The time-honored discounted cash flow method for determining appropriate utility returns falls short when interest rates are low. Inadequate ROEs ultimately increase cost of capital and wipe away...
The Top 10 Utility Tech Challenges
Innovation must play a key role in each company.
the meter, a portal helps distribution companies monitor equipment, detect and isolate outages, shed load with finer control, better optimize power quality, monitor distributed energy resources, and better control voltage. Hence, a portal can reduce energy costs for consumers and reduce various costs for distribution companies, while improving power quality for consumers and offering new revenue opportunities for service providers. It promises one of the biggest win-win propositions in the long history of electricity. 1
Challenge 5 Increase End-Use Energy Efficiency
One of the benefits of a consumer portal—reduced energy consumption and costs—calls for closer scrutiny. The reason is that the benefits of increasing energy efficiency permeate throughout the electricity supply chain and beyond. When end-use devices consume less power, less power generation is needed (which reduces corresponding environmental impacts), less power-delivery system capacity is needed, monthly energy costs decrease, inflation is held in check, and more funds become available for investment (thus stimulating the economy). For these reasons, end-use efficiency often is viewed as a resource. Tapping into this resource, many end-use consumers already have benefited from installing more energy-efficient equipment in their homes, offices, commercial establishments, and factories. Yet, a tremendous opportunity for further savings remains.
Traditional low-hanging fruit in this area, such as lighting, motors, and heating, ventilating, and air conditioning (HVAC) systems continue to consume far more energy than necessary. Artificial lighting alone consumes 20 to 25 percent of all electric energy in developed countries. A variety of innovative technologies can reduce lightings’ share of total electricity consumption, while providing additional benefits of increased worker productivity. At the same time, the opportunities for savings in the industrial sector are as widespread and diverse as the industrial facilities themselves. For example, in the energy-intensive aluminum industry, great energy savings are possible through advances in the Hall-Heroult electrolytic reduction process (the method of aluminum reduction or smelting currently used in the industry accounts for the largest portion of energy use). Across various industries, opportunities exist in the form of high efficiency motors, increased waste heat and material recovery, improved controls, increased cogeneration capacity, expanded use of thermal energy storage, and improved energy management practices. 2
Challenge 6 Improve the Effectiveness Of Power Markets
Power markets underpin all of the challenges discussed so far, including the power-delivery system, reliability, quality, distributed resources, consumer needs, and end-use devices. While markets have existed in various industries for a long time, power markets are relatively new, and we clearly do not yet know how to implement effective power markets in all cases.
The debacle in California a few years ago demonstrated the consequences of improperly designed markets. Yet power markets are being redesigned around the world, in some cases with only limited understanding of the implications of changes that are proposed or implemented.
Simulation tools offer opportunities to stress-test market designs before they are implemented. In this “wind-tunnel” approach, such tools accurately can model the complex interactions among various market participants, individual power markets, and the electricity infrastructure. Particular areas of market design that benefit from modeling are bidding strategies, resource adequacy, market power,