Embracing Disruption: A Utility Perspective on the Energy Transformation

In October 2018, I had the pleasure of listening to Exelon Corporation CEO Chris Crane share a utility perspective on the future of global energy as a key player in mitigating climate change. In the wake of the recent Intergovernmental Panel on Climate Change special report on the effect of global warming above 1.5°C, Crane assured the Brookings Institution audience that the electric sector will play a critical role in decarbonizing the global economy. His remarks emphasized that utilities need to serve as leaders in the energy transformation or risk being left behind.

The makings of good leadership include a willingness to listen to the individuals that keep a company in business. This theme was not lost on the conversation, as Crane routinely stressed building strong relationships with utility customers and stakeholders. Guidehouse Insights explores the importance of utility-customer relationships in a recent report, Enhancing Utility-Consumer Relationships through Residential DER Aggregation. Crane’s discussion and Guidehouse Insights align on a critical understanding, which is that utilities must embrace customer desires to navigate the energy transformation successfully.

Changing Technologies and Changing Relationships 

Utilities across the board are trying to improve relationships with their customer base. Where years ago, customers were referred to as ratepayers and had little interaction with their energy providers beyond paying bills and reporting outages, today utilities wish to be viewed as energy experts among their customer base. Where historically disruptive technologies and business models were to be feared, Crane finds that it is now time to welcome these changes to build positive utility-customer solution sets.

Customers want to see increasingly distributed clean energy and support developing two-way communication channels with the electricity grid. Guidehouse Insights finds that the days of centralized hub-and-spoke electricity generation are quickly fading away as customers add distributed energy resources (DER) behind-the-meter. If customers want to make such a transition, then the utility must work to inform stakeholders of the best places to begin optimization of the grid. Utilities should help to identify the infrastructure that is best suited to move toward two-way grid communication, and where risk is minimized while resiliency maximized. Further, to enhance the functionality of two-way communication some utilities, like Exelon, are investing in large-scale low carbon technologies and improving energy storage.

Utilities will be unable to rely solely on sunk investments to survive in the wake of more commonplace grid modernization projects. Crane is optimistic that new business models will emerge that are mutually beneficial for customers, stakeholders, and the utility itself. However, to see success moving forward the utility must have a seat at the table and engage in partnerships with technology vendors, systems integrators, and regional grid operators.

It Is All about Customer Choice

Guidehouse Insights finds that residential customers need to be convinced that grid integration benefits them more than grid independence. Residential energy players, including utilities, must be willing to trial different DER aggregation strategies to find new solutions that provide clear benefits to the customer base.

Historically, when embraced, disruptive technologies have helped utilities find unique customer solutions. Crane highlighted the advent of smart meters as a tool to allow utilities to understand electricity loads better and respond to customer needs more rapidly. With growing teams of data scientists, these companies have access to a wealth of information that can be used to streamline home energy management and efficiency. By using their unique resources, developing partnerships, and embracing customer choice, utilities can play a critical role in a decarbonized economy.