When it comes to trying out new things, many utilities are notoriously slow-moving and risk-averse, and many of their pilot projects can be ineffective as a result. So how do you change an industry that moves slowly but is nonetheless undergoing a major energy and digital transformation?
According to the researchers at Rocky Mountain Institute, there are a variety of strategies -- from better utility and stakeholder collaboration to a focus on new technology that can scale -- that could help with the problem. RMI recently published a report that digs into a handful of possible solutions that utilities, regulators, tech companies, customers and environmentalists can use to try to get the energy sector to evolve more quickly and effectively.
RMI decided to tackle the topic in a report after working with New York utility Con Edison, which was looking to launch some demonstration projects with new technology, explains RMI’s electricity practice manager, Mike Henchen. “A lot of utility projects are not that effective, and a lot of projects are just pilots, and a lot don't lead to full-scale deployments," he said.
RMI collected lessons learned and best practices from Con Edison, as well as Arizona Public Service and Avista Utilities, to put together ideas on how utilities can become more innovative. Here’s what they came up with.
1) Change is coming, so deal with it intelligently: With the introduction of distributed energy technologies -- solar panels, batteries, electric car chargers and smart thermostats -- the power grid is already transforming. Utilities need to fully embrace and plan for this change, and need to develop road maps and support from leaders for how to navigate these changes.
Henchen said at some utilities “an old guard” exists that is more skeptical of the need for transformation. “Every organization has its skeptics,” said Henchen. A road map helps to get everyone on board.
At the same time, regulators owe utilities clear and consistent messaging around their own strategic priorities for innovation. Successful DER providers also need to understand the varied business models and regulatory environments utilities have around the country in order to offer effective solutions.
2) Pilots and demos need to be designed to scale: One of the biggest takeaways from the report is that many times, utilities’ pilot and demonstration projects don’t lead to useful conclusions and are largely ineffective. RMI says if utilities focused on making the end goal to scale effective technology to their entire network, then their trial runs would be more productive.
Utilities should test out newer technology in small pilot projects that can determine if the tech is useful or not. If it isn't, utilities can shut down those projects and learn from the deployment. “Failure consists of running a pilot or demonstration project and coming away with inconclusive results, or failing to identify and capture important lessons,” states RMI in the report.
If technology is found to be useful, utilities can use larger demo projects to deploy proven tech and experiment with business models and strategies. “Learnings need to lead to decisions,” the report states.
If pilot and demo projects don’t lead to decisions, it can lead to fatigue on the part of the tech vendors participating, the regulators overseeing the projects, and the staff at the utilities working on the projects. Plus, it’s just a waste of time and money.
3) Better leadership: Utilities should have company leaders participate in and oversee innovation projects. The RMI report found that often interesting innovation takes place at utilities, but it's siloed within small groups.
For innovation to be effective across the company, it needs to be supported by leaders of the company, and it needs to involve a variety of business groups early on to ensure the change sticks. Utilities should also find ways to engage new and young employees and not only task the old guard with managing innovative projects.
4) Engage with stakeholders early: When utilities are building pilot and demo projects, they need to work collaboratively with the variety of stakeholders that will be affected by the initiative. That includes regulators, customers, environmentalists and technology providers.
If utilities don’t take these actions, certain stakeholders that feel excluded can block aspects of a project. Regulators and customers can be unnerved if rates rise, and advocates can push back if environmentally sensitive regions are used without agreeing on common ground.
The RMI report also advises that when utilities are looking for new pilots and demos that they design their requests for information or requests for proposals to be neither too prescriptive nor too vague. To get the best results, project solicitations should be clear and but not so detailed that they arbitrarily limit the solutions offered.
5) Collaborate with other utilities: The utility industry is in the unusual position of not having to compete with other utilities in most scenarios. Thus, it should be natural that utilities share lessons learned with each other and use case studies to evolve more efficiently. However, utility collaboration is relatively rare.
Third-party researchers and regulators can help spur this process by seeking out information and synthesizing the most important learnings. RMI’s Henchen said that in some ways, there’s energy information overload with so many conferences and reports, and it can be difficult to break through the noise and find what’s truly useful. Researchers have an important role to play in curating the information provided by utilities to highlight major takeaways and key metrics, targeted at specific concepts and business models.