Andres Carvallo CMG Founder & CEO Co-Author of The Advanced Smart Grid Former Austin Energy CIO ( )

Transcription

1 Changing The Utility Business Model Andres Carvallo CMG Founder & CEO Co-Author of The Advanced Smart Grid Former Austin Energy CIO ( ) Tel CMG Consulting LLC All Rights Reserved 1

2 The Advanced Smart Grid The Inevitable Evolution of Smart Grids. The Rationale for an Advanced Smart Grid. Vision, Planning, and Initiative. Smart Grid 1.0: From Power Plant to Meters. The National Perspective on Smart Grid. Interfacing with Distributed Energy Resources (DER). Smart Grid 2.0 Emerges: An Integrated, Advanced Smart Grid. The Potential of Advanced Smart Grids. Fast Forward to Smart Grid CMG Consulting LLC All Rights Reserved 2

3 Disruption Becomes Evolution Creating The Valued-Based Utility This paper was written for power and energy executives and regulators faced with rationalizing the rapid and numerous changes currently pressuring the traditional structure of the utility industry. It shows how disruptive change in other industries caused the rules of the road to be changed, and how the lessons learned from those experiences can be applied to the utility industry. New business models and cutting edge technologies such as distributed solar and CHP, demand response, microgrids, energy storage, electric vehicles, cyber-security, advanced wholesale markets, and new competitive retail markets are all impacting the traditional regulated utility industry. Generation, grid operations, and wholesale and retail energy sales are being transformed by innovation and competition, forcing utilities faster than ever to make critical choices about business models and technologies. CMG experts bring their deep professional experience and a global view of these trends and opportunities to suggest how the market can accelerate its digitalization and transformation toward a truly robust and sustainable energy future CMG Consulting LLC All Rights Reserved 3

4 Introduction Edison and Tesla s inventions have lasted 132 years almost unchanged, since Pearl Street Station in NYC in 1882 to today. DC power dominated until AC power took over since. Samuel Insull invented the winning business model in 1897 offering two tier rates to Chicago Citizens. Central Generation, Load Factor (Avg. Load / Peak Load), Copper Wires, and Tier Rates are at the core of the business model. First DCS by Honeywell in First SCADA and Modbus by Modicon in And first EMS by most vendors in Power Grid has remained blind from substation to meter and beyond all this time. Demand Response was introduced by IEEE in First Smart Meter (GE) with two way network deployment (Metricom) deployed by Southern California Edison in CMG Consulting LLC All Rights Reserved 4

5 Key Disruptions (or Trends) Renewable and Distributed Energy Demand Response Electric Vehicles Retail Choice Product Bundling 2014 CMG Consulting LLC All Rights Reserved 5

6 Renewable & Distributed Energy Wind power penetration climbs US capacity is up to 61 GW. A 140% growth rate in 5 years. Record Wind Output of 10GW on 3/26/14 and 40% mix on 3/31/14 at ERCOT. 1.9 GW and 61% of mix on 5/24/13 at Xcel in CO. Solar power penetration PV installations totaled 4,751 MW in 2013, up 41% over 2012 Cumulative operating PV capacity in the US now stands at 12 GW Cumulative operating CSP capacity in the US now stands at 1 GW Distributed Energy proliferation Reduces dependence on utilities and lowers carbon footprint Creates potential for P2P energy trading Enables owner to earn revenue stream from ancillary services back to utilities, while increasing resiliency 2014 CMG Consulting LLC All Rights Reserved 6

7 Ex: Solar cheaper than the Grid Nearly 21 million single-family homeowners in 42 of the 50 biggest U.S. cities can now expect to pay less for electricity from solar than for electricity they buy from their utility. In fact, the numbers show money spent on a residential solar system earns a better return than investing in Standard and Poor s 500 index fund CMG Consulting LLC All Rights Reserved 7

8 Demand Response Wholesale market operators are getting impacted through the input of grid-scale and transmission-connected renewables This complexity is augmented because adding intermittent renewables both centralized and/or distributed makes the dispatch equation much more complicated As frequency and duration of intermittency grows, adding and managing generation reserves are not good enough. Demand Response as we know it and Dynamic Demand Response both emerge as great tools to solve this problem CMG Consulting LLC All Rights Reserved 8

