The Changing Utility Industry- 2015

Transcription

1 The Changing Utility Industry Peter Fox-Penner Presented to CleaResult September 16, Views expressed in these slides are solely those of he author unless otherwise noted.

2 Agenda Topic 1: Change Drivers Topic 2: New Business Models Topic 3: Recent Developments 1 brattle.com

3 What s Going On Out There? Long term load growth is slowing down and going negative in some areas The smart grid is changing Cost of renewable energy is declining fast especially PV solar The policy pressure to decarbonize electricity is unstoppable The cost of electricity storage is dropping steadily: Grid Resilience is an important new dimension of reliability 2 brattle.com

4 Smart Grid Impacts A new ecosystem of interdependent controls is developing Meshing of several systems: Advanced Metering Infastrucutre (AMI) Customer Information Systems (CIS) Operations Management Systems (OMS) Traditional SCADA Load forecasting Demand Side Management (DMS) Grid Edge Taxonomy Source: Grid Edge, GTM Research, brattle.com

5 Declining Solar Costs & Fewer Barriers Technological advances have driven module costs down and third party financing has expanded the residential market for rooftop solar Utility scale solar is about half as expensive on a per MW basis compared to residential rooftop solar systems Residential Installed Costs with Decline Curve Utility Installed Costs with Decline Curve Source: Bruce Tsuchida, Comparative Generation Costs of Utility Scale and Residential Scale PV in Xcel Energy Colorado s Service Area, Prepared for First Solar by The Brattle Group, May brattle.com

6 U.S. Carbon Policy = New EPA Rule + Executive Action + State Actions In August several changes were made in the final rule: 3 Building Blocks, not 4 Building Blocks quantified at three regional interconnect levels, trading mechanism allowed Glide Path shifted backwards 2022 & 2030 goals States required to explicitly consider reliability issues Final Rule Emissions Rate Reduction % Source: E&E s Clean Energy Plan Hub 5 brattle.com

7 International Carbon Policies & Reductions More than more than 40 national and 20 subnational jurisdictions have carbon pricing, covering 12% emissions and creating $50bn in value Mexico, Chile, British Columbia, and South Korea all have national carbon pricing China is the largest CO2 emitter and is responsible for >29% of global emissions Solar fueled transformation underway in India Japan s government also investing in solar Source: State and Trends of Carbon Pricing, Prepared for The World Bank by Ecofys, May 2015; Wikimedia, Dawn View north from the Shoin Japan Study center. At right is a Kansai Super. Lowell Silverman. 6 brattle.com

8 A New Driver: Resilience Utilities adapting to climate driven damage Hurricane Sandy the new future for utilities? Growing interest in microgrids as a resiliency investment Impact of Extreme Events Multi Year Drought Derating Model Source: Quadrennial Energy Review, Department of Energy, April 2015.; ERCOT Long Term Supply Assessment, Energy Reliability Council of Texas, brattle.com

9 Agenda Topic 1: Change Drivers Topic 2: New Business Models Topic 3: Recent Developments 8 brattle.com

10 Traditional Industry Structure Traditional Public Power Competitively Supplied, Customer by Customer Grid Supplied Generation Distribution Utility Energy Management Services Energy Efficiency Local Renewables Power Lines From Centralized Power Image Sources: Flickr DC parking lot office building 2 by Brett VA/ House near NMU by Michael Kumm/ Power Plant at Sunset by lady_lbrty / Fort Dix solar panels by U.S. Army Environmental Command 9 brattle.com

11 Smart Integrator Business Model: Platform for Large and Small-Scale Resources & Grid Management Retail Power Energy Management Services Energy Efficiency Local Renewables Smart Integrator Image Sources: Flickr DC parking lot office building 2 by Brett VA/ House near NMU by Michael Kumm/ Power Plant at Sunset by lady_lbrty / Fort Dix solar panels by U.S. Army Environmental Command 10 brattle.com

12 Energy Service Utility Business Model: Integrated Supplier of Most Customer-Preferred Energy Services at Fair Prices Trusted Partners Purchased Competitively in Bulk EE Marketplace EMS Marketplace Renewables Marketplace Mass Customized Products Image Sources: Flickr DC parking lot office building 2 by Brett VA/ House near NMU by Michael Kumm/ Power Plant at Sunset by lady_lbrty / Fort Dix solar panels by U.S. Army Environmental Command 11 brattle.com

13 Agenda Topic 1: Change Drivers Topic 2: New Business Models Topic 3: Recent Developments 12 brattle.com

14 Growth of the ESU Model- Fort Collins Adopted goal reduce GHG 20 % by 2020 and 80 % by 2030 relative to 2005 levels Partnering with RMI on new business model integrated utility services (IUS) The IUS serves as lead administrator, but enlists third party home performance integrators Continuum of Utility Involvement Source: Integrated Utility Services, A New Business Model For Fort Collins Utilities, Rocky Mountain Institute, September brattle.com

