When microgrids are optimized in a smart grid, they’ll usher in a new era of utility resilience and flexibility. Get ready for dynamic microgrids.
Building the Next Generation Utility
Fundamental changes require bold strategies.
on a path toward a significant shift in energy and environmental policy. Even though greenhouse gas (GHG) legislation will provide much-needed certainty, the path forward remains complex. The government has to balance environmental demands while managing a significant budget deficit and an economic recession that leaves little room to increase rates. This dilemma was illustrated in the way multiple renewable portfolio standard initiatives were defeated in the ballots, including Proposition 7 in California. Clearly, companies in the industry will have fewer degrees of freedom in shaping their generation portfolios as regulation and legislation play an increasing role in mandating standards and fuel types, in some cases defying fundamental technological constraints.
In the short term, energy efficiency and conservation provide the most cost efficient and highest impact solution to addressing the environmental challenge. In the medium to long term, there will be a gradual evolution of the generation portfolio, with coal, gas, nuclear and renewables all playing a significant role in powering the nation.
• Theme 1: As renewable energy sources increase, winning utilities will need to be at the forefront of shaping the renewable generation landscape. The new administration is pledging more than $150 billion to be invested in clean technology over the next ten years. The question facing the industry is not whether this will have a significant impact, but rather how a utility should position itself to reap the benefits from one of the most promising growth drivers for the U.S. economy. Clean technologies will reshape the energy industry in the same way the Internet reshaped the IT industry. Winning utilities cannot afford to remain in the mainframe age as new entrants reap the benefit from clean tech growth.
Utilities will need to take a proactive stance toward a renewable strategy. An analysis of research and development (R&D) spending shows that while utilities represent 5.23 percent of U.S. capital spending, they only account for 0.067 percent of U.S. R&D spending. Although much of the R&D in the industry is performed by equipment manufacturers, the DOE and academic centers, utilities will have to take greater control over the evolution of technology. They will need to work with start-ups and research centers to drive and understand how to leverage new technology into their portfolios. In addition to centralized renewable sources, customer-driven distributed generation will play a core part of the country’s future renewable portfolio, and will provide either a competitive threat or an opportunity for growth.
• Theme 2: Gas will be the transition fuel of choice over the next 10 years or more. While demand for power will grow at a much slower rate, the industry needs to alleviate pressure on reserve margins and baseload capacity over the next 10 to 15 years. This will be compounded as old coal and dual-fuel units continue to be retired to meet new environmental regulations. In the short to medium term, new load requirements will be filled by natural gas for three reasons. It is the only option with short enough construction lead times, allowing utilities to meet immediate power requirements and alleviate short-term