Blog Post: Predictions Made 10 Years Ago About Utilities

Blog Post - Predictions Made 10 Years Ago About Utilities - Did They Hold Up?

Greetings,

So … for those of you who were doubting that I was truly going to keep up my writing, here is yet another blog post. (:

This one has to do with something that is always fun to do – look back at predictions made 10 years ago and see how they turned out.

But first, let’s do some follow-ups to recent posts.

Follow-up on EVs

One of your fellow readers commented on the issue I had raised of how to charge EVs that don’t have a dedicated parking space:

Hi Dan –

Speaking as un urban dweller who has off-street parking, but not in a parking garage and not with access to electricity --- I hope Hybrids remain acceptable into the future.

There is no foreseeable way I could locate or install a charging station at my home – nor could tens of millions of Americans living in urban areas like me.

And I only really drive long distances as I can walk to most things in the city. So – I’ll need to wait for charging stations to be in place to allow for road-trips. New York has tried to discourage car ownership and compensate for the lack of parking and congested streets by having numerous rental car options. ON every holiday weekend, and plenty of other just regular weekends, there are no cars left for rent.

Like it or not, some cohort of urban dwellers will continue to own cars. And they will not be electric vehicles. My hybrid gets 40+ miles to the gallon and I drive about 6000 miles a year. I hope this is an acceptable compromise!

Follow-up on NIMBYism

NIMBY efforts against solar farms or gardens often talk about the danger of the facilities catching on fire or some other kind of harm-causing accident. Unfortunately that just happened in Upstate NY. Here are some links to articles written about it so far:

https://spectrumlocalnews.com/nys/central-ny/public-safety/2023/08/01/jefferson-county-solar-farm-battery-fire

https://www.cbsnews.com/news/solar-farm-battery-fire-upstate-new-york-possible-toxic-smoke-shelter-in-place-lyme-jefferson-county/

https://www.localsyr.com/news/local-news/officials-urge-the-public-to-take-caution-potentially-toxic-fire-at-lyme-solar-farm/

https://www.wwnytv.com/2023/07/28/convergent-offers-words-apology-solar-farm-fire-continues-burn/

https://www.usnews.com/news/best-states/new-york/articles/2023-07-28/officials-say-theres-no-sign-of-health-risks-from-solar-farm-battery-blaze-in-northern-new-york

https://apnews.com/article/solar-farm-batteries-fire-new-york-smoke-warning-aa10cba9cea60f2271a6fb88ea9e8697

Follow-up on Chevron Doctrine

A couple of posts ago, I mentioned the Chevron Doctrine, a somewhat obscure but oh-so-important legal doctrine that requires deference to be given to executive branch agencies in writing the rules to implement a law. In that post, I semi-ranted about how in my experience Congress was not equipped to get too far into the weeds in prescribing implementation. Since then, a Utility Trade Association and one of its members have petitioned the Supreme Court to reverse a ruling issued by the Federal Energy Regulatory Commission (FERC) citing the non-applicability of Chevron in the case. As I said in that prior Post, a tug of war among judicial, legislative, and executive branches is extremely important to watch going forward.

Follow-up on Insurance

NPR did a long piece on how climate change is affecting the insurance industry and those seeking insurance. It is a 3-minute listen or you can look at the transcript here:

https://www.npr.org/2023/07/22/1186540332/how-climate-change-could-cause-a-home-insurance-meltdown?utm_source=newsletter&utm_medium=email&utm_campaign=wp_climatecoach&wpisrc=nl_climatecoach

Something New…….

You may or may not have seen that a conservative group of individuals and organizations recently released an important document called Project 2025. Here is the introductory paragraph:

"This book is the product of more than 400 scholars and policy experts from across the conservative movement and around the country. Contributors include former elected officials, world-renowned economists, and veterans from four presidential Administrations.

This is an agenda prepared by and for conservatives who will be ready on Day One of the next Administration to save our country. The Heritage Foundation is once again facilitating this work, but as our dozens of partners and hundreds of authors will attest, this book is the work of the entire conservative movement."

I may do a Post on what is in this document, but then again, I may easily get distracted by the many things new and old that I could write about instead. But I will say this – I do not think I have seen any “Day One” plan as specific and expansive as this. I also have not seen anything of this type that includes so many gratuitous swipes against specific issues, with climate change being just one of them. In any event, as a document it is quite well organized, and you may want to at least peruse it a bit. You can find it at: https://www.project2025.org/policy/

Thanks,

Dan

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Blog Post: 10-Year-Old Predictions About Utilities - Were They On The Mark?

