Last week marked the Edison Electric Institute (EEI) annual convention, which was held this year in New Orleans and hosted 800 utility executives from June 7-10.
The 2015 convention was an unusual one. In the past, the electrical utility industry has not always been especially interested in discussing alternative forms of energy. This year’s event, however, promised to “showcase the ideas and innovations that are transforming the future of the electric power sector.” The convention delivered, kicking off the week with a discussion featuring Tesla founder Elon Musk. A bold choice, given recent global headlines that range from “Musk Battery Works Fill Utilities with Fear and Promise” (December 2014, Bloomberg) to “Elon Musk is Both Utility Killer and Utility Savior” (May 2015, Business Spectator). To say that the industry’s feelings are mixed might be an understatement.
The electric utility industry is a large market responsible for $372 billion total revenues in 2014 from sales to end customers. It’s also a market that is undergoing some very significant and fundamental restructuring, illustrated in EEI’s recent report, “Thought Leaders Speak Out: The Evolving Electric Power Industry.”
According to Musk, the future of the industry will see about one-third of all electric power coming from distributed generation, including an increasing amount coming from solar generation. It would be quite a shift; in the twelve months through March 2015, utility scale solar power generated just 0.50% of total U.S. electricity.
Despite these humble beginnings, the future for solar and other renewables looks bright. EEI forecasts that renewable sources will increase their capability by almost 45% over the period of 2014 through 2040. However, connecting these new solar systems to the grid hasn’t been as simple as flipping the switch, and has so far proved to be a challenging process for utilities. When looking at distributed solar power interconnection challenges and best practices, the Solar Electric Power Association reported that the issue is further complicated by the fact that less than 5% of utilities are processing 75% of the distributed solar power interconnections.
The traditional utility business model is changing, and it’s happening in tandem with shifting consumer demands and a number of regulations poised to create further disruption in the industry. According to a 2015 PwC survey, 89% of power & utilities CEOs are nervous about regulatory upheaval. Keeping up with compliance requirements is becoming an increasingly challenging prospect. But the industry is looking to the future and powering on.
Lisa Wood, vice president of The Edison Foundation, also spoke of the electric power industry as being in the middle of a high-stakes transition. “The key questions for policymakers are whether the regulatory paradigm can be redesigned to best support the power industry transition that’s underway and whether this can be done collaboratively,” she said.
U.S. Secretary of Energy Ernest Moniz was in attendance to help launch the conference as well, and he took the opportunity to highlight the key role that the sector will play in reducing greenhouse gas emissions and adopting new, clean technologies. Whether this is a role that utilities will play by choice or due to necessity is still uncertain.
One thing that is certain: it’s an interesting time to be an electric utility in the U.S.