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Utility Dive: Navigating utility business model reform - A practical guide

Utility Dive published this piece illuminating the need for an evolution of the utility business model that will support the next century’s needs as powerful trends for a cleaner energy generation takes surge across the nation. This is the first in a six-part series on utility business model reform by Rocky Mountain Institute, America’s Power Plan, and Advanced Energy Economy Institute. Summaries of five case studies are to follow. See excerpts below and read the entire Utility Dive piece here.

It's increasingly likely that conventional fossil-fuel power plants won't comprise the core of our future electricity grid. A growing number of state mandates require a transition to cleaner generation, while utilities are embracing renewable energy as key investment strategies…

Variable generation like wind and solar may be the lowest-cost resources, but consumers only benefit if those resources are complemented by cheap, flexible demand-side management and system optimization that fully leverage all available resources. Numerous approaches are available to reform utility regulation to meet this challenge; however, it can be difficult to make sense of the options.

Rocky Mountain Institute, America's Power Plan and Advanced Energy Economy Institute released a new report to give actionable guidance on leading options to reform utilities' business models. Navigating Utility Business Model Reform: A Practical Guide to Regulatory Design provides a menu of 10 options to guide policymakers as they work to modernize electric utilities.

Powerful trends are impacting the electric system, including demands for improved environmental performance, the increasing availability of distributed energy resources like rooftop solar and storage, more customer demand for energy choice and the need for strengthened resilience in the face of extreme weather events…

There are significant new economic opportunities for utilities and other market players as a result of these trends; however, fundamental attributes of the utility business and regulatory framework inhibit them from reorienting to present-day needs. These barriers include financial incentives to grow energy sales and to invest in capital projects instead of more cost-effective solutions…

As U.S. states advance efforts to modernize the grid and utilities pursue higher renewable energy goals, legislators and regulators increasingly face major policy decisions that affect the utility business…

The report focuses on 10 reform options, ranging from the relatively common (e.g., revenue decoupling) to more novel ideas (e.g., platform revenues). The set of options is not exhaustive, but reflects a range of responses to different pressures on the existing utility business model.

With a growing number of reform efforts and ambitious utility commitments underway, it's clear that utilities, regulators, and other policymakers recognize the need for business model and regulatory change. By offering this guide, we hope that policymakers, utilities and policy influencers can work together more effectively to understand their options and take these efforts further, faster, together.

Read the entire Utility Dive piece here.


Topics: AEE In The News