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Energy in Transition


Toward a simpler and smarter energy future: themes from the 2014 Utility of the Future Leadership Forum

This year’s Utility of the Future Leadership Forum brought to light a number of compelling themes facing the energy industry in this period of transformation. One recurring and universal theme is that we all seem to be making everything extremely complicated– between the layering of regulations, rules and protections. We need to remember the KISS rule (“Keep it simple, stupid!”). From federal to state to the local level, regulatory complexity is dramatically challenging the ability of new players to enter this market and confounding the very rules meant to encourage participation.

However, even as policy, legislation and regulation mount, we cannot wait for that perfect policy statement to enable our business. Rather, we need to move forward boldly and create our future, as there is no risk-free option. After all, utilities have been some of the biggest risk takers in the history of capitalism.

Aside from these regulatory issues, the industry continues to struggle to truly and meaningfully engage customers. We must get closer to our customers—and one way to encourage increased interaction is through retail competition. We remember that the two to four year political cycle does not comport well with our long-lived asset industry. However, surprisingly, no one challenges the notion of whether faster amortization of these assets would help energize the modernization of our system.

We were also reminded of the laws of unintended consequences, and the idea that those responsible for helping design this industry and its path forward need to truly try to fully embrace the context of their decisions. There was strong consistency in the notion that we need to move from volumetric charging, and there was strong agreement that the industry requires substantially greater investment in the grid. Indeed, in a previous conversation I had with a utility executive, I was reminded, “If you like renewables, you must love transmission.”

Energy efficiency was center stage in several of the panel discussions, too. Generally, there was a sense that while energy efficiency continues to be a critical resource, we need to evolve it to become a more holistic resource. The topic of energy efficiency led into the discussion of energy storage, another important area of development. One panelist optimistically declared that thanks to rapid deployment of storage, within five years, we should be able to stop building peaking power plants. He foresees global battery production to double in the next two to three years. Whether or not such a scenario emerges, it raises questions about the availability of core natural resources to produce the quantity of batteries needed to support such energy storage growth.

Data availability and data management tools continue to grow in sophistication, presenting many challenges. Our task will be to learn to ask the right questions—lest the sheer volume of data to come overwhelm us. This is especially true of the types of information we choose to provide customers. In fact, one of the key takeaways is that customer information is most welcome when it enables customers to make choices and exercise flexibility before events happen. This is how you create perceived value for consumers. At the same time, we were also reminded that customers do not pay “rates”—they think about prices and value. Customers’ diverse values will shape the choices they make to exercise control in different ways, including the use of prepaid and intelligent systems.

We also saw, in the presentation on energy initiatives in Canada, a model for managing natural resources that seems to work very well. There is great inspiration to be found in a regulatory model that seems to have evolved to discourage surprises and encourage full participation within the industry. Inspiring, too, are Canada’s aggressive goals of reducing carbon intensity by 50% by 2030. As the week concluded the gathering of policymakers, utility executives, retailers, regulatory and consumer advocates shared a wide diversity of experiences and perspectives, yet found common ground in the mutual goal of building a safer, smarter, greener energy economy.

Related downloads are available on the 2014 Utility of the Future Virtual Booth.

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