Disruptive Technology or Regulatory Challenge?
Rob Neumann works in the Energy Practice section at Navigant Consulting, as does Ralph Zarumba, a Director in the section’s Litigation, Regulatory, and Markets group. Mr. Neumann consults on behalf of electric and natural gas public utilities, energy companies, and government agencies on energy efficiency, developing technologies, regulatory issues, and other related matters. Mr. Zarumba specializes in theoretical and applied techniques of electricity cost and pricing analysis, market analysis, and asset valuation, and has testified as an expert witness before the U.S. Federal Energy Regulatory Commission and various state utility commissions.
The U.S. and other developed nations are undergoing unprecedented change in their electric and natural gas systems. One such change - the growth of of distributed generation, including solar, wind, localized turbines, and micro networks (defined collectively here as DG) - is disrupting established market structures within the utility industry. Regulatory incentives have become misaligned. Pricing no longer allows utilities to recover the costs of existing infrastructure. That portends of stranded investment within transmission, distribution, and generation systems.
Proponents of change may see this threat as a normal outcome from the inevitable introduction of disruptive technologies. Yet detractors claim that unwisely implemented DG poses an uneconomic threat to the traditional idea of a healthy public utility landscape. Either way, however, this one key fact remains: distributed generation will certainly prove disruptive if subsidies are provided to support these new technologies.