the nation's power system to keep pace with the escalating reliability requirements of a digital economy is already costing businesses and consumers at least $100 billion each year (about a 50 cent surcharge on every dollar of electricity purchased).

The cost of capital also is likely to remain elevated. For years, the financial community was willing to provide relatively leveraged investor-owned utilities with funding on favorable terms (compared to industrial companies with the same debt ratings) because of investor confidence in the predictable regulatory treatment of these costs. As regulatory treatment becomes more uncertain, credit ratings slip, and the financing costs for the industry have risen proportionally. In addition, replacing institutional knowledge as worker retirements escalate may particularly increase the cost of utility operations and maintenance. Moreover, integrating new technology into the electricity sector workplace will require a more highly trained workforce, which, in turn, entails higher wages for more skilled personnel and higher costs for recurring training.

A New Proposition

There are two general solution alternatives to resolving the electricity sector's growing financial gap. The first is reliance on public subsidies, but this is politically unattractive, runs counter to the business incentive goals of restructuring, and, based on experience, is likely to do little more than maintain the performance status quo —thus requiring ever higher subsidies.

The second alternative is to steadily raise the consumer value of electricity. The most important asset in resolving the growing electricity cost/value dilemma, and its negative implications, is technology-based innovation that disrupts the  status quo  and changes the rules of the game. This disruption begins by marketing the greater value of smart electricity services, rather than continuing to sell bulk energy below cost. The innovative technology opportunities for this value enhancement begin at the consumer interface. These include:

  • Transforming the consumer interface itself from a one-way energy "iron curtain" meter into a real-time, transparent, service portal that truly empowers consumers;
  • Increasing fundamentally the controllability, functionality, and resilience of the electricity distribution system through digital automation with power electronic controls (, FACTS);
  • Incorporating very high-power quality microgrids as capillaries within the electricity supply system. These could, for example, effectively utilize DC power to minimize digital disturbances, and to incorporate distributed/ renewable power sources. These microgrids would have the capability to expand based upon growing consumer demand; while
  • Enabling the true convergence of electricity and telecommunications into a smart, "Intelligrid" system powering the digital society.

In effect, the electricity supply network no longer will be artificially interrupted by an arbitrary meter, but will extend seamlessly to every consumer's end-use devices and appliances. The result, for the first time, would engage consumers directly in assuring the continued commercial success of the electricity enterprise in the most efficient manner, while also enabling integration