Illinois regulator sees massive energy sector changes ahead
EDITOR’S NOTE: This is the first of two articles extracted from a keynote speech delivered by Brien Sheahan at the recent Empowering Customers & Cities conference in Chicago. Next: Utilities in Era of Self-Driving Cars.
New technologies will enable utilities and other energy sector players to bring a raft of new services to their customers, especially through cloud computing arrangements.
Samuel Insull, who was Thomas Edison’s personal secretary and later became the founder of Commonwealth Edison, built Chicago’s first, at the time massive, central station. It was a revolutionary development in the nascent electricity business.
When Thomas Edison and Samuel Insull invented the central station it was so revolutionary that banks would not lend to them. Distributed generation was the prevalent - actually only - technology of the day.
Today’s revolution involves the smart grid, connected network devices, the Internet of Things, data, and ultimately, cost and who pays.
According to Klaus Schwab, founder and executive chairman of the World Economic Forum, recent technology breakthroughs in a number of fields including artificial intelligence, the Internet of Things, autonomous vehicles, and energy storage, indicate a shift on par with a new industrial revolution.
This trend is emerging quickly among utilities.
The energy industry is on the verge of profound change due to evolving customer preferences, environmental concerns, and the steady advancement of new technology.
Like the Uberization of the traditional monopoly taxi business, this transformation is disrupting the electricity sector; it is revolutionizing how utilities think about, produce, and use power. Utilities, however, are finding that their business models and operational capabilities are ill-equipped to respond efficiently to flat and decreasing load, rising costs, pressure on carbon based generation, growing renewable energy deployment, and increasing customer choice and competition.
The grid is shifting from a 19th century architecture based on large centralized fossil fuel, hydropower, and nuclear generation assets toward an increasingly decentralized structure taking advantage of more distributed energy resources. It is also becoming smarter and more connected.
According to the U.S. Energy Information Administration, there are currently more than 60 million installed smart meters in the United States, representing about a fifth of all electricity customers that will eventually be online.
This figure will be dwarfed by the number of smart pieces of equipment on the network. Jeremy Rifkin, the noted author, theorizes that over the next couple of decades the Internet of Things will involve 100 trillion sensors and lead to orders of magnitude greater efficiency.
Today, many utilities are just beginning to scratch the surface of possibilities.
PG&E, for example, consolidated siloed data which had been previously difficult to analyze and applied analytics to quickly and precisely identify candidates for demand response programs—focused targeting that had been impossible.
Arizona Public Service manages a network of 60 independent contractors to deliver energy efficiency programs to the Phoenix metro area. These projects involved whole house measures such as insulation and duct sealing. Previously, quality assurance for the work completed by these contractors was done through randomized sampling selected for physical inspections. In 2015, APS sampled 40 percent of the projects completed. That means coordinating with homeowners, driving through the 34,000 mile service territory, and crawling through hot attics to inspect insulation, ducts, air sealing, and HVAC equipment. Each inspection required around 2.5 hours to complete.
APS enlisted a software solutions firm to develop a monitoring program that incorporates customer usage data, project data, and weather data, to identify the savings achieved at the meter. Using analytics APS was able to reallocate 25 percent of the program’s inspection budget to make it more efficient and effective.
On the east coast, Baltimore Gas & Electric partnered with C3 IoT to use analytics to manage operations of the 2 million smart meters it is deploying. According to C3’s value calculations, developed from work it did with McKinsey & Company, BG&E believes it can better detect, isolate, and reduce meter tampering, unbilled energy delivery, and other revenue losses to the tune of $6-8 per meter, for a $24 million annual impact.
All of these smart devices generate vast amounts of data. The average smart meter, recording readings every 15 minutes, generates about 400 megabytes of data per year. For a utility like ComEd that’s the equivalent of four hundred billon double-sided printed pages.
The application of these new technologies in the utility space creates some interesting possibilities.
This convergence will likely create opportunities for utilities and customers, and challenges for policymakers and regulators.
Brien Sheahan is chairman of the Illinois Commerce Commission.