Opportunities Await Utilities and Co-Ops in 2016
A quick look at developments in the public utilities and rural co-op markets reveal some opportunities (and challenges) for discussion at the planning table.
“Smart Homes” Are On The Rise
Tech-savvy homeowners are making investments in equipment, appliances, and software to help them lower energy consumption, lower household costs, and do their part to make the electric grid run smoothly. In fact, research by Parks Associates suggests that 18% of U.S. broadband houses owned at least one smart home device in 2015, up from 13% in 2014.
In a perfect world, a common control language would enable residential and commercial devices to communicate with the grid. Coordinated power management could minimize energy use during high demand periods and/or shift power use intervals when services are available at lower rates.
As has been amply demonstrated in other settings, industry standards take a long time to negotiate, solidify, and implement. It may be time for utilities and co-ops to take the lead in advancing this cause.
Communications Infrastructure Needs OverhaulIf the future contemplates millions of smart devices that talk to the grid, public utilities and co-ops will need a communications infrastructure capable of sending and receiving large amounts of data. These networks would also accommodate:
If the future contemplates millions of smart devices that talk to the grid, public utilities and co-ops will need a communications infrastructure capable of sending and receiving large amounts of data. These networks would also accommodate:
- An advanced metering infrastructure that aggregates usage data at headquarters for energy management and customer billing
- Cloud-based computer applications for utility engineering and operations
- Central dispatch and its outreach to work crews
- Improved SCADA links between control centers and between G&T cooperatives and its members
- Video feeds between offices and substations
- Enhanced services for members
Companies appear to favor fiber optics as the means to “future proof” their communications requirements. Some finance their networks in part by leasing out their “dark fiber” to third parties. Some believe excess capacity could rise to direct member services. The latter could bring much-needed bandwidth to rural America while creating a revenue stream for the co-op.
Some companies may find a private fiber network to be cost-prohibitive. Partnerships with third-party fiber providers could open the door to below market rates in exchange for access to the co-op’s right of way for transmission lines.
No matter which path a company pursues, implementation takes time. If plans aren’t on the drawing boards, 2016 would be an auspicious time to begin.
Battery Systems Spark Customer Interest
Home-based solar panels have been the all the rage for the past few years based on the underlying economics of the technology, the availability of government subsidies, and creative approaches to service delivery (e.g., Solar City). Battery packs may be poised to realize a similar boost in consumer and commercial interest.
Tesla Energy’s introduced an affordable residential scale battery system in 2015 and reaped a full book of orders for 2016. Dubbed the “Powerwall,” this battery-operated power system provides a cost-effective solution for customers in outlying (rural) areas and for those experiencing quality and reliability issues. Large-scale battery packs have also taken root in commercial markets. These systems enable companies to cover some or all of their power demands during periods subject to premium rates.
While neither of these developments reflects a major shift in power generation for the grid as a whole, they may present an opportunity for providers to aggregate demand-response battery systems and make them available on a fee-for-service basis.
FERC Order No. 1000 Takes Effect
In the wake of the U.S. District Court of Appeal’s sanctioning of Federal Energy Regulatory Commission’s (FERC) Order No. 1000, public utilities and co-ops are moving forward with regional planning for grid investments. These forums will be taking public policy requirements into account when defining transmission needs – e.g., carbon reduction and renewable energy integration. They will also explore opportunities to increase efficiency and lower costs to satisfy their mutual transmission needs, and they will provide an equitable means to allocate costs for facilities based on benefits received.
These developments (and others) are changing today’s power generation and distribution landscape. Aldrich can provide the analytical support to assess the relative merits of a variety of investment opportunities and their impact on a company’s profitability, financial health, and risk profile.
Contact us to secure a committed partner in your planning process.