Bloomberg Government regularly publishes insights, opinion and best practices from our community of senior leaders and decision-makers. This column is written by Arvin Ganesan, vice president for federal policy at Advanced Energy Economy, a national business group.
The electricity industry is entering a period of fundamental change, driven by strong technology and policy forces, as well as changing consumer demands and expectations. Business-as-usual is no longer sustainable in a future with increasing distributed energy resources and a smarter, cleaner, more interactive electric grid. Why? Traditionally, utilities collected revenues to cover their costs, plus profit, through the electricity sold to consumers. However, as more rooftop solar and energy efficiency come online due to customer preference, the amount of electricity sold by the utility declines, reducing revenues and cutting their profitability.
It is this pressure that is leading utilities, policymakers, regulators and businesses to rethink the utility regulatory framework that has governed the electric power system for decades, to find a system where utilities can continue to thrive and provide a reliable, resilient, affordable grid, and where consumers can get the choices and control they are looking for.
For the past few years, Advanced Energy Economy (AEE) has been convening 21st Century Electricity System CEO forums, and facilitating informal discussions in states around the country, to help support this. Just last week, following a four-month process of dialogue facilitated by the AEE Institute, three major solar companies held hands with six New York utilities to jointly propose rate design changes intended to balance the needs of regulators, utilities, solar companies and customers.
What have we learned from these discussions? While each state, utility and regulator is different, key themes resonate everywhere:<
First, the role of the utility is changing. How will utilities, customers and third-party DER providers interact in the future? It will require collaborationamong state regulators, utilities, technology companies and other stakeholders to find solutions that work for everyone.
Second, many utilities are also aware that there need to be investments in the grid to make it more transactive, allowing more interaction between utilities, customers and third-party companies, and giving utilities the significant benefits thatdistributed resources have to offer. Technologies like advanced metering can help provide this.
Finally, utilities and advanced energy companies agree on more than one might expect from reading the headlines. While differences exist, there are significant opportunities for diverse parties to move forward with a common vision of what a 21st Century grid will look like, as exemplified by the position papers facilitated by AEE Institute in New York and California. Other states exploring similar issues include Hawaii, Minnesota, and Massachusetts.
Our CEO Forums and other, more informal discussions, have focused attention on the strategic challenges facing the electric industry today. While change can bring many challenges, it can also bring positive opportunities.