Utility Business Models
in a Low Load Growth/High DG Future
Andy Satchwell
Lawrence Berkeley National Laboratory
California Municipal Utilities Association
Annual Conference
April 2, 2014
1
Chicken Little Redux?
“…economic
fundamentals
and public
policies in
place are likely
to encourage
significant
future
disruption to
the utility
business
model.” Edison
Electric
Institute –
January 2013
“Alarmed by what they say has
become an existential threat to
their business, utility
companies are moving to roll
back government incentives
aimed at promoting solar
energy and other renewable
sources of power. At stake, the
companies say, is nothing less
than the future of the American
electricity industry.” New York
Times – July 2013
“It’s a [business]
model that hasn’t
changed much
since Thomas
Edison invented the
light bulb. And it’s
doomed to
obsolescence.”
Bloomberg
BusinessWeek –
August 2013
2
Cumulative grid investments and
decreasing utility sales put upward
pressure on rates
Grid-Connected PV Capacity
(MWDC )
Declining load growth…
Substantial increases in PV
capacity…
4000
3500
3000
2500
Cumulative Capacity (U.S. Total)
Cumulative Capacity (Data Sample)
Annual Capacity Additions (U.S. Total)
Annual Capacity Additions (Data Sample)
2000
1500
1000
500
0
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Source: EIA 2012 Annual Energy Outlook; Faruqui (2013)
Installation Year
Increasing utility investments…
•
TWh new green energy from state RPS by 2030: ~$120B
•
Total generation decarbonization: ~$1T
•
New transmission to integrate renewables and maintain reliability: ~$250B
•
Replace aging distribution system with smart grid: $600B
3
Continuum of Utility Business Models:
Current Approaches
Achievement
Services
Motivation
Value
Assets
Ratemaking
Variant
Commodity
Traditional IOU
Meters- & WiresOnly T&D
Owner/Operator
4
Continuum of Utility Business Models:
Performance Based Regulation
Achievement
Services
Motivation
Value
Assets
Ratemaking
Variant
Meters- & WiresOnly T&D
Owner/Operator
Commodity
Traditional IOU
Performance
Based
Regulation
5
Continuum of Utility Business Models:
Combining Existing Models
Achievement
Services
Motivation
Smart Integrator
Value
Assets
Ratemaking
Variant
Meters- & WiresOnly T&D
Owner/Operator
Commodity
Traditional IOU
Performance
Based
Regulation
6
Continuum of Utility Business Models:
Fundamental Paradigm Shift
Achievement
Services
Energy Service
Utility
Motivation
Value
Assets
Ratemaking
Variant
Meters- & WiresOnly T&D
Owner/Operator
Commodity
Traditional IOU
Performance
Based
Regulation
7