15 Growth of the ESU Model-ConEd REV Demo ConEd s CONnectED Homes Platform was submitted as demonstration project to comply with NY s REV Docket CONnectED Homes Platform CONnectED Homes aims to overcome low customer engagement and cost of acquiring customers Customer data use combined with customer specific offers, sponsored by third party providers Source: CONnectED Homes Platform Demonstration Project," ConEdison, July 1, brattle.com

16 Germany: Move to Highly Distributed Grid and Energy Services Utilities Municipal Utility Clusters, Moving towards distributed grid Re municipalization spreadingmany communities targeting 100% renewables As of 2012: 83% of German municipals offered online consulting services 64% had customer service centers 71% lent consumers meters to improve energy audits Source: Susanne Fratzscher, The Future of Utilities: Extinction or Re Invention? A Transatlantic Perspective, May Oliver Wagner, The wave of remunicipalisation of energy networks and supply in Germany the establishment of 72 new municipal power utilities, Wuppertal Institute for Climate, Environment and Energy, brattle.com

17 Growth of Community or Shared Solar Cooperatives are developing solar in 34 states Co ops reported an existing capacity of nearly 95 MW of owned and purchased solar capacity in 34 states, and plans for an additional 144 MW. Third parties like the Clean Energy Collective growing quickly Co Ops with Solar Investments Third Party Community Solar Gardens Source: NRECA Website: content/plugins/nreca interactive maps/esri solar storymap/index.html and The Rise of Solar Co ops, RMI Outlet, April brattle.com

18 Opportunities and Challenges Provide customers services that lower total energy bills, help environment, create jobs. Help customers navigate very complex marketplace. New revenue streams to pay for system investments. New core competencies. New product development costs. Unstoppable pressure from marketplace. Now is the time to be proactive! 17 brattle.com

19 Dr. Peter Fox-Penner Dr. Peter Fox-Penner is a consulting executive and internationally recognized authority on energy and electric power industry issues. He is a principal and director of The Brattle Group, a leading international economic consulting firm. In his consulting practice, Dr. Fox-Penner advises energy companies, government agencies, and their counsels on energy regulatory and market policy issues. Although his work has spanned most areas within the energy field, his current primary focus is on electric industry competition and structure, global climate change, and energy efficiency policies. Peter Fox-Penner Principal and Director The Brattle Group Dr. Fox-Penner s background includes co-founding Environment2004, the Environmental Alliance, and Patriot's Energy Pledge; service as a senior official in the U.S. Department of Energy and the White House Office of Science and Technology Policy; and staff positions in the Illinois Governor s office. He has a Ph.D. in economics from the business school at the University of Chicago and M.S. and B.S. degrees in engineering from the University of Illinois. Contact: Peter.Fox-Penner@brattle.com or The Brattle Group ( provides consulting and expert testimony in economics, finance, and regulation to corporations, law firms, and governments around the world. We combine in-depth industry experience and rigorous analyses to help clients answer complex economic and financial questions in litigation and regulation, develop strategies for changing markets, and make critical business decisions. Island Press, a nonprofit organization, is the nation s leading publisher on environmental issues. Their topics are both timely and wide-ranging, from biodiversity and land use to forestry, agriculture, marine science, climate change, and energy use. Island Press believes in transforming science and evidence-based information into understanding and action. 18 brattle.com

20 The Brattle Group The Brattle Group ( provides consulting and expert testimony in economics, finance, and regulation. We have assisted government agencies all over the world with electric and gas restructuring, tariff calculations, market design, contract renegotiations, and regulatory policies. Our services include: Climate Change Policy and Planning Cost of Capital Demand Response and Energy Efficiency Electricity Market modeling Energy Asset Valuation Energy Contract Litigation Environmental Compliance Fuel and Power Procurement Incentive Regulation Rate Design and Cost Allocation Regulatory Strategy and Litigation Support Renewables Resource Planning Retail Access and Restructuring Market Design and Competitive Analysis Mergers and Acquisitions Transmission Brattle s experts include: Frank Graves Frank.graves@brattle.com Ahmad Faruqui Ahmad.faruqui@brattle.com Judy Chang Judy.Chang@brattle.com Joseph Wharton Joe.wharton@brattle.com Robert Mudge Bob.mudge@brattle.com Bill Zarakas Bill.zarakas@brattle.com Metin Celebi Metin.Celebi@brattle.com Johannes Pfeifenberger Hannes.pfeifenberge@brattle.com Marc Chupka Marc.chupka@brattle.com Sam Newell Sam.Newell@brattle.com Phil Hanser Phil.hanser@brattle.com Jurgen Weiss Jurgen.Weiss@brattle.com 19 brattle.com