9 Ex: PJM Program Benefits Customers Demand response has proven itself to be a cost-effective way to manage energy elsewhere. For example, PJM Interconnection, the power grid in thirteen states surrounding Pennsylvania, launched a demand response program which is projected to pay participants more than $300 million in in addition to $1.2 billion they have already received in savings. RPM = Reliability Pricing Model UCAP = Unforced Capacity VVR = Value Resource Requirement 2014 CMG Consulting LLC All Rights Reserved 9

10 Electric Vehicles US growth of Electric Vehicles (EVs) reached over 100,000 units in EV s are a special case of Energy Storage and can offer the same benefits with the ability to be moved to further relief traffic congestion and peak loads. Navigant Research predicts worldwide sales of electric commercial vehicles to grow from less than 16,000 in 2014 to nearly 160,000 in CMG Consulting LLC All Rights Reserved 10

11 Ex: DOE, CA & GA, etc. The U.S. Department of Energy (DOE) has announced more than $55 million in funding to develop and deploy cutting edge vehicle technologies that strengthen the clean energy economy. California dominates the PEV market, with more than 100,000 on the road. Georgia is the second largest market in the country with about 20,000 PEVs. In the third quarter of last year there were 4,473 registered electric vehicles in Georgia, and a year later that figure hit almost 19,000. Eight states have released an action plan to reach their collective goal of 3.3 million zero emission vehicles (ZEV), including electric vehicles (EV) and fuel cell vehicles, by CMG Consulting LLC All Rights Reserved 11

12 Retail Choice Retail Choice was approved in Connecticut, Delaware, Washington DC, Illinois, Maine, Maryland, New Hampshire, New Jersey, New York, Ohio, Pennsylvania, Rhode Island, and Texas between 2000 and Australia, New Zealand, and Western Europe adopted retail choice from 1998 to UK adopted retail choice in 2004 and is now all over the EU. Competitive Markets show significant technology and business model innovation along with cheaper prices and better customer satisfaction. In some competitive markets Power+Voice+Data+Wireless services are offered bundled and some even include Water+Gas on top of the other four CMG Consulting LLC All Rights Reserved 12

13 Ex: 8 States lead the way The deregulation trend started in 1998 and is being adopted state by state. Full electric retail choice is currently provided in Connecticut, Delaware, District of Columbia, Illinois, Maryland, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, and Texas. Customers choose between their old incumbent utility supplier and an array of new competitive suppliers, rather than being captive to a single provider. Competitive retail suppliers provide a variety of service plans that give consumers and businesses flexibility in their energy purchases. In Texas, retail energy providers (REPs) offer many flavors of real-time pricing, time-of-use pricing, and even free nights and weekends electricity pricing, as part of a package. They may also offer services to hedge against price fluctuations; more choices for alternative energy resources, and newer energy efficiency projects, allowing consumers and businesses to choose the services that best meet their needs. Players from the telecom, Internet, cable, and home security industries are consolidating into a single group of companies (e.g., Comcast, AT&T, Verizon) that deliver services bundled to customers. Other than not owning the wires, these new entrants appear to customers as legitimate sources from which to purchase power CMG Consulting LLC All Rights Reserved 13

14 Product Bundling Players from the telecom, Internet, cable, natural gas, water, and home security industries are consolidating into a single group of companies (e.g., Comcast, Time Warner, AT&T, Verizon, Sprint, and others) that deliver services bundled to customers. Some unexpected players are gunning for the digital home dominance and energy is on their target (e.g. Google, Apple, and others). Several Muni and Co-ops already offer bundle products and are looking to expand their services. Many utilities in Australia, New Zealand, and Western Europe offer bundled products and one-bill to all their customers CMG Consulting LLC All Rights Reserved 14

15 Ex: Comcast and NRG The pilot for that partnership is now live in Duquesne Light s service territory, which covers parts of Allegheny County around Pittsburgh and most of Beaver County, PA, serving about 580,000 people. Comcast customers in that area who sign up with Xfinity s Energy Rewards will get a $25 enrollment bonus and other incentives, such as three free months of HBO or Showtime, plus a free smart thermostat if they also sign up for Xfinity Home, Comcast s home automation service. The fixed and variable price plans are in line with other offerings in the region, with rates of about $0.06 per kilowatt-hour for the variable rate plan (which comes with a guarantee that the price will be 10 percent below the utility s rate for the first six months), or $0.065 per kilowatthour for a year of fixed pricing. Although some of the perks, such as free HBO, will show up on a customer s Comcast bill, Energy Rewards will still be billed through the utility, which is a regulatory requirement CMG Consulting LLC All Rights Reserved 15

16 Questions? Website: Tel: CMG Consulting LLC All Rights Reserved 16