Traditionally asset-focused and utility-driven, the energy sector is undergoing an important evolution. Driven by the digital revolution and disruptive new technologies, electricity consumers are increasingly more informed, connected and demanding than ever before.
Recent advances in renewable energy accessibility and policies supporting distributed energy resources like battery storage technologies have left me thinking about one big question, “What will the utility of the future will look like?”. Given the uncertain timing of these changes, future-ready power utilities have to think ahead to meet the challenges this evolution poses.
Electric Utilities Today
Whether powering appliances, leaving a light on at night or connecting to the internet, many of modern life’s most basic functions require electricity. For decades, electric utilities have been paramount to the United States’ energy grid. By engaging in the generation and distribution of electricity for sale, utilities serve as the primary energy providers around the world.
In the U.S., many states have historically required consumers to sign up through their local utilities to keep the power on in their homes and businesses, and even states with so-called deregulated energy markets continue to rely on local utilities for power delivery and grid maintenance.
When we pay for the energy that we consume, we typically pay for the kilowatt hours (kWh) used, transmission and distribution, customer service and various fees. When you pay your electric utility bill, that payment is not just for the electricity you consume, but it also contributes to helping the utility maintain the grid and pay its workers’ salaries.
The price you pay can also depend on a number of factors, including your location, what time of year it is, consumption, market changes/disruptions and more. As of March 2019, the average electricity price is 13.31 cents per kWh for a residential customer in the United States.
Historically, utilities take a one-size-fits-all rate structure, but some forward-thinking utilities are searching for better ways to engage their customers, introducing new rate plans.
New Rate Options: Xcel Energy
Take Xcel Energy’s residential rate plans for the state of Colorado as an example. Xcel Energy has deployed two additional pricing plans that enable its customers to control their costs based on how and when they use energy.
Both plans give consumers an opportunity to pay less for the energy used, and if customers are flexible in how they consume energy during on-peak hours (weekdays from 2-6 p.m.), their bills can drop even lower.
Time-of-Use Pricing Plan
• Charges different rates based on the time of day electricity is consumed. This plan allows customers to take control and save money by shifting optional usage to off-peak hours.
Peak Demand Pricing Plan
• Gives consumers the ability to control the rate they’re charged even further. It requires that consumers understand their energy demand, which is measured during on-peak hours. The peak demand charge is determined by the highest hours of usage during that peak period, allowing customers to save money by consistently shifting and staggering energy usage.
While electricity bill payments today are based on customer usage, at Hygge Power, we don’t believe that’s going to be the way it plays out in the future.
The Utility of the Future
As the electricity utility sector shifts away from a centralized, usage-focused past to a more distributed, renewable-focused future, forward-thinking utilities are searching for better ways to engage their customers. Experts are wondering whether the current utility model is sustainable — or even necessary — for the future of energy.
Consider Google and Amazon’s foray into the space. With increasing investments in the energy space, the two tech giants could play a significant role in determining the future of utilities. Amazon recently partnered with Arcadia Power in an attempt to make it easier to lower a consumer’s power bill. Their idea is that “home efficiency” bundles—including a smart thermostat, smart plugs and smart LED light bulbs—can help homeowners reduce energy costs. Additionally, both Amazon and Google are leveraging voice-assistant device platforms like Amazon Alexa and Google Assistant to provide utilities the opportunity to better engage their customers by answering questions about energy use and bills with real, personalized data.
From energy storage to advanced power electronics and control devices, a variety of emerging distributed technologies are creating new options for consumers and utilities alike. With consumers gaining more insight into usage, they’re also gaining significant bargaining power, and utilities need to re-examine their business models in order to remain relevant, meet the heightened consumer expectations, and continue creating value.
What Do Customers Want?
- In demanding more continuous connectivity with everyday devices, consumers will increasingly aspire for reliable power supply.
Access to Renewable Energy
- Climate-conscious consumers expect energy from low carbon energy resources, helping to speed the growth of renewables.
Control and Convenience
- With the ubiquity of smartphones and connected devices, consumers expect more control over how much and when they consume energy so that they can optimize their energy usage.
- Additionally, consumers have come to expect more real-time information on services, outages, consumption, etc.
Imagining the ways that utilities of the future can provide enhanced value to consumers is something that we do everyday at Hygge Power. What’s your vision for the utilities of the future?
We’d love to hear your ideas!
Written by Caleb Scalf.