Many forces are converging to focus the debate on the evolving role of utilities, and events and trends are being closely watched by utilities, regulators and policymakers. Just in the last week or so, a few developments indicate that new technologies are likely to be transformative.
On the innovation front, the Pacific Northwest National Laboratory (PNNL) reported that with certain advances, fuel cells could provide power to large customer facilities like big box stores or hospitals such that they could go off the grid. Fuel cells are a form of distributed generation in which electricity is produced by solid oxide ceramic cells that oxidize a fuel electrochemically. PNNL concludes that natural gas fuel cells could play a significant role in meeting future energy demand if their lifespans are improved and enough systems are produced to reach economies of scale. Larry Chick, a materials engineer at PNNL, says that “the Department of Energy’s Solid Oxide Fuel Cell program has been achieving targeted improvements over the last decade, so things are moving in the right direction.” Improvements will lower the cost of fuel cells and hasten their adoption by customers, thereby further eroding the utility’s role as sole power provider.
On the deployment front, energy storage is reportedly poised for significant growth in the U.S. Storage is an important complement to variable generators such as solar and wind because it provides energy when those resources cannot. According to a report by the Energy Storage Association and GTM Research, the storage capacity forecasted to be deployed in 2015 (220 megawatts) is more than three times the 2014 total, and by 2019 annual additions are expected to be almost four times the 2015 level (860 megawatts). Perhaps more important, 90% of storage capacity added in 2014 was on the utility side of the meter but by 2019, 45% of new storage is expected to be on the customer side of the meter. Increased deployment of customer-side storage will mean customers can lower their demand at peak times and perhaps rely on their own renewable power resources. Either means less need for utility income-producing investment in generation capacity.
And on the regulatory front, the New York Public Service Commission adopted a comprehensive policy framework for a reformed retail electric industry that is aimed at increasing distributed energy resources and dramatically changing the role of utilities. Distributed energy resources “will become integral tools in the planning, management and operation of the electric system,” placing them “on a competitive par with centralized options.” The current retail utilities will serve as a platform to provide uniform market access to customers, distributed resources and aggregators. In a press release, Commission Chair Audrey Zibelman said the new policy “will reorient both the electric industry and the ratemaking process toward a consumer-centered approach that harnesses new technologies and markets.” Each New York utility must file an implementation plan by December 15, 2015.
These developments — advances in fuel cells and storage, and a new regulatory policy in a key state that significantly elevates the role of distributed resources to meet customer needs — are but the most recent indicators that new technologies are making steady inroads toward transforming the traditional role of electric utilities.