Research

Utility 2.0: New policies needed for next-generation utility business models

On December 1, 2017, in Utility of the Future: Engineering Economic Systems, by Joe Nyangon
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A new publication, Utility 2.0: A Multi-Dimensional Review of New York’s Reforming the Energy Vision (REV) and Great Britain’s RIIO Utility Business Models, examines the trends and developments in the electricity market that are placing tremendous pressure on utilities and triggering changes in how electricity is produced, transmitted, and consumed.

A powerful confluence of architectural, technological, and socio-economic forces is transforming the U.S. electricity market. These trends include, among others, increased electricity generation from distributed renewable energy sources especially solar and wind energy, aggressive state-wide demand side management (DSM) and energy efficiency policy schemes, flat to declining load growth, aging infrastructure and lagging capital investment in transmission and distribution infrastructure, security threats from extreme weather and cyber attacks.

A new publication, Utility 2.0: A Multi-Dimensional Review of New York’s Reforming the Energy Vision (REV) and Great Britain’s RIIO Utility Business Models, examines the trends and developments in the electricity market that are placing tremendous pressure on utilities and triggering changes in how electricity is produced, transmitted, and consumed. Increased democratized choice over energy usage, for instance, is empowering consumers to take key actions such as peak shaving, flexible loading, and installation of grid automation and intelligence solutions. A key step to achieving full benefits of these programs is repurposed Utility 2.0 concepts: the distributed grid, innovations in electric market design, real-time automated monitoring and verification, deployment of microgrids, increased uptake of ‘smart meters and smarter’ grids, and investment in data analytics in order to incentivize efficient market design and flexibility.

Using a seven-part multi-dimensional framework, the report examines the role of infrastructure network, revenue models, customer interface, business model resilience, organizational logic and mandate, risk management, and value proposition in improving communication with consumers and operational boundary of utilities in the new utility business model regime. The report also assesses two prominent utility business models in the United States and the United Kingdom, the New York’s Reforming the Energy Vision (REV) and Great Britain’s ‘Revenue = Incentives + Innovation + Outputs” (RIIO) legislation in order to illustrate potential changes that await the energy utility actors. We conclude that positioning the ‘business model’ as the unit for analysis provides a robust and multi-dimensional tool for evaluating the suitability of new proposals for regulating electric utilities and transforming our energy governance systems into ones that support a fair, safe, reliable and sustainable economy.

(Photograph: Shutterstock)

 

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