Utilities: Survival course for dinosaurs (advice from one of our own)
Steve Klein has been one of our industry's most progressive thinkers, first at Tacoma Power and more recently as the General Manager of Snohomish County PUD. Sparked by an article I wrote a while back, Steve recently penned an opinion piece for the Northwest Public Power Association.
I wanted you to see it too. We hear so much about why utilities are doomed. But if the "dinosaurs" are alert this time, If they take the approach recommended by Steve, they can not only survive, but prosper. - Jesse Berst
By Steve Klein
I recently served as a utility industry panelist at a conference where I introduced myself as a living, breathing dinosaur. It was not my intent to imply that I was really old, or not hip to the latest trends. Rather, I was making the point that this description was now being applied to electric power utility executives.
Citibank published a report titled â€œEnergy Darwinismâ€ that led industry analyst Jesse Berst to coin the prophetic phrase â€œUtilities are Dinosaurs Waiting to Die.â€ The original report argues that the utility industryâ€™s dismissive attitude toward disruptive technological changes mirrors that of those who failed to recognize the game-changing impact of the Internet and cell phones. The report suggests that todayâ€™s electric power utilities could lose a substantial portion of their market to energy efficiency, solar, and other distributed generation technologies. Citibank further emphasized that history tells us such changes are never gradual.
Earlier this year, Marlene Motyka, an alternative energy advisor for Deloitte LLP, wrote an op-ed titled, â€œWhy We Should Pity Utilities.â€ She highlighted the fact that utility â€œcompanies are caught in a vise: squeezed by simultaneously rising expenses combined with falling demand for electricity.â€
Motyka was only addressing a portion of the vise. To complete the entire squeeze play, you also have to factor in legislative and regulatory pressure on utilities to fund large expansions of the nationâ€™s transmission grid, as well as renewable portfolio standards, to ultimately promote large-scale commercial wind and solar development that likely will only add to the oversupply problem.
As I write this I am reminded of a clean tech venture capitalist who served with me on a panel that was charged with helping the previous governor of Washington establish a state energy strategy. Every time I made what I thought was an insightful comment from the utility perspective, he would whisper sarcastically to me, â€œSpoken like a true power company executive.â€ The electric utility industry is being accused today of resisting consumer demands by protecting its traditional business model in much the same way that Ma Bell sought to maintain control of its big black rotary telephone. Are we simply protectionists or dinosaurs that donâ€™t want to adapt and accommodate technological advancement? Are we irrationally trying to preserve our version of the rotary phone?
I donâ€™t want to be perceived like Ma Bell, but I do believe there are foundational elements of our industry that were put in place years ago and have served the nation and its citizens well. Unlike other parts of the world, everyone in America has access to safe, reliable, and affordable electricity at the flick of a switch. On the other hand, I would argue that we must adapt to the changing needs of our customers even if that means facilitating the application of new technologies that threaten our traditional business model.