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Smart Grid: Wholesale Market Realities

Granular customer data will revolutionize megawatt markets.

Fortnightly Magazine - September 2009

due to loss of native load, increased generation availability, and expansion of demand-side programs. However, it will remain one of the premier avenues to increase earnings and cash flow for utilities and power providers.

Today, utilities and power providers approach the wholesale power business as a bridge between generation and retail, much like the link between supply and demand. The deployment of smart technologies will blur these lines. Accordingly, the distinction between wholesale and retail markets slowly will disappear. Utilities and power providers won’t be able to conduct their operations in a siloed manner. As demand-side assets—EE, conservation, and DR—gain scale and expand, the need to simultaneously coordinate the dispatch of electric supply and demand resources will require greater and greater visibility and real-time coordination across the electricity value chain. A new operating model and business processes that will provide for better coordination of supply and demand will emerge. This new model will help companies crunch data that is generated by smart technologies, ascertain patterns in increasingly unpredictable customer energy-consumption behavior, and coordinate appropriate responses. These capabilities or skills will distinguish the winners from the rest of the pack. It’s unavoidable that over the next decade, large central-plant generation facilities will remain a dominant part of the electric-supply equation, but demand-side assets will become a greater part of the whole equation. Regardless of whether these assets are fossil-fuel, nuclear, wind-powered, EE or DR resources, the winners in a smart technologies world always will be able to optimize the entire wholesale portfolio, having a mixture of energy management and energy sales. To achieve such vision, high-performing companies will embark on a three-phase journey:

Phase I, Build the Foundation : Change operating model and organizational structure, and implement new processes to allow the incorporation of smart technologies;

Phase II, Grow Integrated Wholesale Portfolio : Build integrated wholesale products and services portfolio enabling deployment of supply-and-demand assets, including energy efficiency and DR resources;

Phase III, Expand Business to Fulfill Vision : Optimize the entire wholesale portfolio, using a mixture of energy management and kilowatt-hour sales

Although this won’t happen in the next five years, smart technologies eventually will create markets comprised of one customer. Utilities and power providers will no longer segment their customer base into just a few categories. They instead will view their constituents as a large portfolio of individuals and will have access to the information necessary to tailor products and services to each of these individual customers or groups of customers. This is the future that utilities and power providers must begin preparing for today.