Michael Giberson
Chris Davis, at PowrTalk, asks, “What if power companies became more like banks?”
Maybe the idea seems a little scary, especially with the way some banks have performed lately, but if it scares you then you are missing the point. Here is more:
When electricity comes from distributed renewables, there is less for the power company to do. In a distributed renewables world, people make their own power and for the most part use it where they make it. But power companies exist to make and distribute that power, so the bothersome renewables are encroaching squarely on the their raison d’etre. Where is the business model, the profit motive, for the power company in such a world?
… What if power companies became more like banks? Power companies might end up making better money managing and distributing power that is created by others (just as banks seem to make excellent money managing and distributing the stored value, the cash, that is created and owned by others).
Right? For the utility, there’s less heavy lifting (building and operating and maintaining power plants and transmission lines) but more thinking (analyzing and efficiently and dependably allocating the power from so many distributed production points).
Davis has seen a vision of the utility of the future: “a scrawny, geeky, googilian smart power company that is laughing all the way to the bank.”
I think the author is describing competitive retailers in ERCOT, Alberta, and Australia. Unbundled retailers in ERCOT also have facilitated the development of renewables in ERCOT, so the causality runs in both directions.
The future is closer than you think.
Great idea, it will never happen in the US… Too much regulation.
“people make their own power and for the most part use it where they make it.”
Whatever he is smoking or drinking, I want it. At my house the sun sets every day, and we need energy the most when daylight is the shortest and the light the most wan. Moreover, where I live, the winds are, according to nrel.gov, not promising for non-solar power.
So, what are we supposed to do? Move to Arizona? Chop down the trees in the front yard?
Well, that is no problem, since you have no obligation to sell power (remember, you can also only take a credit and not have a saving account). In this case, you will probably pay more than someone who sends power back in the grid (however, I doubt that your costs would rise). One important point here is that energy companies need the right to set prices for energy transmitted in their nets (like the rent you get on your savings account), otherwise they will be flooded with useless energy at high prices.
I think one has better chances with smart grids (which are already used in europe) and a more informational approach (f.e. running your laundry at night) and a spot pricing scheme for houses (which means that peak hour energy costs are higher than midnight uses, because actual demand is higher). Right now you pay an averaged price, which means you are not conciouse to the hour you wanna use electricity.
So, I think smart grids and an rethinking of energy prices will have more of an effect than bring “banking” to the energy sector.
But perhaps the situation in the US differs a bit from the situation in here Europe, where the well-kept grid is interconnected between most of the european states.
The idea of the monolithic, vertically integrated “power company” is already outmoded in much of the U.S. There are many wires companies (transmission and/or distribution) that own no generation. There are independent system operators (under various guises) that manage load/resource balance, complete with real-time pricing. And there are energy-service providers, independent of wires, who will be willing to do anything they can get paid to do. And, of course, there are generation companies, for whom generating power is their raison d’etre. But my point is, there are already lots of “power” companies in the U.S. that perform specialized functions, some of which are similar to what Davis describes. So his scenario is not so far out of possibility from an industry-structure perspective. What is more difficult to imagine is having so much small-site renewable capacity that it changes the industry to predominantly managing customer-owned generation.
Nevertheless, daytime technologies such as solar would tend to reduce the power system’s load factor, which could make the power system more cost-efficient. Of course, you’d still have to pay for the use of the transmission/distribution system and for your base energy needs.
Yes, once you get the the wires company divorced from the generation and retail supply ends of the business, then the wires utility is just in the business of shipping power around between its customers, some of whom are net producers of power and others of whom are net consumers of power. In that sense the idea is already here, and some restructured retail markets resemble this “future” already in a bare bones way.
But even the most advanced wires co. now is mostly in the business of shipping power from generation companies to retail consumers, not coordinating among customers of diverse, distributed energy supply and consumption resources. And I get the sense that most of the companies induced to unbundle wires from non-wires business tended to see generation as the hot property and the wires business remaining the steady-as-it-goes regulated business entity.
What caught my eye in Davis’s description was the sense of the wires business as the hot property in a world of smart grids and diverse energy resources.
I think this is brilliant … But so much depends on storage.
Regarding D.O.U.G.’s comment about small site renewables, who knows where all this leads, but it seems that there’s some possibility that renewables make more sense and become a bigger part of the mix if these issues play out in their favor:
the smart grid makes renewables smarter and more sensible (for instance, it rationalizes wind’s intermittency)
technological advances in the renewables r&d department: urban wind, enhanced geothermal, offshore wind, other offshore renewables like wave, tidal, and all the other stuff that people are playing around with right now
vehicle-to-grid (V2G) shakes up the equation because electricity is a cheap car fuel, and the effects of buffering the grid with car batteries
Enron! This really really sounds like Enron!
Enron did try to become an asset-light mostly trading-based company, but that isn’t the kind of idea discussed here. Instead, (at least as I understood him) Davis is talking about a wires-based electric utility that adds value by helping energy users manage locally-interconnected distributed energy resources.