Severe upward pressure on electric rates after a decade of stability has regulators, legislators, utility executives, consumer advocates, and myriad other stakeholders searching for solutions....
The Color of Money
Wall Street sees “green” in demand response, energy efficiency, and distributed generation. Will the industry step up?
other green technologies. For a number of companies that are considering investing in infrastructure that supports DR, EE, and DG solutions, such as AMI, the infrastructure they are replacing is not fully depreciated. This occurs because the existing asset still is usable and meets the needs of the functions it was designed for. However, with the rapid advancement of technology, these functions are obsolete. The new solutions improve service and meet new customer expectations. Therefore, while the existing capital investment still may be usable, it will not support DR, EE, and DG or future business needs. Under a regulatory environment, unless a utility is allowed to accelerate depreciation of old assets, this will be a cost barrier to innovation and could prevent the rapid movement to newer technologies. Allowing the accelerated depreciation of these assets and the recovery of the remaining value removes this barrier. It also reduces the risk associated with implementing DR, EE, and DG solutions and supporting infrastructure investment.
Our recent research indicates that an opportunity exists for DR, EE, and alternative DG to become a sustainable and viable part of the future energy infrastructure. This opportunity is supported by Wall Street paying attention to these solutions as a means to increase earnings and assist in ensuring the sustainability of its business. Regulators will play a key role in the development of this opportunity and in utilities being able to meet the new energy challenges. At a minimum, a level playing field must be established among DR, EE, and alternative DG options and traditional investments for sustainability to take place. This will require leadership from both the utilities and regulators.