All industries have to change and adapt in order to survive; the electric industry is no exception. For the electric industry, there are a number of trends underway that are driving change. What will result from these influences is unclear, but what we know for sure is that the industry will be different in the next couple of decades. This part of the book looks at the important trends and pressures and how these will likely affect the future of the industry and the way it relates to it as customers.
- Utility-scale renewable energy, and in particular wind and solar, have a cost per unit of electricity produced (LCOE) that is about equal to the best gas generators and costs are continuing to decline. Battery storage is also experiencing cost declines similar to wind and solar. This technology will help address the intermittency of wind and solar, but also provide another means to provide operating reserves.
- The frequency and duration of weather-related power outages (including wildfires) is increasing with climate change, creating pressure for more resiliency. Large customers are looking for ways to “island” their electric system during disruptions and some are building microgrids that can operate in two modes: grid-connected or islanded.
- Distributed energy resources (behind-the-meter generation and flexible loads) are becoming more prevalent, enabling electricity customers to be more empowered. Customers have cost effective options for generating and storing their own electricity and they are no longer simple passive buyers; they have many flexible electric loads, and the development of information and communication technologies enables them to use electricity when prices and emissions are low and avoid use when prices and emissions are high.
- Policymakers and regulators around the world are pressuring the electric utility industry to reduce pollution, in particular carbon emissions. Renewable portfolio standards specify a minimum amount of eligible renewable energy. Net-metering policies allow customers to sell excess power production into the grid. Feed-in tariffs encourage renewable energy developers to supply more clean energy. Some of the policies and programs are controversial and are being opposed by many agents in the electric industry, but pressure is not expected to wane.
It is not clear where all this is leading. Some think that electric utilities will go the way of the dinosaurs and be a relic of the past, replaced by distributed electric generation and storage. But this is not likely to happen; utilities will continue to play an important, perhaps essential, role, plus utilities are powerful players in the political world and have lots of well-funded lobbyists to look after their interests. The pressures for change are real, not only by policymakers and regulators but perhaps more importantly by the market.