To understand the way the utility industry in America is structured, you have to look back in time to the railroads. When Manifest Destiny and the “iron horse” were transforming the prairies, titanic battles between captains of industry resulted in a welter of competing railroad companies. Competition led to the demise of many. When the age of electricity began, America decided it was better to allow utility companies to operate as vertically integrated monopolies than to have two or more competitors building power plants, putting poles in the ground, and stringing wires everywhere.
The bedrock of the utility industry is the belief that the demand for electricity will increase forever. And for nearly a century, it did. But then in the last years of the 20th century, things changed. The change had nothing to do with renewable energy, natural gas, or electric cars. It had to do with the basic presumption — ever expanding demand — being no longer valid. Instead of going up, up, up, demand stayed the same for several years. In some parts of the country, it even began to fall.
For the first time in US history, GDP continued to rise while demand for electricity remained constant. That was unheard of and sent shock waves throughout the industry. Every 5 years, the TVA creates an Integrated Resource Plan. It’s basically a road map the utility uses to make decisions about what new infrastructure it will need to meet the needs of its customers 20 years from now. Its last IRP was completed in 2015, but falling demand means it has begun revising the current plan 2 years early. According to the Times Free Press, the latest projections are that demand for electricity within the TVA service area will fall 13% by 2027, the first decrease in its 85 year history.
One thing monopolies are very good at is ensuring reliability. One thing they are very poor at is innovation. As the bedrock principle the industry was built on started to crumble, some new ideas began to seep into the system. Then came Enron and all innovation came to a screeching halt. What America has today is a utility system ideally suited to the 1950s. What it needs is a system designed for the 21st century, a system that is built to take advantage of digital technology to balance supply and demand efficiently and reliably.
Utilities once thought of electric cars as threats. Charging them would require massive new investments in infrastructure. Plugging them all in would destabilize the grid and cause hardware like transformers to fail prematurely. It’s fair to say the attitude of the utilities toward electric cars was initially one of hostility. But that is changing. According to Quartz,utilities are slowly revising their thinking about electric cars. Some are seeing EVs as a potential new market they can exploit to drive growth in the demand for electricity again.
Prodded by the California Public Utilities Commission, the three major utility companies in the Golden State are experimenting with new pricing structures designed to encourage EV drivers to plug in at times that work best for the companies. “Think about it like telecom,” Dan Bowermaster, electric transportation manager for the Electric Power Research Institute, tells Midwest Energy News. “You offer free nights and weekends, free lunch time charging.”
Vehicle to grid technology is still in its infancy, with much debate about whether it benefits EV owners. There are concerns constantly charging and discharging the battery could lead to premature degradation. But in Denmark, Nissan and Enel have teamed up to create a new V2G program that pays drivers for the electricity they give back to the grid. During the first year, those who participated in the program got about $1500 back on average, which should help ease concerns about putting a strain on the batteries. Consulting firm Deloitte is recommending a program that would see utility companies lease batteries to fleet operators, then repurpose those batteries for energy storage use once they are no longer suitable for powering electric vehicles.
Changing the utility industry is like steering a ship with a canoe paddle. It takes a long, long time to notice any alteration in course. But change is happening and, as usual, it is because of economics. Quartz sums it up this way: “In a world of falling electricity demand, utilities can now take billions of dollars in the transportation sector away from the fossil fuel industry. Politics, technology and economics are aligning to help them do that. ‘[Utilities] all want to eat the oil industry’s lunch,” says Max Baumhefner of the environmental group Natural Resources Defense Council. “So we’re happy to show them the way to the buffet’.”
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