The Future is Now Blog Series: Choice is the New Green.

Choice is the New Green

By Alisa Ferguson

March 1, 2019

What do today’s electricity customers want? That’s not a question most utilities are accustomed to considering. But it may be the question that makes or breaks the business model of any company looking to win the 21st Century grid.

Customer choice in electricity is not a new concept. States have experimented with retail electric competition for more than 20 years. But today, customer choice is evolving to mean not merely a choice of supplier of a commodity (electricity), but rather a choice among a multitude of different energy products (renewable, local, zero-carbon) and energy services (demand response, energy efficiency, energy storage), each of which can be tailored to meet unique customer needs.

This shifting trend began as many do, with a few pioneers. About a decade ago, a handful of companies including Google, Walmart, and Apple began pursuing aggressive goals to go “green” by reducing their carbon footprint and using a greater percentage of renewable energy. Since then, they and dozens of other companies have grown more sophisticated about how they leverage market and investment power, driving access to green tariffs, virtual power purchase agreements (PPAs), and other bespoke contracts and partnerships that meet their needs for clean, innovative, and diversified energy. Between 2017 and 2018, corporate clean energy contracts doubled, totaling a record-setting 13.4 GW. It’s a trend that’s creating new tensions between utilities, customers, and regulators.

Increasingly, new renewable generation represents a significant cost savings over power from legacy generation assets, and utilities are under pressure to access those savings for customers. Across the country, large commercial and industrial customers are seeking to break from incumbent utilities and shop for power on the open market, leading to questions about the impact on residential ratepayers who remain. Even utility capital investments under the auspices of grid modernization—seemingly a step in the right direction—have come under fire from regulators concerned about how the costs and benefits of billions in new investment will trickle down to customers.

In these and similar cases, utilities are often portrayed as the bad guy— stuck in the past, blocking innovation, spending ratepayer dollars on boondoggles. Perhaps some are. But many are merely responding to a regulatory system designed for a grid of the past, where economies of scale and high barriers to entry limited the number of companies able to deliver affordable, reliable power.

Innovations emerging today can help us imagine a different future—one where utilities are freed from outdated regulatory frameworks and proactively embrace new business models and new technologies. In this future, utilities will take a holistic approach to grid modernization that leverages existing assets, embraces third-party access to energy data, and delivers what customers want—whether it’s low-emission, low-cost, off-grid, or locally produced power. Stranded assets will be repurposed in creative ways and exit fees will have become a relic of the past. Real-time, digital price signals will accurately reflect the value of energy as well as the cost of carbon across on-grid and off-grid resources. A variety of resources, including the EVs that will have reached critical mass, will serve as assets for the grid and customers alike.

In this future, other players—oil majors, tech companies, even auto manufacturers may challenge utilities for market supremacy. But the utilities who have embraced their own evolution will have the advantage of infrastructure and experience, and they will be positioned to power the economy well into the future.

The conventional wisdom says customers—even commercial customers—don’t have the time or interest to manage their energy use. However, a surge in access to energy data, user-friendly apps, intelligent appliances, grid automation, and maybe even the much-maligned blockchain, are poised to change that. These and other emerging digital technologies are transforming what was once complex decision-making into energy choices no more than a few clicks away. That means customers of all shapes and sizes can get what they want without understanding the vast complexity of the grid. It’s a trend that’s accelerating and one that utilities ignore at their peril.

Alisa Ferguson is a Senior Advisor with EC-MAP and writes regularly on ideas for accelerating energy innovation.

Further Reading (and Listening):

Winning in a More Distributed Energy World: 3 Steps to Utility Success,” Utility Dive

2019 Power and Utilities Industry Outlook, Deloitte

Interchange Podcast: Battle Royale: Utilities vs. Oil Majors vs. Mobility Providers vs. Big Tech, Greentech Media