In 1995, only 2% of the global population had a mobile phone. Today 96% do. In just 20 years, the telecommunications industry has completely changed because of new technology. Apoorv Ghargava, an analyst at Opower, says a similar shift is happening to electricity utility companies. And it’s good news for customers and renewable energy.
For over a century, big companies have controlled our power supply. They’ve built large coal, gas, and nuclear plants and charged customers a regulated rate to generate and deliver that electricity.
But today, more and more homeowners and communities are generating their own electricity, through rooftop solar installations, for example. That simple reality, combined with the US economy’s increased efficiency, is forcing utilities to change the way they do business.
Just because homeowners have abandoned their landlines in favor of cell phones doesn’t meant the phone companies disappeared, says Ghargava. AT&T didn’t disappear with the rotary phone. They adapted.
Electricity companies need to adapt too. Some already are.
Consider New York State. Leaders there saw what happened during Hurricane Sandy. They know that their infrastructure is vulnerable to more frequent big storms. They also know that their residents want renewable energy and don’t want to spend public funds on costly dirty energy projects.
So Governor Cuomo launched the Reforming the Energy Vision (REV) project in 2014 to fast-track clean energy, save customers money, and increase reliability. One way to do this is to roll out more community-owned microgrids and electricity storage.
You’d think that New York’s utility companies would reject these changes, but Con Edison sees REV as an opportunity, not a threat.
“This is truly one of the most dynamic times our industry has seen,” says Sergej Mahnovski, Director at Consolidated Edison’s Utility of the Future. “By advancing change, utilities will need to invest in the infrastructure and systems that will become the backbone of future markets. But more importantly, utilities will invest in people, industry knowledge, brainpower and application skills.”
In other words, utilities should rethink the kinds of services they're providing customers in the clean energy era. From modernizing the grid and powering the new electric vehicle fleet, to developing software tools that help people manage energy better, new business models can support community efforts.
Hawaii is also aggressively adopting clean energy. This year, the state became the first in the country to mandate a 100% renewable energy supply by 2045. This ambitious goal has given Hawaii’s residents a chance to rethink the power system.
While shareholders in the state’s major utility, Hawaiian Electric, are considering a merger with NextEra Energy (a Florida company that owns 14% of installed utility-scale solar in the US), other residents are calling for a co-op model that would put more control in the hands of residents.
“Hawaii is at a crossroads. We have disruptive technologies that are changing how customers expect to get energy,” says Rob Harris, spokesperson with KULOLO (Keep Utilities Locally Owned, Locally Operated). “In [NextEra’s] model, they generate all the power and sell all the power. One would have to presume that is the model they want to bring to Hawaii. That is why we think the public option should be on the table.”
Similar conversations are taking place around the country, wherever rooftop solar is cutting into a utility’s traditional business model. Most states have net metering policies that allow solar PV owners to sell their extra energy back to the grid. As the cost of solar drops and more people switch to solar, threatened utilities are responding by attacking net metering with more fees.
Instead of fighting net metering, utilities should work with customers to develop new pricing models that acknowledge the growing prominence of small producers, according to the Rocky Mountain Institute. It would be a win for everyone involved.
“Let’s shift the conversation away from net metering, and start debating the electricity rate structures of the future.”
Environmental Defense Fund Attorney John Finnigan agrees. What’s needed, he says, are “Performance Based Rates” that compensate utilities not based on their costs (which is the current model), but on how well they deliver sustainable, affordable energy to consumers.
“Performance Based Rates” might sound like a pretty boring idea in the exciting world of clean energy, but it’s just the approach we need to get our electricity utilities into the 21st century.
REV-ing it Up in New York, Natural Resources Defense Council
Transforming Electric Utilities, Rocky Mountain Institute
Smart Grid and Clean Energy Go Hand in Hand, EarthShare