A Bright Future Ahead for Utilities

By Traver Kennedy, Chairman and CEO on December 06, 2016
Traver Kennedy
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You flip the switch on, and rooms in your home get illuminated; your morning coffee starts to brew; the morning news comes up; and your electric car starts. Easy-breezy. You’re ready for the day. Yet, behind that unassuming “on” switch for the lights, the gadgets, and the many machines that make our modern lives possible, there is a daunting story. A story of natural resources, technical innovation, and network complexity that starts in a coal mine, or a natural gas well, a nuclear plant, a windmill, a solar panel, or all of these combined.

The hero behind this story of effortless power for consumers everywhere? Utilities.

As consumers, all we have to do is turn on the power (and pay our bills). However, the term “effortless” is a complete understatement to describe what actually goes on behind the other side of that power switch. Bringing electricity into your home, apartment building, office complex, school, shopping mall, and countless other institutions of modern life is a monumental task with high complexity achieved by an industry where disruption is about to change the traditional business model—for the benefit of all.

city

The invisible network

If you live in a typical American city, you get reliable, 24/7 electricity (rarely interrupted except when the occasional bad weather happens). According to the U.S. Energy Information Administration (EIA), when you turn on your lights for ten minutes, the electricity powering that bulb (which by now, it is most likely a low-consuming bulb) comes from a myriad of natural resources as follows:

  • Coal: 3.5 minutes
  • Natural gas: 3 minutes
  • Nuclear: 2 minutes
  • Hydropower: 36 seconds
  • Other renewables: 42 seconds (wind, solar, biomass and geothermal)
  • Petroleum: 6 seconds
  • Other gases: Less than 6 seconds

The power from this mix of resources traveled hundreds, if not thousands, of miles from the source through a very complex network of towers, cables, and all kinds of electrical equipment to make sure your home has power when you turn on that switch. This network is typically managed and monitored centrally to ensure you have uninterrupted power any time of the day or night. As you may imagine, peak periods—those times of the day and night when your city uses more electricity for heating or illumination—present a challenge and add huge complexity to an already elaborate power grid.

Challenges for Utilities

Like most industries today, utilities face numerous challenges that may end up modifying their business model in several ways. First, is the escalating demand for energy to power our 24/7 connected lives. This high growth rate makes it harder for utilities to manage peak periods and keep the energy flowing to homes, businesses, and institutions. These days, we seem to be experiencing more peak periods that stress the electricity network. One of the answers has been the smart grid. For perspective, the Department of Energy (DOE) accurately refers to the smart grid as a “Class of technology people are using to bring utility electricity delivery systems into the 21st century, using computer-based remote control and automation.”

Second, is the equally escalating speed of technological breakthroughs in distributed and renewable power generation, which challenges the traditional, centralized command and control model that worked so well in the past. For perspective, when you install solar panels at your home, you still need to rely on the grid, as solar is a variable resource. The industry refers to these panels as being “on the edge,” since they are not part of the central network of electricity. Yet, they are usually connected to it. Several utilities have begun to offer contracts where users of solar panels can sell surplus electricity back to the network. However, the fact that solar can’t provide you with 24/7 power means that the cost to bring you electricity—even if it is less than what you would use if you didn’t have those panels—remains practically the same. Utility companies know this fixed cost structure is sometimes hard to swallow and need to modify their model to remain competitive.

Finally, changes in environmental, regulatory, and consumer expectations around clean power are putting enormous pressure on utilities to find sustainable and affordable sources of power that are reliably available. At the beginning of our article, we shared information about America’s electricity mix of energy resources. Note that two-thirds of our current energy mix or 6.7 minutes of those 10 minutes of electricity came from fossil fuels. If those were 10 minutes of charge for your sleek electric vehicle, it contributed 67% of its power to global warming via the carbon emissions of these fossil fuels. Your utility company knows this and is working to help you become more sustainable.

The Bright Future for Utilities

Technological innovation in renewables, such as solar and wind, and in other clean energy sources, such as hydrogen, is helping utilities to become more sustainable. As we’ve written in the past, renewables capacity is quickly overtaking fossil fuels. Innovation is now focused on making these variable resources more reliable so that those 42 seconds (as cited in the example above) can grow to contribute a greater share to the ten minutes of electricity resource mix.

In addition, advances in the production of other renewable sources of power, such as Hydrogen 2.0, can help the industry increase the clean sources of electricity that goes into your home. The future promise of Hydrogen 2.0 is one that can deliver energy wherever it is needed on-demand, so that utilities can balance the grid more effectively and reduce system peaks.

Other innovations not directly related to energy, such as cloud computing, will further help the industry better manage power so they can become more agile. Taken together, these technological breakthroughs in sustainability, energy delivery, and power management will make the smart grid a truly integrated system that can bring the utility industry into the 21st century.

“Super Power”

Utilities, the heroes of the story behind effortless power, will soon be equipped with innovation “super-powers” to help them meet the future with confidence.  An evolution in the utility business model is on the horizon so they can meet today’s demand for clean and available energy, at costs that both industry and consumers can afford.

The future is indeed brighter and cleaner for this mighty industry.

 

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As the Hydrogen 2.0 ecosystem gains momentum, we’ll be sharing our views and insights on the new Hydrogen 2.0 Economy. We also update our blog every week with insightful and current knowledge in this growing energy field.

 
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