I recently had occasion to search for one of my past appearances in Utility Dive, a free pub which many of you may be familiar with. The first thing that occurred in my search was a feeling of pride and old age, because after entering “Delurey” in the search bar the first few quotes and appearances were not mine but my son John. But I did eventually find what I was looking for. In n the process, however, I found another 10-year-old article that sets up today’s Blog Post.

As some of you will remember, I used to produce an event called the National Town Meeting. Day one of this event all plenary style and featured panels of top experts being interrogated – er, I mean questioned – by me about various issues of the day.

Utility Dive reported on a particular panel and the panelists responses to me asking a particular question. I asked this question in the faddish context at that time of 2.0. Everyone was talking about the next version of things, as in Efficiency 2.0, Demand Response 2.0 – and Utility 2.0. I asked the experts to, in one sentence, predict what the utility industry will look like in 10 years.

Of course, most of them violated the one-sentence rule, but I found it quite interesting to look back at what they predicted from the standpoint of 10 years hence.

I have eliminated the names of the individuals on the panel that day, and instead am providing a description of which aspect of the electricity/utility world they hailed from. Here we go.

1. Former State Commissioner and (at the time) Industry Consultant

“I think it’s going to be substantially different. I think, at a minimum, utilities are going to look much more like system operators. They are going to be integrators of a full range of technologies. We will see their pricing for those services be much less on a per kWh charge, much more fixed customer charges, fixed demand charges. There will be some utilities, I don’t know that it will be (a named Midwestern utility) or everybody, who will be operating partially regulated, partially unregulated and operating a whole range of services. One of the key challenges will be defining, much like we had to define in the telephone industry, the boundary between those regulated services and the unregulated services.”

2. Senior Executive, Investor-Owned Utility Trade Association

“I would say very different, and I do agree with a lot of what the former Commissioner said. But I would also say, I think there’s going to be a tremendous consolidation of the industry. And I don’t think a utility is going to be a utility that we see today. I think a utility is going to be involved in a partnership with others who have not traditionally been in the utility industry. It’s going to be a hybrid model; [a] very, very different model because it’s going to require a different level of expertise and traditional utilities are not going to be able to experts in all those areas.”

3. Vice President of Midwest-based Investor-Owned Utility.

“The grid will still be at the center of significant value creation in the same model we’ve had for 100 years.”

4. Ex-Utility Executive and (at the time) Industry Consultant.

“I think it’s going to have attributes of the telecommunications industry, particularly as we think about mobile and other services that were able to be bundled in. I think we’ll see more of that. And then the other is, similar to retail banking, where you saw many more opportunities where banks got into insurance and other things. Not saying that those are things a utility will do, but there will be a set of bundled services that will be packaged up and offered as some customers will want a simple choice, and the utility might be the most cost-effective way of partnering for others to deliver that.”

5. Vice President, Large Engineering Multi-National Company Serving Utility Industry

“I think we’ll see more utilities [in] an enabler role, the integrator that the former Commissioner talked about earlier. But I also think in ten years we’re going to see many more utilities under performance-based regulation. You’re seeing it north in Canada, in Ontario, now Alberta, soon British Columbia. I think we’re going to see some of that increase over the next ten years.”

6. Official State-Appointed Consumer Advocate

“I am going to be a little bit contrarian, just because I know how glacially slow everything happens in the utility business. There will be some changes; technology will wreak some changes. I think that the regulatory process changes at an equally glacial pace. In ten years, a lot of things will look a lot like they are today but there will be some fancier gizmos and some larger customers will have some opportunities. I think, 20 years, it will start looking a lot different, but really 10 years is near-term in this world we live in.”

My thoughts……

On the one hand, I could just not say anything at all and just let the prediction of the Consumer Advocate say it all. From my viewpoint he is the one who had the accurate prediction. After all, what is different today about the utility industry from 10 years ago? I would say not as much as a lot of us thought.

Many of us thought along the same lines as the Ex-Commissioner, that the utility industry was on the cusp of great change and "modernization." It seemed to make so much sense then. New technologies, both of an engineering and infotech nature, were bursting onto the scene. Also roaring into place was distributed energy.

