- How are cloud and SaaS transforming the energy software space?
- Why and how have regulatory and accounting rule frameworks hindered cloud and SaaS adoption to date?
- What approaches can be leveraged to circumvent regulatory barriers and capitalize cloud and SaaS investments?
- How can utilities engage with regulatory commissions to explore capitalization mechanisms in lieu of waiting for widespread standardization or industry consensus?
- How can regulators facilitate industry innovation?
2Q 2023
Enabling Utilities to Invest in Cloud-Based Solutions
The perception that electric utilities have failed to keep pace with the level of innovation seen in other major industries is largely correct. As most other mission-critical sectors migrate to cloud-first software strategies, the question becomes, “why not electric utilities?” The answer is multi-faceted.
Beyond inherent cultural skepticism, issues pertaining to accounting and regulatory parity have inhibited the adoption of cloud computing and software as a service (SaaS). While a few state commissions have eased their capitalization restrictions to help level the playing field between on-premise and cloud-based solutions, without a standard approach or industry-wide consensus, eliciting widespread change remains a challenge. Utilities are, however, using several creative workarounds to sidestep these traditional capitalization requirements.
This study takes a look at the evolution of cloud-based regulatory policy and outlines ways electric utilities can capitalize their cloud and SaaS investments today.
Pages
19
Tables | Charts | Figures
5
Key Questions Addressed
Who Needs This Report
- Utilities and grid operators
- Utility software vendors and service providers
- Regulatory bodies
- Government agencies
- Research community
- Investor community
Table Of Contents
Spark
Context
Recommendations
Cloud and Software as a Service Are Quickly Becoming the Norm
Energy Providers Are Awakening to Cloud Computing’s Multi-Pronged Value Streams
Energy Industry Still Trails Other Major Verticals in Cloud and SaaS Adoption
Outdated Regulations and Lack of Accounting Parity Plague the Industry and Stifle Innovation
North American Utilities Cite Regulatory Barriers as the Primary Obstacle
The Pace of Regulatory Modernization Remains Slow and Insufficient
Energy Software Providers Are Not Waiting for Regulators to Catch Up
Utilities May Still Capitalize Their Cloud and SaaS Investments Today
Prepaid Contracts Have Been Well Received by Regulators
Periodic Payments Preserve Flexibility at the Expense of Earnings Potential
Hybrid Approach Minimizes the Flexibility and Earnings Tradeoffs of Available Alternatives
Make-Whole Adders Can Help Bridge the Opportunity Cost of Cloud Investments
Performance-Based Ratemaking Enables Future Pathways
Growing Number of State PUCs Have Eased Their Capitalization Requirements
New York Public Service Commission Recognized Cloud Capitalization Issues Early On
Illinois’ Landmark Regulatory Proceeding Could Have Changed the Game
Alabama Power’s Direct Approach Offers a Template for Others
Indiana Commission Allows for Prepaid Cloud Capitalization
Pennsylvania Adds to the Growing Case Study Library
Green Mountain Power Looks to Build on Early Precedents
California IOUs Are Clamoring for Regulatory Parity
Energy Providers Run the Risk of Falling Behind
List of Charts and Figures
- SaaS/Recurring Spending by Region, World Markets: 2022-2030
- Cloud Computing’s Key Benefits
- Regulatory Accounting Timeline/Evolution
List of Tables
- Key OT Vendors: Cloud/SaaS Development and Sales Strategies
- Cloud Adoption Trends
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