JOE HERGER: There are three major trends with the potential to
dramatically impact the electric sector as we know it today.
They are electrification, primarily the electrification
of transportation, but also of other parts
of the economy like heating, which
largely run on other fuel sources today;
decentralization, where instead of getting our
power from a centralized power plant today,
we instead start to source those
resources from things like rooftop solar,
community solar, distributed storage and demand
response; and digitalization through the increased
deployment of smart meters, connected devices and automation.
Now in combination, these three trends have the potential to
confer huge benefits to society through improved reliability,
increased energy asset utilization [and] increased customer
choice, all while reducing our total carbon intensity.
The challenge, however, is how do we accelerate
the deployment and adoption of these technologies
while reducing the total cost to serve the customer,
instead of increasing it; while reinforcing the grid,
instead of taxing it; and engaging
the consumer in an effective way.
Bain worked with the World Economic
Forum, and came up with four priorities
to help accelerate the adoption of these technologies
in a way that is more economically sustainable.
The first priority was to deploy the enabling infrastructure.
And when we talk about that infrastructure, we don't just
mean the physical assets that need to go into the grid.
We're also talking about the legal, regulatory and
economic frameworks that will support those deployments.
So for example, with electric vehicles, obviously the
charging station is a critical part of infrastructure.
But we also think about things like, who is going
to have the right to build those charging stations?
How will they be compensated for them?
How do you earn a return on those investments
that they're going to have to make?
What role should distribution system planners have in
dictating where those charging stations should go in,
such that they can encourage the charging of vehicles at
a time when we're taking advantage of renewable resources?
For example, noontime in California, when
peak solar is at its height, or overnight,
when wind resources are blowing in other parts of the country.
The second priority was to simplify the customer experience.
There's a small segment of customers today who are
really engaged and interested in their energy usage.
But the vast majority of us don't want to
spend too much time thinking about electricity.
Most consumers still view electricity
as an undifferentiated commodity that
doesn't really consume too much of their disposable income.
If we acknowledge that and we accept that, how do
we design programs and services and devices in a way
that they allow customers to opt
out, rather than opt in, that allow
us to set it and forget it, or even better,
are able to learn our patterns automatically
and then adjust our energy usage for us?
The third priority was to embrace new business models.
These grid edge technologies are going to impact
the traditional economics for a regulated utility.
And the ways utilities are likely to respond are
through increased partnerships and collaboration
with manufacturers of equipment, providers of
programs and services, and energy retailers.
Utilities are also likely to expand the
portfolio, products and services that they offer,
so that they're not just providing electrons anymore.
And finally, the last priority was for
legislators, regulators and utility executives
to work together to redefine the regulatory paradigm.
You know, as the business model evolves for the utility,
and the investments that they make start to change,
the way that they're compensated for those
investments will also have to evolve.
In regulating the market, a move towards encouraging outcomes,
rather than subsidizing or mandating specific technologies,
is likely to lead to more creative and economic solutions.
