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By Jesse Berst

 

In an article about the volume-to-value continuum for electric power utilities, we discussed the use of that metaphor to help utilities prepare for the future. As you can see in the nearby illustration, utilities need to decide where they belong on that spectrum, based on their core competencies and their aspirations. They can focus on just the infrastructure needed to provide commodity electrons. They can act as intermediaries, using partners to offer customers new options. Or they can become innovators themselves, building their own new services.

 

In this article, we'll focus on the Innovator role, where the utility has the job of conceiving, developing and operating products and services.

 

In the short term, the Innovator role is most likely to occur at utilities with an unregulated subsidiary. Many of those subsidiaries are already reaching into areas such as Texas and California with innovative new services. But regulated IOUs are also considering this option. Duke Energy and others have experimented with programs that allow them to "micro-dispatch" customer loads. These programs can reach into customer homes and offices to adjust the performance of grid-connected appliances. The utility might, for instance, cycle air conditioners on and off during peak events. Or it might pre-heat electric water heaters to smooth out the load curve.

 

 

Utilities should determine where they want to fit along the continuum from pure "commodity" electrons to value-added services

Utilities thinking in Innovator mode may look to offer programs beyond their own service territories. Progressive utilities that develop successful programs for solar rooftops, wind power, green energy or community energy storage, for instance, might look for ways to get additional value from their innovations. They could seek to market them in deregulated areas, sell them through an unregulated subsidiary, or license the intellectual property to a third-party partner.

Innovator examples

Other Innovator utilities may own assets beyond the meter. For instance, both Southern California Edison and Arizona Public Service are piloting programs whereby they own solar panels that sit on customer rooftops. Elsewhere, some utilities are exploring the ownership of EV charging stations in public parking garages and apartment complexes.

 

And some Innovators may offer services to other utilities. For instance Constellation Energy, which owns Baltimore Gas and Electric, purchased demand response provider CPower in the fall of 2010. CPower is a DR market leader in Texas and other regions. Large, progressive utilities that develop highly capable internal software may offer it to other utilities as packaged software or SaaS (software as a service) via an unregulated subsidiary, a spinout, or a joint venture with a partner.

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Utility & Innovation - is this a joke?

A company or an industry doesn't just wake up one morning and announce to world that they will become an innovative force, after being isolated, sheltered for 100 years. Jesse, as a consultant, you might be able to convince a few ambitious utility executive to carry out the popular "innovative" flag. But who are going to execute it? Majorit of utility work force have been working in the same place for 20 or 30 years. The business model for utility didn't change for 100 years. If you want innovtion, fire 90% of workforce, including workers, and managers, and executives, hire the smart kids who would have gone to work for Google, Apple. If you think the idea is to extreme, then just outsource the innovation to technology companies. Then again, utilities don't know how to manage the outsourcing technology development either. They only know how to buy vendor products that are mature, with proven track records of stability and reliability. So the result: utility has sit on the sideline, watching market being taken away little by litte by other industries. Is that a bad thing? Maybe not. Maybe it's part of evolution. Watch how other industries such as telecommunications, publication, media, marketing, technology, entertainment have changed significantly in past 20 years. Stop betting your money on utilities for innovation. They will still be around, for doing what they've good at for 100 years in US - keep lights on.

Lilian Gong - 05/09/2012 - 10:30

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