New Era in the Electric Utility Industry
Solar, batteries and energy efficiency create a consumer-centric system of electricity
By Paul Wesslund
The power that lights your home is not your grandfather’s electricity. It might not even be your older brother’s electricity.
“Consumers are becoming more active participants in their daily energy lives,” says Jan Ahlen, director of energy solutions at the National Rural Electric Cooperative Association.
Think about it. When a homeowner installs an array of solar panels on their roof, they are no longer just a customer. They have become a generator of electricity. Under federal and state rules, that homeowner can sell their excess electricity back to their utility.
“The utility industry has traditionally generated electricity from large power plants, then sent that to the distribution system, and then to the consumer,” Jan says. “It’s going to be a huge transformation. We’re moving from a top-down approach to a networked model.”
The transformation that’s going on is huge because it is not just about the solar energy hobbyist, but about more people using a growing number of energy choices.
It’s a trend utility insiders call “distributed generation,” meaning electricity is getting made in different ways and places.
Backup generators give a homeowner the option to run a refrigerator during a power outage. A smart thermostat helps a consumer control energy use by automatically using less heating or cooling at times when nobody is home. Even electric cars can store electricity and use it in a different way at a different time.
Jan sees the trends as a new era of the industry that is “more consumer-centric.”
The new era means utilities will have to find new ways of doing business. It gives consumers more choices, but more choices mean home-owners and businesses will need the time and expertise to figure out how to get the best deal.
Jan says electric utilities are positioning themselves to help sort out the options for consumer-members in ways that benefit the surrounding community as well by connecting to the larger electricity network.
The distributed energy revolution is spreading as technology gets better and cheaper. New ideas are even changing ways of thinking about what generating electricity means. Energy efficiency can be thought of as a substitute for generating electricity, as improved lighting and appliances do the same work with less energy.
Here are a few of the trends creating the new era of distributed energy:
- Wind and solar energy have grown from generating about 3% of the electricity in the United States 10 years ago to about 8% today. The Energy Information Administration says that will continue, with wind energy growing 12% this year and 14% next year. EIA projects large-scale solar power will jump 10% in 2019 and 17% in 2020. Smaller-scale solar installed at homes and businesses is predicted to increase 44% in the next two years.
- Falling costs help drive that rise in renewable energy. One industry group estimates the cost of wind power is about a third of what it was 10 years ago. The Solar Energy Industries Association says the cost to install an average- size residential system has dropped from $40,000 in 2010 to $17,000 last year.
- Americans are becoming increasingly energy efficient, and in a new way of thinking that is considered distributed generation. One way to measure efficiency is to calculate the amount of electricity used by each household—a number called energy intensity. EIA projects that number will decrease 0.3% each year for the next 20 years.
- Big batteries are putting more power under the control of consumers. From large home models that let rooftop solar owners store electricity from sunlight for use at night to huge industrial-scale arrays, batteries are getting better and cheaper. One industry group forecasts the U.S. energy storage market will reach $4.5 billion by 2023.
- Batteries power increasingly popular electric vehicles. About 700,000 electric vehicles are on American roads today, according to an analysis by CoBank, a financier for electric cooperatives. That number could jump to 3 million in the next five years.
One of the newer forms of distributed energy comes in the form of microgrids— essentially, a miniature utility system.
A hog farm might get some of its electricity from the local utility, but it also might have its own wiring system powered by an anaerobic digester producing electricity from pig waste, a set of solar panels and a large battery.
Those interested in microgrids and others jumping on the distributed generation bandwagon can benefit by working with their electric utility, says Brian Sloboda, director of consumer solutions for NRECA.
“A commercial company could put in a battery to benefit themselves, but they’re only going to get a fraction of the benefit they could get from working with their co-op,” Brian says.
Electric utilities could help the company use its extra capacity to provide backup power to the surrounding community, with financial benefits to the company.
In an era of distributed energy, electric utilities are in a position to help consumers make the best energy decisions, Brian says.
“There are all sorts of people out there trying to sell you stuff, and they may or may not have your best interests at heart,” Brian says.
Instead of putting solar on your roof, your utility may have a community solar program you could participate in at a cheaper cost. He encourages consumers to talk to folks at their local utility before making an investment.
“They’re the electricity experts, and they’re your fellow community members,” Brian says. “They’re going to give you the most unbiased information.”