Fundamentally, the utility and energy industry is transitioning on a number of fronts including generation, transmission, distribution and most importantly, on the customer end. The traditional utility model of a centralized grid connected power generation structure with utility at the core, is now being questioned by the rapid deployment of distributed energy resources from renewables, smart grid technologies, smart customer services and distribution, changes in market economics and regulatory frameworks as well as more engaged customers and competitors. The predominant changes can be seen happening on the customer, grid, regulatory and market environment.
In the next 10 years or so, significant changes will come through distributed generation, energy efficiency improvements, technological advances in energy storage, electric vehicles, micro-grids and intelligent home energy management, demand aggregation & response, retail choice of electricity offered by deregulation, lower marginal cost of renewables and their related merit order advantage. This phenomenon will spread due to a favorable cost differential in distributed generation vis-a-vis grid-supplied electricity. Power utilities worldwide face an inevitable looming threat, if market forces are successful in permitting consumers to generate their own power, thus alienating the power utilities in the process. The next few years will be significantly important for utilities to reinvent themselves as small-scale distributed capacity will add up gradually particularly for onshore wind and solar photovoltaics thus improving the economics of renewables. Large scale decentralized wind project investments and customer-sited distributed generation, particularly of rooftop solar, will significantly increase as costs for PV decrease even further. There is a growing international trend towards floating energy production in nuclear, wind and solar categories. Being mobile, these facilities could be useful for supplying power to remote coastal areas or deepwater oil and gas rigs, better suited in the event of a natural disaster, have few siting concerns, a low environmental impact and better efficiencies and cost savings. Floating solar projects would be ideal for countries with space constraints and having numerous inland waterways. There could be a surge in community solar programs for customers who can’t put solar on their roofs due to ownership, space or shading limitations but want to possess a big chunk of their power requirements from Sun. Floating wind farms could be next on the futuristic agenda primarily due to benefits of setting them up farther away from shore where the wind is stronger and consistent over the open ocean and the water is too deep for bottom-mounted systems. FPSOs like floating production, storage and offloading vessels for oil and gas exploration would become more popular as depleted onshore oil and gas reserves are pushing companies to scout for energy resources in high seas. High upfront costs of FPSOs would be offset by high technical risks and costs associated with fixed platforms, which could ultimately push up demand for floating systems.
Favourable regulatory & market conditions, increasing financial pressure due to eroded utility credit ratings, barriers to low-cost capital, decreasing revenues from declining demand, complete grid defection will impact utilities everywhere especially more in the developed economies vis-a-vis emerging economies forcing them to find innovative ways of conducting business. The futuristic distribution grid will be an integrated, interactive, interconnected multi-directional platform characterized by smart meters and smart grid technologies, providing data collection, analytics, time of use price signals, digital processing and communication to the power grid through a two-way flow of power and information interconnecting a variety of devices, consumers and producers. This sophisticated platform will allow smart energy management and be the foundation for a new way of thinking about the utility sector. Customers will start playing increasingly significant roles as consumers, generators and balancers of power preferring to purchase energy products fitting into their criteria of being cheap and convenient. Regulatory & technological changes especially in the rooftop solar PV sector will change the role of customers from passive power consumers to proactive generators, consumers and traders of power at the same time. Utilities will have to proactively engage customers on a personalized basis by providing specialized services up to the meter and behind the meter thus helping them to maximize their returns. This will accelerate the pace of grid defection and further endanger utilities sticking to the old business model of exclusively centralized generation. Utilities would have to assume a pivotal role as grid managers and service providers by establishing innovative partnerships with their competitors. As smart Integrators, utilities role would focus exclusively on operating the distribution grid as an open platform without ownership of generating assets and sale of power. This would enable consumers, generators and service providers to transact based on market discovery of prices. The power generation market would become highly fragmented and localized with the same trend noticeable in the retail sales market resulting in gradual erosion of market capitalization of big utilities.
Finally, utilities will have to broaden the scope of their market penetration by providing direct services like marketing of customer-sited renewable power, provide reliability services including domestic and international energy contracting to industrial customers, sourcing of clean energy, facilitate selling of decentralized energy at wholesale rates, financing and EPC services for construction of generation facilities along with O&M services.
The future of energy and utility industry would be definitely more decentralized and low-carbon intensive and utilities that will proactively embrace the changes will have a place in it. Historically, the pace of change in the utility industry has been slow. However with rapid technological advances, changing consumer requirements and the need for protecting the climate, we are going to witness a rapid transition in the utility industry going forward. Down the line in the next 10 years or so, the power industry would be characteristically low carbon marked by a proportionately noticeable and sizeable presence of renewables like wind and solar with an interconnected webbed grid. Regulations would adjust to align incentives with clean energy, distributed generation and advanced grid technologies.
Fundamentally, the one thing that will drive the energy and utility industry of the future going forward would be the changing mix and pattern of energy production and consumption and the enabling role played by the grid to provide a level playing field for the various stakeholders in the electricity value chain. Finally, Emerging economies like India would have to learn hard lessons from developed economies to start working on a concrete plan for reforming their electricity sector by implementing a structured and a closely monitored mechanism for transforming its distribution infrastructure.
