Can Utilities and Innovators Work Together at the Edge of the Grid?
Bryce Yonker, Executive Director of Smart Grid NW
Earlier this month I attended the GTM GridEdge event and it left me wondering: can traditional utilities and companies innovating at the edge of the grid find common ground to work together?
One of the most exciting areas in the energy sector right now is happening downstream of distribution substations, and especially at customer premises. We are seeing penetration of photovoltaic systems as they successfully and significantly scale down; the promises of energy storage starting to become a reality; building energy management systems becoming much more commonplace today than even just a few years ago; and smart thermostats are starting to offer much more value in addition to simply more access to data.
All of these solutions (and much more if you start digging) are taking the energy industry by storm, making it increasingly clear the power system of the 21st century will be quite different from that of the 20th. An even more important concept is that the business models for energy that worked for that system over the last 100+ years will need to evolve to keep up with these changes.
As all this disruption comes rushing into the system there is a battle brewing– quiet at times and at other times not so quiet – a battle to determine how energy solutions will be delivered in the market. In some instances technology providers initially went directly to the consumer to get their solutions in the market – think SolarCity rooftop solar and Nest’s learning thermostats. In other instances companies decided from the onset to partner with utilities to bring offerings to market – such as Opower efficiency programs and Pulse Energy (now part of EnerNOC) with its commercial energy management solutions.
Other paths to market have walked a fine line between working with utilities and working with utility customers directly, and still others have essentially bypassed regulated utility territories entirely and gone after solutions in competitive market locations, domestically in markets like Texas, certain solutions for ITO/RTOs, and internationally.
Many of us are watching with interest as markets like New York reform their energy landscape so that utilities and technology solutions providers can work together on edge-of-the-grid solutions. However, for most parts of the country the question still remains: how can utilities and technology companies work together effectively? There are also some big, company-specific questions being asked in the industry:
- How can high levels of rooftop solar work for Hawaiian Electric / NextEra?
- How can deep efficiency and demand response programs work for National Grid?
- How can responsive buildings and energy storage systems work for ConEd?
- How can smart electric vehicle charging work for San Diego Gas & Electric?
And most importantly, how can all of these solutions provide real value to the customers they interface with and not cross-subsidize the value for other energy customers?
To me the answer largely boils down to this: utilities must begin shifting their business models to offer a more dynamic set of energy solutions- options that are customized to their clients’ interests- and regulators need to encourage this. If they don’t, innovators will continue to find angles into providing solutions to energy customers themselves, bypassing utilities. (This is not to argue that utilities and utilities alone should be offering solutions in markets, only that it is imperative that utilities be proactive about providing cutting edge solutions to their customers. The debate of the appropriate level of competition in markets is a topic for another piece.)
Accessible, reliable, affordable, and safe energy has driven the progress of our society for over 100 years, and utilities have done an amazing job delivering that energy. The checks and balances between providers, regulators, and users have also largely served consumers well. Utilities, regulators, energy users, and advocates need to see that distributed resources are going to play a key role in the energy system of the future and it is in everyone’s best interest to integrate that new era of solutions into the framework that has served us all so well.
So the real question isn’t “can grid edge innovators and utilities work together,” but “when will they work together?” Unless we evolve our energy models to ensure that this happens, the friction between the two will only increase and the real costs of that happening are high.
From what I saw at GridEdge, and in the conversations I have each week at Smart Grid Northwest, it is clear that the edge of our energy system is ground zero for a lot of new functionality. I would like to see as many of these solutions come online as possible, albeit in a way that delivers clear value for energy providers and users alike. It’s time to make sure our energy markets are structured to make the distributed energy resource revolution, and the grid supporting it, as successful as our hardwired power system has been for the last century.