Memo to Utilities: Your Old Business Model Won’t Make it in a Green, Low-Carbon 21st Century

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By: SGN Staff

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Utilities need to kick their old business model to the curb and embrace a strikingly different one if they're going to successfully meet regulatory and policy demands to generate cleaner, low-carbon power and give customers the ability to better manage their electricity use in the 21st century. That's the conclusion of a new report prepared for the sustainability advocacy coalition Ceres. The report by Navigant Consulting

explores the major trends affecting the electric power industry and the implications for investors and utility business strategies in the future. Those trends include:

·         Growing pressure to reduce greenhouse gas emissions by more than 80% by 2050

·         Policy and regulatory momentum at all levels to make fossil fuel power, particularly coal-fired generation, less competitive

·         Increasing use and policy support for cost-effective efficiency and Smart Grid technologies

·         Declining costs of renewable energy

The report also identifies roadblocks that could prevent utilities from moving more quickly, such as uncertainty over the future price and responsibility for cutting carbon emissions, rate models based on electricity sales that undermine cost-effective measures such as energy efficiency, and current limitations on existing infrastructure that affect utilities' ability to accommodate renewable energy and customer engagement. The report notes that those challenges also represent opportunities for enterprising, nimble utilities.

 

Quick Take: While the report's recommendations essentially amount to admonishing utilities to actively address the trends and challenges they face, it puts the arguments for a new utility business model in the proverbial nutshell. In the links below you'll find some interesting assessments from industry experts about what that model could like like.

 

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