The Trade Association representative talked about consolidation. The decade prior to his statement certainly saw a lot of consolidation, but the last 10 years not so much. There may be several reasons for this, but one is certainly the fact that there are only so many investor-owned utilities and thus a limited amount of dance partners.

Another interesting part of the prediction is the influx of different kinds of people, with different types of expertise, into utilities to allow inside-the-tent expertise on new and different things. I know this has happened to some extent in the finance area, but if it has happened in other areas, I have not seen it. I hope that it is happening at the lower levels, i.e., bringing in people to utilities who have already been in another industry and have more of a traditional business exposure than the untraditional world of the utility business. Comments to enlighten me are welcome.

One general theme in some of the comments is the prognosis of utilities becoming more telecom-like. Similar statements were made about bundling and enabling.

Where is the performance-based regulation that was predicted? For that matter, where is there innovation in ratemaking. I am sure that 10 years ago there was a lot of talk at the Town Meeting about the fact that the smart meters were being rapidly deployed and thus the path was clear for time-based pricing. The meters are in – where is the innovative pricing?

I suppose there are some examples of greater use of bundling today. Some utilities are offering solar, storage and EV charging together. Some are adding time-based pricing. But 10 years ago, if I remember correctly, bundling meant more than that. It meant pulling in other products and services from outside the traditional utility industry. Is that happening?

As for enabling, utilities are enabling solar, storage, demand response, and of course the old war-horse of energy efficiency. But is there some other breakthrough or at least advancement on bundling?

The comment that stands out for me – and I suspect for you – will be that of the utility executive, which can be roughly translated into Clinton-speak to say, “It’s the wires, stupid”. Whether you make that statement in the context of a restructured, deregulated state or a traditionally regulated state, the exec was pretty much on point. The grid is the grid and seemingly should forever be the focus of the utility business.

Now for the extra-fun part … What did not get predicted?

While the utility executive essentially said, “It’s the wires” no one talked about how problematic it would be to build new wires systems, both from a federal and state permitting standpoint and having to deal with NIMBYs and BANANAs.

No one talked about EVs. No one (on the panel or in the audience that day) seemed to imagine that the auto industry would step up to be such a driver of conversion to EV-based transportation and have such an impact on utilities.

No one talked about electrification and what it would mean as a driver of electricity demand (and sales), and the electric utility business planning and operations model in general. No one talked about the fact, that even though penetration of air conditioning was already high 10 years ago that its usage was going to increase in duration and timing.

But most notable to me is that no one mentioned climate change and what it would mean in terms of a change agent for a major emitting industry.

No one talked about the turn against natural gas (for climate reasons) and what it would mean to utilities that offered both gas and electricity to its customers.

No one talked about resilience and adaptation and the increased importance of outage prevention and management would be in the face of wildfires, flooding, and other climate-enhanced disasters.

No one talked about the utility regulatory system being an important government arm when it came to climate change.

Ten years ago, most of what is known about climate change was already known in terms of where it was headed. Yet the utility industry was not seen then as the key player that it must be. Talk about enabling, what industry has the potential to be a bigger enabler of actions to mitigate climate change? What other industry has the potential to bundle actions together in a way to achieve high penetration of those actions? What other industry is so tied to Air Conditioning, something that is already taking on increased significance as things change. Which other industry must find a way out of the conundrum of electricity versus gas? What other industry is subject to the regulatory system that it is?

The predictions made on that panel 10 years ago were good predictions based on what we all knew and thought then, and how we were all prioritizing things. But that was then, and this is now. To slip back into Clinton-speak again – “It’s the climate, stupid.” We all have to look to utilities and the regulatory system that governs them as a necessary and vital vehicle for deploying many of the components of the national climate war plans we must follow in the years to come - starting now.

Links to Past Posts:

My Vote For The Most Under-Appreciated Impact of Climate Change

10 Things I Should Have Written About

So I Went to the COP - Here Are My Top 10 Takeaways.

Efficiency and Clean Energy - Faster vs More

Efficiency & Clean Energy - More vs. Faster

It's Time For A Climate Vote - On the Record

Good COP, Bad COP .....Thoughts Before Glasgow

One of These Things is Not Like the Others

What I Should Have Written About

The Serenity of Being a Climate Voter

Decarbonization Dilemma: 10 COVID Impacts that Worry Me