What role do/can Utility companies have in a decentralized consumer electricity delivery model?

As a poster has mentioned below, with deregulation in some countries, we are seeing a new breed of smaller "utilities" companies being born or evolving, that have had a different market foundation or way of looking at the industry, (a bit like ours).

After decades of designing, installing and maintaining central energy plants in buildings and facilities, (which are typically the biggest consumer of baseload energy anyway), and working with customers over the years on saving energy and implementing demand response strategies, we "pushed out" to become a utility company in our own right, to improve the value proposition for ourselves and our customers, and mitigate any "perceived" conflicts of interest in the supply chain. In this way, the focus isn't so much on pure product supply from the grid, but on an ongoing service to customers to help improve their decentralized, or microgrid status, and investment in future assets.

Its a different way of thinking from where we have seen traditional utilities companies trying to push into the "behind the meter" market.

Conventionally, power is generated in large power station and delivered through high voltage transmission line that stretches across the county.  Initially, it reaches a substation where, voltage is lowered to suit smaller power lines.

Traditionally, electricity has been treated as a commodity instead of service and even this service is gradually turning poor.  In order to free from this quality of service, Decentralized energy has been suggested.  Decentralization has been gaining momentum mainly owing to – Customers’ better knowledge on problems in their localities; their better ideas on where to invest and manage more efficiently; greater advantage being direct participation in decision process.

Decentralised energy is generated off the main grid and close to the usage point unlike large plant elsewhere sent through national grid.  This not only reduces fossil fuel but increases eco-efficiency as well.  This is indeed is a new approach in the energy sector world over.  Utilities have started recognizing it in improving local electricity grid power quality and reduce the need for expensive supply of electricity.  These are small scale energy generation structures which are either stand alone or connected to others through network that deliver energy to local customers.

Decentralised Renewable Energy an offshoot was to be created.  Decentralised Renewable Energy (DRE) could support household, community and productive energy needs and above all, could serve as franchise to meet last mile maintenance service.  Complimentarities to the distributed systems would always prove beneficial with least investments.

It is indeed time ripe for an overhauling of the energy sector now before the chance is lost.  Not only do the utilities need to explore options for cleaner but, more efficient energy generation but also pay greater attention to their distribution as well and decentralized energy has proven its benefits already.

Similar to the serious attention on the strategic energy options during the post pandemic phase, decentralised electric supply to customer is more important at this juncture than any other time owing to the advantages that it brings with it.  In fact, decentralized electricity delivery would reduce the burden on the utility to a great extent.  Moreover, customers have realized the advantage of being independent on power requirement over a period of time. Though this started initially at the individual level, it seems to be gradually spreading to communities as well and there are many examples in this regard.  A dozen housing societies in Delhi, India benefited from distributed solar installations. Similarly, about 1000 health centres are using rooftop solar systems and saving on diesel which has been found beneficial in improved health outcome.

As I said, these options reduce demand on the grid.  A rise of global demand for stationary electricity storage has risen phenomenally from a mere 400 MW to 50 GW.  Apart from this, even household appliances (lights, fans, and refrigerator) are also being replaced with superefficient ones in order to make the best use of energy.  The entire scheme has undergone unexpected shift in digitalization as digitally connected systems interact with each other and coordinate with the grid.

Pandemic though has been treated as an unwanted phase of global economy; it has brought with it certain unexpected but, welcome changes which will transform the future trend, as well.

With greater time available to everyone including children, many children have excelled in applications like, small solar module to power gadgets as for example Robot which, have become quite popular. In addition, solar dryers, freezers, sewing machines and many such appliances that are essential to not only urban but even rural markets have created new jobs for skills.

Decentralization has been gaining momentum mainly owing to – Customers better knowledge of problems in their localities; their better ideas on where to invest and manage more efficiently; greater advantage being direct participation in decision process

I think you see the electric cooperative model in the US as more of a partnership between electric services and the customers. DG, appliances, load management programs, irrigation, and customer input into rates. Small and mid-sized municipal electric utilities also have more of an eye in this direction. At the IOU level, this would be more difficult due to the higher level of oversight at a state level, but local control makes this more feasible. 

From a System Integrator's vantage point we see two distinct responses from utilities, depending on where they are:

In deregulated markets: In UK, Europe, Australia - the decentralized consumer market (or the Behind the Meter market as some call it) is the primary battlefield for utilities. Challenged by oil and gas companies (BP, Shell) and distant entities(e.g. Google and Telsa) entering the electricity value chain, utilities are fighting for relevance. Delivering new services and capturing this market through innovative solutions means everything to them - better customer stickiness, new revenue streams and monetization of assets (physical and digital) - improving the ability to compete in the decentralized world. This trend is seen across all major utilities - E.ON, EDF, Engie, Origin, AGL etc.

