What Is the Future Utility Business Model?

Renewable energy technologies are taking off and costs are dropping each year, so what’s holding the industry back? A new report called America’s Power Plan suggests that the real culprits are outdated utility business models — rewarding utilities for building and maintaining fossil-fuel plants is dragging the industry down.

The report suggests several policy shifts that can help the problem, such as increasing renewable energy requirements and abandoning “rate of return” as a basis for utility profit. Former U.S. Secretary of Energy Stephen Chu believes that utilities should own, install and maintain residential solar and storage systems and continue to sell power as they do now — just as phone companies previously owned entire telephone systems from the telephone lines down to your home phone.

Renewable Energy World asked industry experts to share their insights on one important question:

What do you think the future utility business model will look like?

We want to hear your opinion, too! Share your thoughts in the comments below.

There are a multitude of factors today that deter the development of utility-scale renewable energy projects, including a lack of reliable energy storage technologies, high initial capital costs and perceived technology performance uncertainty. However, one of the most pressing obstacles to the development of utility-scale renewable energy is the lack of appropriate transmission infrastructure to support these projects.

Several issues contribute to the shortage of available transmission for renewable energy. These include 1) the need for new transmission corridors to serve remote sites, and 2) the need for extensive environmental impact assessments that often take several years to complete.

Some of the best land for renewable energy development is located far from demand centers and existing distribution networks, therefore the construction of these transmission lines is a huge undertaking. It requires investment for the construction of thousands of miles of power lines in multiple jurisdictions, such as Bureau of Land Management, state and local governments. In addition, many of the existing transmission systems that exist today require reconductoring and, in some cases, a complete overhaul in order to handle the power generated from renewable sources.

These factors serve to create a bottleneck in the development of renewable energy projects as they lead to delays in project financing, licensing and permitting, and the receipt of power purchase agreements for the output of these projects.

Transmission infrastructure will not be constructed without some guarantee that there will be generation sites to feed it, yet the generation centers will not be built without the promise of adequate transmission systems for the power that is produced.  Transmission infrastructure and access is necessary to enhance the renewable energy market and ensure that it is viable well into the future.

Kevin Wedman has over 25 years of building and safety experience for both jurisdictions and public agencies.  He is currently the vice president of power and utilities for Bureau Veritas North America in Sacramento, Calif.  

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