Horror Story or Happy Ending? Embracing Change in the Power Sector

by Sonia Aggarwal

For fans of wonky energy reports, Disruptive Challenges is the runaway blockbuster of 2013.  It's author, Peter Kind crafted a utility horror story worthy of Steven King, describing a death spiral caused by the seemingly innocuous solar panel.

This week, Kind addressed an audience of attorneys and others brought together by Energy Biz in Kansas City.

Mr. Kind summarized the take-aways from his report for the Edison Electric Institute, which will be quite familiar to readers of America’s Power Plan. GDP is unlikely to grow as quickly as it has in the past, Americans are moving from the rustbelt to the sunbelt, and electricity demand growth has been slowing or even contracting at the same time we need more capital investment to update our infrastructure. At the same time, we have only seen a tiny fraction of the potential for new energy efficiency, distributed generation, and demand response technologies, which are also poised to erode utility market share.

All of these pressures point to more competition in the electric sector.  Kind pointed out that utilities have several unique advantages to be strong competitors: access to low-cost capital, skills in building large-scale infrastructure projects, and experience interacting with a broad customer base.  But new entrants also have assets, including the flexibility to offer innovative new technologies, products, and financing to their customers.

But the most interesting thing about Mr. Kind’s update is how his thinking has changed since he released the report.  As a banker by trade, he wrote the report with the intention of calling out the need for regulatory changes to keep utilities’ balance sheets strong.  Over the past year, though, he has come to realize the inevitability of technological changeâ€"neither large utilities nor state regulators can stop the wave of innovation in energy efficiency, demand response, and clean energy.  It is time to look for bold solutions that will help us manage the transformation underway.

As a result, he calls on utilities to embrace the unstoppable change and look for opportunities within it.  “We need to move to a new paradigm where we need to think about deploying efficiency solutions as a way to optimize the customer’s value being received, [with]  the utility being compensated fairly for the value it’s providing for those customers.”

We couldn’t agree more. With the right policies and planning, the story of a changing energy landscape can have a happy ending.

For more ideas on models that work for efficiency and other clean energy resources, see Rethinking Policy to Deliver a Clean Energy Future and Utility and Regulatory Models for the Modern Era, from America's Power Plan.

 Sonia Aggarwal is Director of Strategy for Energy Innovation: Policy and Technology LLC, in San Francisco.

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America's Power Plan

America’s Power Plan is a response to the rapid changes in the power sector being driven by consumer demand, new technologies, and policy. These changes hold the promise of a cleaner, more efficient, and more secure power system for America, but are being hindered by outmoded policies and business models.  Curated by the Energy Foundation, in partnership with Energy Innovation, the Plan ...

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