In vertically integrated markets: Like in US, the market and regulatory pressure to change is remarkably absent. Hence the presence of same Google and Tesla or dissatisfied consumers do not raise significant concerns. Not to the level where business existence can be jeopardized. Hence the primary motivations to focus on decentralized consumer space in such markets are bit different and can be listed on priority as:

1. Grid safety - smart meter is enough to capture anomalies and to help maintain grid integrity, including outage response
2. Energy efficiency - acquire visibility and control in consumer premise to limit usage
3. Capital cost avoidance - acquire visibility and control in consumer premise for aggregate DR
4. Customer satisfaction - provide single point of accountability for all service assurance
5. New revenue - provide end to end services, personalized rates, adjacent services(e.g. insurance)

What role utility companies should play will depend on where they see the priority. At present we don't see it going beyond 1 and 2.

I hope that a separate auditing body would be created until distributed energy is accepted.

Anita Lewis

The decentralized grid is a reality.  With the significant growth in distributed generating units, many of which are intermittent renewable resources, there are significant challenges that a utility must deal with.  In the old paradigm the utility planned, scheduled and dispatched resources to meet load.  Now they need to plan for the NET load with a significant set of resources that are outside of their control and by design, non-dispatchable. They need to keep the system up and running when wind resources don't show up or during the solar ramp up or ramp down.  Keeping the transmission system up and stable and preventing catastrophic failures is the future role of the utilities. 

Eric, cynical though it may sound, like any for-profit, corporate entity utilities want whatever role will be the most profitable for their shareholders - it's all about the money. And far be it from me to attack the big, bad, greedy corporations - their directors will lose their jobs if they don't deliver. They may even be sued for "wrongful acts that harm the corporation or the value of its shares" - even if it means protecting the environment.

Many seem to believe that no one could be held liable for doing what's best for the environment, but that's the unfortunate truth in our society. It's set up so that consumption is rewarded over all other considerations - and as long as it's set up that way, fighting climate change will remain a fruitless endeavor.

Eric,

Thanks for asking such a great question.

Utilities do have a role in the decentralized electricity delivery ecosystem.

First, utilities need to incorporate more distributed energy resources in their capacity expansion plans documented in the state Integrated Resource Plans (IRPs). Specifically, utilities should model DERs as any other capacity alternative on the level playing field with other capacity alternatives such as utility-scale natural gas plants.

Second, utilities must model distributed generation near the load centers and see the impact of capacity credit of DERs in the capacity accreditation process at grid operators. Once again, utilities must ensure Effective Load Carrying Capability (ELCC) calculation of DERs is done fairly like utility-scale wind and solar.

Third, when DG is placed at mostly peak-loaded distribution substations and feeders, the loading at the distribution substation and feeders would be reduced. Hence a distribution or even a transmission substation or a new distribution feeder or transmission line need can be deferred. Utilities must document these instances to show the benefit of "integrated" distribution planning with transmission planning.

Fourth, utilities must share the lessons learned from deploying grid enhancing technologies such as dynamic line ratings and SmartValves when interconnecting distributed scale renewable technologies. Integrating distributed-scale renewables reduces the curtailment risk from integrating utility-scale renewables.

Fifth, utilities must post hosting capacity maps and update them frequently to show the locations where it makes sense to interconnect distributed generation without harming the distribution system's reliability.   

Finally, utilities must work with third-party aggregators to allow multiple aggregated distributed technologies to interconnect at the transmission system and allow more DERs to participate in the wholesale energy, capacity, and ancillary services markets.

Utility companies are in an excellent position (potentially) to help energy users. It might be energy efficiency, cost (energy sources) arbitrage, on-site power projects, to the fence projects, demand response among others.

Usually utility companies belong to "energy companies" with other business units under their control, which can team up with their customers, whether industrial, commercial, institutional or residential ones to identify and capture opportunities.

In my consulting experience I saw reactive utility companies and proactive ones in this respect. Most of them, and by far, are reactive. They focus on the regulator to make sure they get the best possible rates. The proactive ones end up creating great projects in a win-win situation.

My guess is: it is not about technology. It is about upper management's drive to make value added services for the client happen.