GE's most important contribution to the smart grid yet (and it's not technology)
By: SGN Staff
Quick Take: I know that General Electric has made innumerable contributions to smart grid technology. Even so, I want to suggest that their new report promoting a better regulatory model may be even more valuable. We won't be able to afford the technology we need unless we fix the regulatory morass.
Here are the two things I liked the most. First, GE doesn't just belabor the problem. They offer specific solutions. We've had a decade of arm-wavers and hand-wringers, but very few organizations have stepped forward with concrete recommendations. Second, they favor performance-based regulation (they call it "results-based"). SGN has been arguing in favor of this approach for some time, along with experts such as David O'Brien, Matt Futch and Paul Alvarez.
The performance-based concepts are not new. What's new is that this giant, global company is putting its muscle behind it. Is willing to lobby for it. Is willing to stand up and be counted.
Now if I could just convince more utility CEOs to stand up as well. I know the "don't rock the boat" mentality was the right one in the last century. But unless utilities start agitating for the future they want, somebody else is going to make their choices for them. - By Jesse Berst
GE: Time to rethink electric utility regulation
Â§ Increased Expectations for Utilities Arrive at Time of Declining Electricity Sales
Â§ New Report from GE Shows Need for More Forward-Looking Regulatory Model
Â§ Results-Based Regulation Designed to Support Investments that Share Cost Savings with Consumers, Reward Utilities for Innovation and Efficiency, and Remain Affordable
ATLANTAâ€"October 23, 2013â€"Nearly one year ago, Hurricane Sandy struck the East Coast of the United States, leaving 72 dead, damaging 650,000 homes and knocking out power for 8.5 million Americans. This anniversary serves as a reminder of the challenges facing electric distribution companies as they plan for the future design and operation of the power grid. These utilities are expected to improve their resiliency during severe weather events, replace aging infrastructure, integrate greater quantities of renewable and distributed generation and secure their systems against cyber and physical attacks.
"Tackling today’s emerging challenges is a daunting task for utilities, considering that most operate under a regulatory model set in the first half of the last century,” said David Malkin, director of Government Affairs and Policy for GE’s Digital Energy business. "If we wish to build out a modern gridâ€"one that meets these challenges and delivers long-term value to consumersâ€"then we must rethink how utilities are currently regulated.”
GE (NYSE: GE) today released a new report outlining the benefits of modernizing the power grid, hurdles that impede the upgrade of U.S. electrical infrastructure and how moving to a results-driven regulatory model could support the transition to an efficient, reliable and sustainable power system.
Results-based regulation creates a forward-looking contract to achieve desired objectives and provide incentives for delivering long-term value to customers. Key elements can include:
Â§ Revenues set based on the regulator’s review of a forward-looking utility business plan.
Â§ A multi-year revenue plan that provides an incentive for cost reductions.
Â§ An earnings-sharing mechanism that enables customers to benefit from utility cost savings.
Â§ Clearly defined performance metrics and incentives for delivering value to customers.
Â§ Funding set aside for innovation projects.
The goal of this report is to advance conversations on the design of forward-looking regulatory models to meet today’s energy challenges. The authors of this paper include David Malkin, director of Government Affairs and Policy for GE’s Digital Energy business, and Paul Centolella, former utility commissioner and current vice president at Analysis Group, a leading economics consulting firm.
To download the report, view a data visualization, watch a video, or to learn more about the authors, please visit GEdigitalenergy.com/regulation.
GE’s Digital Energy business is a global leader in protection and control, communications, power sensing and power quality solutions. Its products and services increase the reliability of electrical power networks and critical equipment for utility, industrial and large commercial customers. From protecting and optimizing assets such as generators, transmission lines and motors, to ensuring secure wireless data transmission and providing uninterruptible power, GE’s Digital Energy business delivers industry-leading technologies to solve the unique challenges of each customer. For more information, visit www.gedigitalenergy.com. Follow GE’s Digital Energy business on Twitter @YourSmartGrid.
GE (NYSE: GE) works on things that matter. The best people and the best technologies taking on the toughest challenges. Finding solutions in energy, health and home, transportation and finance. Building, powering, moving and curing the world. Not just imagining. Doing. GE works. For more information, visit the company's website at www.ge.com.
About Analysis Group
Analysis Group’s more than 500 professionals provide economic, financial, and business strategy consulting to leading law firms, corporations, and government agencies. The firm’s 11 offices are located in Boston, Chicago, Dallas, Denver, Los Angeles, Menlo Park, New York, San Francisco, and Washington, DC; and internationally in Montreal and Beijing. For more information, visit www.analysisgroup.com.
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