Legacy utilities are grappling with the need to reinvent themselves in order to survive.
A successful future involves improving customer experience and expanding offerings like smart home appliances, solar power and electric vehicles, executives from utilities Entergy and ComEd said in the opening keynote at DistribuTech in New Orleans Tuesday.
Speeches are not the same as actions, but the keynote address to tens of thousands of distribution grid professionals offers a valuable glimpse into what strategic vision the utilities have decided to communicate at this point in time.
It’s a starkly different picture than the one utilities painted just a few years ago, when the core business was keeping the lights on, and net-metered rooftop solar threatened to lure away customer dollars and send utilities into “death spirals.”
“The death spiral, as some predicted, I think is dead,” said Terence Donnelly, president and COO of Chicago area utility ComEd.
Instead, the future of the grid will bring more renewable energy, energy storage, electric vehicles and microgrids, Donnelly explained, in a speech tellingly titled “We Are Not in the Utility Business Anymore.”
“It isn’t enough to provide a service that’s merely useful,” he said.
“We will need to be more to our customers, communities and stakeholders," Donnelly continued. "Our world is changing faster than ever. I think we all feel that change in our bones.”
Paul Hinnenkamp, executive vice president and COO of Entergy, recalled Netflix’s unexpected rise and eventual displacement of incumbent Blockbuster as a warning against utility complacency. Google and Amazon received shoutouts as well.
“If this business is going to be disrupted, why don’t we disrupt it ourselves, and be wildly successful doing so?” Hinnenkamp said.
The transition from supplier to partner
This self-disruption requires that utilities think of themselves as more than electricity providers, Hinnenkamp added. They should transition from “supplier” to “partner,” delivering to their "customers" (rather than that old concept, "ratepayers") the services that they desire.
After all, electricity itself doesn’t get people excited.
“You want the outcomes that our electricity provides,” Hinnenkamp said.
How to deliver this vision remains to be seen. If encouraging customers to take advantage of rebates for efficient lightbulbs is hard enough for some utilities, an upsell to a suite of home energy services will be even more difficult.
Entergy’s recent headlines aren’t likely to help the pitch to consumers: News broke last year that the company won approval for a controversial gas plant in New Orleans with help from a crowd of people who were paid to turn out in support of the plant. Entergy insists that it did not know a consultant for the company procured the paid actors, The Times-Picayune reported. The fallout from the scandal is still unfolding.
Other trends make for a more natural entry point into the home.
Smart home devices are coming to market that can synchronize energy usage with grid price signals. Utilities could take on a greater role in managing the complexity of dynamic energy rates on behalf of customers.
There's an even more natural fit with electric vehicles, which could substantially increase the amount of power homes draw from the grid.
Market penetration of electric vehicles requires capital investment in electrical charging infrastructure. If old-school utilities know how to do anything, it’s build infrastructure and deliver electricity. If competitive market rules don’t get in the way, EVs drive new utility revenue.
ComEd can point to a concrete project that instantiates the newfangled utility role: the Bronzeville microgrid, which Donnelly described as “not just a technology project.” The hub of localized electricity generation and storage will serve as a resilient community hub for electric mobility, ridesharing and STEM education, he said.
Regulators approved that project in early 2018, after considerable scrutiny of whether market rules would allow the utility to own generation assets in the system, and whether all ratepayers should pay for a localized asset serving a particular neighborhood.
Much work remains to be done if the utilities of yore wish to transform into home energy platform companies. Wanting to change is the first step.
In the story Entergy and ComEd told at DistribuTech, the grid is heading toward a lower-carbon, more distributed, more digital place — and it’s up to utilities to adapt to that reality.