The Next 10 Years5 min read
In the next 10 years, AMP and its members face a rapidly changing grid and a new type of customer. This new reality is coming quickly, as disrupting technologies change the models of generation and distribution.
In response to coming changes, AMP has established two initiatives to ensure a strong future for the organization and its members.
The first initiative to address future changes is the Focus Forward initiative, which was created in 2016 at the direction of the AMP Board of Trustees in response to an evolving industry. As part of this initiative, the Focus Forward Advisory Council (FFAC) was created. The FFAC is comprised of more than 30 member volunteers, rate and engineering consultants and AMP staff who work to educate and inform members about emerging industry trends and prepare for further integration of distributed energy resources (DERs). The FFAC examines emerging trends, identifies the needs of members and develops tools to assist member communities. Recently the FFAC developed an electric vehicle (EV) subgroup to share experiences and lessons learned about EVs and charging infrastructure.
In 2018, the executive leadership of AMP created a cross-departmental internal Innovation Team (I-Team) to identify potential industry disruptors and adaptation roadmaps for AMP and its members’ current business models. Recently in Cleveland, during the 2018 AMP/OMEA Annual Conference, I outlined five areas of focus that we believe will have the greatest impact on our industry.
As the industry moves toward a multidirectional network of electron flows, the future utility will need to support two-way communications. Customers will be doing more than simply buying and using electricity, which means that technical efforts such as cloud computing and advanced metering infrastructure (AMI) will be key in adapting to the modern industry.
In many ways, AMI will function as the central concept from which all other innovations will flow. Smart meters will form the base layer of infrastructure required to become the utility of tomorrow. They allow for the collection of user data that makes optimization of grid operations possible.
To add to this initial flow of data, more and more household items are landing in the category of the “Internet of Things.” The Smart designation now belongs to more than just phones, as all sorts of simple household items are connecting to the internet, allowing customers more opportunities for control and savings. These new connected devices can provide utilities with better optimization and opportunities for new services, but an understanding of how to collect and utilize the data must come first.
As digitalization of the American household continues, the way that electric utilities interact with their customers will change significantly. A better understanding of this concept is key, no matter the size of the utility.
The cleanliness of the grid has been, until recently, largely dependent on regulation. However, regulations and subsidies are no longer playing the outsized role in decarbonization that they once did. States, corporations and most importantly, the end consumer are making their own push toward a cleaner electric grid.
It is important to note that one of the driving factors of this is dropping prices of technologies such as solar. Swanson’s law is the observation that the price of solar photovoltaic modules tends to drop 20 percent for every doubling of cumulative shipped volume. In layman’s terms, as demand rises, prices drop, which ultimately opens up even more markets for the technology and leads to broader deployment.
The observations of Swanson’s law can also be found in other technologies, such as battery storage. What this means is that as more people adopt these technologies, the prices will continue to drop, which will lead to more adoption. This will happen with or without utilities’ say, so public power utilities must consider how to best respond to these changes.
One of the biggest changes that the evolution of our industry will bring is the proliferation and spread of electric vehicles (EVs) and their requisite infrastructure. Already, the number of EVs on the road has grown to a rate that cannot be ignored. According to a 2017 study produced by the Rocky Mountain Institute, there could be as many as 2.9 million EVs on the road within five years.
That means two things to an electric utility: there will be significant load growth that comes with EVs, and infrastructure must be installed to meet rising demand.
Utilities must plan for how to handle rising electric demand and monitor where charging stations are installed.
As the world around us changes, so too does the way our customers interact with it. The technologies and areas of focus previously mentioned are changing the expectations and habits of our customers. Utilities must adapt in order to meet their customers’ needs and form an engaging relationship.
One concept to watch is the rise of the prosumer. Prosumers are both consumers and producers of a product, and the steady decline in the cost of technologies, such as solar and storage, is making them an increasingly prevalent part of the industry landscape.
Prosumers will drive the pace of change in our industry, as even the largest corporations are forced to contend with the idea of social-driven change. Efforts such as decarbonization or the implementation of more robust sustainability practices are no longer an internally-driven decision — customers are demanding them.
In the past, a company could rely on the idea that putting out the highest-quality or lowest-priced product would drive sales. However, the relationship between corporations and their customers has shifted. An increasing number of customers now demand that corporations share their values.
As customers demand that corporations become more environmentally friendly, on-site generation will increase, making renewable generation far more prevalent and economical. It also means that prospective businesses are more likely to site new projects in areas where clean energy needs can be effectively met. Utilities play a large role in attracting new jobs to their communities.
Depend on AMP to help navigate
As our study of these issues continues, members can depend on AMP to keep them in the loop. It is our goal to help members navigate the coming changes in a way that balances technological and customer drivers with the need to operate a reliable electric system.
Public power systems will need to consider how to best position themselves locally. I encourage members who haven’t yet done so to take a look at the Focus Forward Toolkit that is available on the AMP website’s Member Extranet as a starting place. Our staff is available to join in those discussions if that would be helpful. Additionally, other AMP members who have already seen the impact of these changes are available to share lessons learned.
Joint action between public power entities is more important than ever, which is why we became an equity owner in Hometown Connections, Inc. Working together means access to economies of scale, buying power, advantageous partnerships and technological, financial and legal resources that might not otherwise be available.
Conquering the coming challenges in our industry will require something from all of us, and we look forward to all that AMP and our member communities will accomplish together.
I encourage you to contact us and get involved. Collaboration will be vitally important, and there is no better time to start than now. If your community is not involved in the FFAC, find an interested employee within your municipal utility to participate.