Behind-the-meter energy threatens the utility business model. Does history offer a lesson for crafting a response?
Beyond The Downturn
Today’s challenges are transforming the industry.
early in the rollout, only a small percentage of utility providers are currently planning or actively deploying smart grids. The slow pace of adoption reflects some formidable obstacles. Consumers have yet to be won over to the idea of utilities taking a more active role in managing demand. With a few exceptions, regulators have not thrown their support behind the idea or mandated the use of smart-grid technologies on a broad scale. And there remains plenty of uncertainty over which groups—consumers, technology partners, regulators, or utility shareholders—will reap the economic benefits from the sizable investments they will be required to make. Solving this complex problem will take foresight and deft bargaining skills.
But initial results from early adopters like Austin Energy hint at smart grid’s promise. Serving 388,000 customers with more than 2,600 MW of generating capacity, the Texas-based company is the ninth largest public power utility in the United States. Under a mandate imposed by local regulators to reduce the level of demand by 15 percent and boost efficiency to cut peak loads by 700 MW by 2020, Austin Energy began phasing in a smart-grid system. To date, the utility has linked most residential customers’ homes and apartments by fiber-optic cable to monitor consumption patterns. Last fall, the company began installing software that will enable it to offer time-of-day pricing, adjust power flow remotely to balance loads, and purchase electricity directly from customers who install solar collectors. Already, the smart grid has helped Austin Energy conserve sufficient electricity to power 45,000 homes.
Adopting smart-grid systems will sharpen utilities’ talents for integrating new technologies into their operations. As they learn to do more with this underutilized capability, utility companies will strengthen their hand in forging joint ventures with promising green-tech start-ups, turning potential competitors into partners.
In an environment fraught with so many potentially game-changing challenges, utility company leaders have to be ready for any contingency. Those who can navigate today’s economic tumult while preparing for the disruptive trends that lie ahead are likely to emerge as tomorrow’s winners.