Dive Brief:
- A new analysis from smart grid expert Sonita Lontoh identified the key challenges utilities are facing right now.
- Traditional utility business models that focus on return-on-equity for shareholders as the main profit point, and a cost-of-service model for customers will have to change.
- Lontoh said that a flexible, and expandable smart grid with excellent between-grid communication will be key to this change, and it must be the most cost effective option.
Dive Insight:
According to Lontoh, the key challenges are: Bringing in more intermittent energy resources, like solar and wind; integrating more distributed generation into the grid; environmental standards and regulations, such as the new Environmental Protection Agency proposals; modernizing the grid; balancing demand loads year-round and restructuring the business model.
So who is on their way to changing their models to fit this vision? Hawaii and New York, as well as a number of other states, are in the process of bringing out legislation that will be critical to achieving a modernized and integrated grid.
Some industry consultants have come up with their own models. One such model is Utilities 2020, which seeks to do “nothing less than changing the way utilities and their regulators think and behave.”
Peter Fox-Penner at industry analyst firm the Brattle Group thinks the change to utilities is now inevitable, it just remains to be seen how far they will develop. “These unprecedented developments will prompt utilities to undergo the largest and most significant changes in their history, transforming them from regulated commodity energy firms to low-carbon network operators.”