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The Future of Public Utility Companies

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Eric Kaufman's picture
CEO Veric Industries LLC dba EAV Realty Corp

Wharton MBA with 30 plus years financing experience, primarily in large scale commercial real estate projects.  The move toward decarbonization is exciting for me and I have decided to devote...

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  • May 26, 2022
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Over the past few years, I have begun to study the changes that are occurring in the public utility space. These changes are massive and are going to require public, government and business interests to align in ways that achieve the overall goal of carbon neutrality by the year 2050.

The overriding trend seems to be for utilities to focus on distribution of power throughout the central grids, maintain reliability of those central grids, and determine the least cost power options to benefit the ratepayers, which are the customers of the utility.

Less emphasis will be placed on actual power generation by Utilities themselves in the future, in my opinion. The power generation space is becoming rapidly decentralized and ideally subject to free market forces and less to artificial government subsidies. Producers will have to start considering power generation that considers both the environmental and social costs, in addition to financial considerations.

Ratepayers, whether they are families or businesses, want reliable power at a price they can afford.  Utility companies have to remember that they are public benefit companies and have a fiduciary responsibility to their ratepayers.

The decentralization of power generation, through concepts like district energy, microgrids, renewable energy, are the future of power generation and not fossil fuels. Fossil fuels are a 19th century technology that has helped distort our relationship with nature and has hastened our reliance on instant power.

An area that Utilities are going to have to focus more on as decentralized energy production increases is how to deal with the “spikiness” of renewable energy and microgrids as it relates to centralized grids.

Being able to handle multiple energy sources is the new normal for Utilities and reliance on things like pipelines and large-scale coal production should be transitioned away from in favorable of renewable energy and yes, even nuclear power generation as a new transitional baseload fuel source until renewables are sufficiently developed with better battery storage technologies and more efficient power generation for renewable technologies.

The opportunity for Utility companies is to reinvent themselves as energy traders rather than energy producers. The distribution of power to homes and businesses will continue to be the primary focus of Utilities with supply being more a trading function rather than actual production by Utilities.

Ideally, the regulatory burden of federal and state regulation will be redefined to oversee energy production by fossil fuel entities to ensure their gradual phase out over the next twenty-eight years and things like capacity payments, renewable energy credits, carbon taxation/offsets and carbon capture sequestration will become peripheral to the main issues of lower cost technologies that have less social and environmental impacts than fossil fuels.

If we truly factored into fossil fuel generation, the social costs (the fouling of land, pollution of groundwater, excessive use of water to mine fossil fuels and the many wars attributed to fossil fuel generation and wealth) and environmental costs (air pollution, greenhouse gas emissions and true costs of long distance fossil fuel distribution)  then we would understand as ratepayers that we pay far more for fossil fuels than fossil fuel companies, lobbyists, special interest groups and even governments own up to. The addiction to fossil fuels is purposeful and pernicious, just like cigarette smoking and other things that are just not good for us.

These issues are continually being discussed, but I have this sinking feeling that we, as ratepayers, have little or no say, in the public benefit portion of the role of Utility companies. As I have been saying for the last decade or so, until we take the power away from the producers and shift it to what the public really needs and wants, we will remain in this never-ending addiction cycle that includes wars, strife and unrest.

The central grids are marvels of modern civilization.

What needs to be redefined is how the sources of energy and Utility companies deal with the transition away from fossil fuels. By letting fossil fuel companies continue to have the power (pun intended), we risk a lot more than just easy switch on the power we have come to expect.

The coming electrification with EVs, self-driving cars, quantum computers and artificial intelligence will require a new magnitude of power generation that Utilities have to budget for, especially if fossil fuels are going to be considered personas non grata.

We see with the war in Ukraine that there are forces like Russia, China and India that wish to rely on fossil fuels far beyond 2050 so the question remains: Do we have the public and political will to stay the course to systematically reduce the usage of fossil fuels?

I fear that the answer is we are like that opioid addict that needs that next pill or shot and will complain ad infinitum about the cost of fossil fuels but continue to use them. The argument is that we are only individuals and cannot do anything about the status quo.

What do you think?

Eric Kaufman's picture
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Jason Price's picture
Jason Price on May 31, 2022

If we continue to demonstrate the economic and environmental benefits of decarbonizing and modernizing the grid thank other gov'ts will jump on board. Amazing what a profit motive will do to change opinions. 

Michael Keller's picture
Michael Keller on May 31, 2022

The massive subsidies provided renewable energy hardly constitute economic or environmental benefits. Rather, demonstrates the enrichment of select politicians, companies and individuals at the expense of the poor and middle class. Electricity in California has now become a luxury item. Covering vast areas with solar panels and wind turbines is a negative environmental benefit.

Eric Kaufman's picture
Eric Kaufman on Jun 11, 2022

I hear you.

A lot of the lithium fueled electrification revolution seems less eco friendly and not much better than fossil fuels.

The future is to largely wean off fossil fuels and transition toward truly renewable energy like sun, wind and water. I personally do not like the term renewable natural gas.

Hopefully, we will phase out internal combustion engineers in favor of hydrogen cells, which appear to be more environmentally friendly. Especially green hydrogen, which is still probably about a decade away from widespread usage.

 

Julian Jackson's picture
Julian Jackson on Jun 3, 2022

The energy cost of energy, EROEI  or Net Energy is going up, that is, fossil fuels are becoming harder to extract so we get less energy value out of them. This is a serious tipping point towards renewable systems. Unfortunately our who society is bound up with heavily-damaging fossil fuels, and excess consumption. Something's going to break, but I worry about the consequences of unplanned, chaotic events, rather than a planned, gradual transition which should have started thirty years ago.

Ed Reid's picture
Ed Reid on Jun 4, 2022

Perhaps a rigorous EROEI analysis of wind and solar, with appropriate storage, cradle to grave (mine mouth to landfill), would be instructive. A lot of net energy is consumed in fabricating and installing them, and they have a shorter lifetime than conventional generation systems.

Michael Keller's picture
Michael Keller on Jun 6, 2022

The cost of energy ($/kWh) in California is about 3 times what I pay in Kansas, as determined by contrasting my folks bill in San Diego versus mine in Kansas for the month of April, 2022. This massive difference is directly due to the California’s mindless embrace of renewable energy.

These are real numbers, not manipulated propaganda invented by the green energy mafia, as aided and abetted by the Democratic Party.

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