The 21st Century Utility Business Model: Technology Investments to Enable Grid Edge Advancement

August 2, 2021
Blog

By Dominique de Wit

The electricity industry has embarked upon its clean energy pathway: 74 utilities serving 71% of the U.S. customer base now have low-carbon goals. 51 of these utilities have carbon free or net zero emission targets by 2050 or earlier.  

To obtain these goals, utility business models will get much more complex, and IT increasingly serves as a core function – rather than a support system – of utility operations.  

What lies at the utility’s fingertips is a transformation from a 20th century engineering company to a 21st century product company through investments in distributed energy resources, complex billing systems, and digital platforms.  

In Utility Dive’s 2021 State of the Utility Survey report, utility professionals foresee their utility’s power mix changing drastically over the next ten years (see figure 1). The shift from fossil fuel resources towards distributed generation and grid-scale battery storage and solar imply that cost shifting and decentralization will be integral to the transition to a clean- and resilient grid.  

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Figure 1: Utility Dive, State of the Utility Survey Report, 2021 

Decarbonizing the grid will require careful planning from both a resilience and cost standpoint. A June 2021 National Renewable Energy Laboratory (NREL) report foresees grid-scale solar and wind saturating certain regional energy markets, and a decline in their market value. A July 2021 Energy Institute Blog points to a Vibrant Clean Energy study to show how investing in distributed solar could even save us billions of dollars.  

And a June 2021 policy brief by the American Council for an Energy-Efficient Economy (ACEEE) shows that utilities needing to replace old power plants or meet increased electric demand could be more cost-effective by investing in energy efficiency instead.  

ACEEE points toward grid modernization to unlock DER and energy efficiency potential. NREL points toward the value of shifting output profiles through energy storage (including behind-the-meter), dynamic rate structures, demand response, and flexible loads.   

A prerequisite to the aforementioned shifting output profiles is Advanced Metering Infrastructure (AMI). AMI meters measure electricity use in 15- or 60-minute intervals, rather than by month, and consequently place a wealth of granular data at the utility’s fingertips.  

Optimizing this data is where the value lies. It enables the utility to enhance the customer experience in an unparalleled fashion via digital platforms, gain knowledge on load profiles to enhance grid resilience, and ultimately gives the utility new tools in its toolbox. Notably, the utility needs to invest in both billing- and analytics engines and rate engineering tools to navigate the developments that are taking the industry by storm.  

Utilities need to augment their legacy utility Customer Information Systems (CIS) to utilize interval data. Traditional CIS are true meter to cash systems, designed to calculate one bill per customer per month. These legacy systems are incapable of performing big data analytics and providing revenue grade insights with the interval data.  

As customers increasingly adopt solar, electric vehicles, and programmable thermostats, a wider option of rates become of value to both the customer and the utility; from time-of-use to Net Energy Metering to EV rates. A billing and analytics engine can calculate the bill impacts for each individual customer under various rate offerings by drawing on the customer’s historic or forecasted electricity usage. 

Rate engineering tools can aggregate this data to show entire population impacts of rate designs. These tools could also show how low-income and vulnerable customers are impacted under rate structures, enabling the utility to reduce the energy burden borne by these low-income customers during the energy transition.   

Utilities can now serve as the customer’s trusted energy advisor. Tech companies such as Apple and Google have familiarized the consumer with having interactable data at their fingertips through various applications. It has set the stage for a higher customer awareness of their energy use, and a growing customer demand for energy saving products and time-of-use rates.  

In fact, as a growing number of customers adopt behind-the-meter energy technologies, they play growing roles to balancing the load on the grid and therefore enhancing grid resilience, stability and sustainability. As the electricity industry is innovating at grid edge, utilities will achieve their decarbonization goals and unlock value by investing in their business operating systems.