Utilities Can Better Secure Customer Relationships by Offering More Distributed Energy Resources

As falling costs for distributed energy resources reduce the barriers to entry, new players like solar and battery storage developers are establishing relationships with utility customers. This is raising new concerns that without action, utilities will lose their cherished one-to-one customer relationship.

In response, some utilities are offering utility-owned rooftop solar in direct competition with third-party solar installers, while others are offering community solar programs – in both cases to meet customer demand for renewables while maintaining the customer relationship.

“As distributed energy resource adoption expands, we expect more utilities to wrestle with this emerging dynamic and create new ways to partner with customers in adopting these technologies,” said Dan Wilson, a Consultant in Black & Veatch’s renewable energy business.

Wilson said there are increasing examples of utility involvement in distributed energy resources. For instance, as the electric vehicle market share grows, more utilities are encouraging or directly investing in public charging infrastructure – often in collaboration with customers – since it constitutes a large potential load growth opportunity.

In Vermont, Green Mountain Power announced it will make Tesla’s Powerwall home energy storage system available to customers. The utility sees the technology as a way to partner with customers on emerging technology while creating savings tied to the devices’ ability to lower peak demand.

“We see a window for utilities to embrace distributed energy resources and develop new partnerships with customers,” said Paul Stith, a Transportation Product Manager in Black & Veatch’s Smart Integrated Infrastructure service line. “The costs and capabilities of these technologies are evolving rapidly, and if utilities do not seize the emerging opportunities, other new market entrants certainly will.”

According to the 2016 Black & Veatch Strategic Directions: Smart City/Smart Utilities report, more than 70 percent of utility respondents said that solar is the form of distributed energy that will affect them the most in the near term, while noting that other types of energy resources are also having an impact and will only grow in importance.

Advances in solar and wind generation, small natural gas-fired generation units, electric vehicles, energy storage technologies, and more careful management of electric demand are seen as foundational to helping communities become more efficient and sustainable.

“Utilities have begun to see wider adoption of distributed energy resources by both residential and business customers,” said Nicholas Noecker, Director of Smart Architecture for Black & Veatch’s management consulting business. “For utilities, the top challenge today is the immediate need to ensure the distribution system’s reliability, but other challenges are related to planning, modeling, and real-time operations.”

Because of the challenges for the traditional grid, technology for integration of renewables is ranked highly among smart city and smart utility priorities. Survey responses show that among electric utilities that are planning to use automation and data analytics to improve their systems, renewable integration takes the top spot.

Many states are pushing the adoption of renewables and distributed energy resources through specific policies such as renewable portfolio standards and tax credits. However, a few states with relatively high solar penetration – like Hawaii and California – are now requiring utilities to conduct specific planning studies and incorporate the results into their normal resource planning processes.

“Perhaps the most aggressive effort is in New York, where the Public Service Commission’s Reforming the Energy Vision (REV) proceedings are targeting increased reliance on distributed energy resources, such as rooftop solar and battery storage,” Noecker said. He noted that REV plan is also considering the formation of an independent distribution system operator to manage daily operations and provide a market for third-party disturbed energy resources services.

Stith noted that California’s “50/50/50 by 2030” plan will also likely have an impact. It calls for increasing electricity from renewable sources by 50 percent, cutting petroleum consumption by 50 percent, and increasing energy efficiency in buildings by 50 percent. Like renewable portfolio standards, these goals will drive more implementation by utilities and customers alike.

The price of rooftop solar installations is already entering mainstream affordability, especially with loan and lease options available. On the horizon are anticipated cost declines in potential game-changing technology such as residential energy storage.

“Companies are showing an increased willingness to cut fat from their margins to encourage wide adoption,” Wilson said.

Utilities are also driving down hardware outlays and costs for design, permitting, interconnection approval and customer acquisition. These actions are designed to meet both the demands of increasingly sophisticated customers and their desire to lower their carbon footprint.