The latest dispute over PJM’s bidding rules has raised the level of uncertainty in organized electricity markets. Efforts at reform have created a market structure so jumbled that it can’t produce...
The Widening Technological Divide
Increased business and regulatory challenges have utilities lagging in investments to meet energy demand a decade from now.
of cleaner distributed generation technology as a power supply system asset.
It is quite clear from extensive stakeholder discussions that consumers at all levels increasingly expect, and are hungry for, higher value and more flexible levels of electric service that they can control. They also are generally willing to pay accordingly if they can be assured of realizing this result. In the end, consumers want to better control their monthly electricity bill based on the value they receive. When electrons and information are merged, consumers can create customized services that are tailored to best meet their individual needs. An arbitrary, opaque, rate structure is not an acceptable surrogate in today's reality.
As a first step toward offsetting the impact of higher electricity prices, the electricity enterprise needs to design innovative offerings that meet the needs of diverse consumer segments. Differentiated offerings will, however, require improvements to the electric power delivery system that enhance the functionality of various utility services. For example, real-time connectivity between the utilities and the consumers will facilitate automated meter reading, theft detection, outage management, and a variety of new offerings and consumer benefits such as:
- Consumer-managed demand-response and real-time pricing;
- Energy management services, including power quality;
- Communications and data services; and
- Personally customized home automation.
These transformed networks will place new levels of comfort, convenience, speed, efficiency and adaptive intelligence at each consumer's finger tips.
Growing emphasis by a variety of major technology based firms, indicates that home automation will emerge as a major consumer market during the next 10 years, as "ubiquitous computing" becomes a technological reality. Home-based "gateways" will enable providers (including utilities) to offer bundled, whole-house energy/communications systems connecting HVAC, security, lighting, consumer electronics, PCs, and other appliances, accessible through any Internet connection. This is a significant new market opportunity for electricity distribution utilities that invest in technologically advanced distribution systems.
In summary, this smart infrastructure system modernization can comprehensively resolve the combined vulnerabilities of today's power system-reliability, power quality, and system security, as well as declining consumer value. Simultaneously, this system modernization will raise efficiency and thus reduce both fuel and capital costs.
Policy Initiatives: The States and Feds Must Take Action
Various state and federal policies, other than tax-based subsidies, are needed to incent electricity sector investment. There are numerous precedents for publicly supported mechanisms that, if applied to the electricity sector, would boost investment.
Three such policy initiatives broadly are recommended by stakeholders to fundamentally increase investment confidence in the electricity sector. The first is the establishment of mandatory federal electricity reliability standards. As noted earlier, such standards should anticipate the need for reliability enhancements appropriate to the digital economy and to greater infrastructure security. There clearly will be greater consumer confidence in the electricity sector after it establishes, and adheres to, up-to-date reliability standards.
The second measure to reward investment in the electricity enterprise is the establishment of federal electricity efficiency standards. The need to use energy more efficiently grows in importance as the prices of oil, natural gas, coal, and even uranium are reaching historic highs. Certainly, a variety of