Advanced Energy Perspectives

At most times of the year, much of the electricity generating capacity in the United States stands idle. That's because the electric power system is built to handle demand at its peak — those few sweltering summer days when everyone's AC is running full blast. What utilities pay for power at those times of peak demand drives up the price we pay for electricity. In fact, approximately 10% of infrastructure investments in the United States focus on serving demand in just 1% of hours of the year. This leads to the question: are there more efficient ways to manage this demand — and make it in utilities' business interest to implement them?

As we have written many times in the past, the electric power sector is in the midst of some big changes. Whether it is new wind and solar power beating existing coal generation on price, the rise of electric and autonomous vehicles, or the multiple factors behind the evolving utility business model, change is in the air, and those changes are being driven in large part by technology and customer preferences. So it is not a question of if, but when change occurs, and it is also possible to imagine what the end state is going to look like, even if the timing and many of the details remain unknown. Uncertain, as well, is the path to that end state. But states ranging from Pennsylvania to Hawaii are blazing the trail, each in their own way.

Photo by Drew Buikema, used under a Creative Commons license. 

Back in December 2016, an omnibus energy bill signed into law in Michigan contained a small section requiring utilities to develop “voluntary green pricing” programs. Today, nearly two years later, the ensuing regulatory process is producing results that will open new renewable energy options for residential as well as commercial and industrial (C&I) customers. The Michigan Public Service Commission recently issued orders requiring improvements to Consumers Energy’s “Large Customer Renewable Energy Program” (LC-REP) and Solar Gardens program, and to DTE’s MIGreenPower program, while also requiring DTE to introduce a new program focused on C&I customers. The regulatory process is far from complete, but before long corporate customers in Michigan will have more and better ways to procure the renewable energy they want to power their operations.

U.S. utilities invest over $20 billion per year replacing and modernizing their electricity distribution infrastructure. As the electricity system continues to evolve, making sure that this money continues to be invested wisely, especially at a time of growing deployment of distributed energy resources (DER), is prompting changes to how utilities conduct distribution system planning.

Photo by Tom Burke, used under a Creative Commons license. 

The most important innovation coming along in electricity may not be a cutting-edge technology or a first-in-the-nation government policy. Rather, it might be a subtle, yet transformative, change in the way utilities meet their resource needs. Instead of prescribing specific technologies to meet future demand – typically, power plants of a particular type – and buying it or building it themselves, utilities are increasingly defining their needs and allowing all technologies and services that can meet those needs to slug it out. It’s an approach that can save money for customers, relieve regulators of unnecessary risk, and open up opportunities for advanced energy companies of all kinds.