Today, the “new utility” is one that is decoupled, makes a rate of return on generation, but also on degeneration. Although the ROI on degeneration isn’t as high, it helps and is a starting point. And, while there is a lot of discussion around the “new utility,” nothing in the utility industry will happen overnight. Eventually the new model will takeover and the ROI for generation will be something like 1x, demand response and energy efficiency will be 2x the ROI and renewables will be 3x the return. We are not there yet.
In contrast to what has been a siloed approach to energy efficiency, demand response and renewables, progressive utilities are now moving towards a more holistic approach.
The promise of an integrated demand side management program gives the utilities a place to start. Companies like EnerNOC, which started in DR and went into EE, and Opower, which started in EE and is integrating DR, are both beginning to successfully unite energy efficiency with demand response and see a longer vision of these two programs synchronized.
Having customer information to appropriately engage is key to offering the right programs to the right residents, while a real time view of the customer’s energy history allows utilities to provide tailored programs and the ability to create a more integrated environment for the customers that want to participate in energy efficiency, demand response, and distributed generation or renewables.
The realization is that you’ve got customers that are proactively green, dubbed “prosumers” and those that are uninterested. Each type of customer will either opt into or out of these programs. An integrated solution helps lower utilities’ marketing costs to effectively target solutions to those already intent on energy conservation and clean energy.
The opportunity to create economic value from the grid is being heavily reexamined. States like Colorado, California, Hawaii, Massachusetts, and New York are retooling existing regulatory framework for delivering electricity and introducing legislation that further incentivizes energy efficiency, demand response and renewables.
The next generation of utility business models are considering performance-based ratemaking, which aims to create new revenue streams from demand side technologies like distributed solar and energy efficiency.
Colorado recently introduced Bill 1250, which “prioritizes developing a performance-based regulatory system that will drive innovation and promote economic development in a variety of technologies.” And New York’s Reforming The Energy Vision (REV) Initiative affords the utility a new role to manage the distributed resource platform. These legislative shifts will challenge business-as-usual and spur the next wave of clean energy innovation