Electric cooperative officials discuss cheap renewable energy and an “eroding monopoly”
Article used with permission from Joe Smyth.
At the 2018 Colorado Rural Electric Association Energy Innovations Summit this week in Denver, electric utility industry officials discussed changes in energy technologies and utility business models, such as increasing customer choices and declining costs of distributed renewable energy. But while there was broad agreement about the opportunities provided by cheaper renewable energy, there were disagreements about the scope and pace of business model changes underway in the industry - and the implications of those changes for the hundreds of electric cooperative directors and staff attending the conference.
Steve Collier, Director of Smart Grid Strategies at Milsoft Utility Solutions, delivered a presentation titled “Revolutionary Change in the Electric Industry: Threats and Opportunities,” which focused on the implications for electric cooperatives of what he described as an “eroding monopoly.” Collier explained:
What choices do customers have other than buying from you, all that that they have ever bought? Do they have choices? Yeah they have choices. Primarily distributed energy resources. But we’re not just talking about rooftop solar, we’re talking about a whole variety of options that they have to reduce the amount of electricity that they buy from you.
Collier pointed to energy management system providers like EnerNOC (now Enel X), which offer businesses a variety of products and services to reduce their electricity costs, as the company’s website explains:
Unlike other major operational costs that are driven by a simple price-times-quantity formula, energy spend is driven by how you buy energy (price), how much you use (quantity), and when you use it (time). Without visibility into or control of these cost drivers, businesses can't manage energy like other major line items—hurting overall business productivity and profitability. Enel X works with large energy users to develop tailored plans to reduce their biggest energy-related cost drivers, as well as to leverage their facilities’ energy data to take control of operational, maintenance, and capital expense.
While those energy management services are available now mostly to large electricity consumers like commercial and industrial customers, Collier said that similar services will become increasingly available to residential customers - whether or not they are offered by electric cooperatives.
Tri-State has received “unbelievably aggressive” bids for renewable energy projects
Tri-State Generation and Transmission Association CEO Mike McInnes provided a different message to conference attendees, during a morning session titled “Navigating Turbulent Waters: Colorado Utility Leaders Discuss an Industry in Transition.” McInnes downplayed the scale of changes in the electric utility industry, and instead focused on uncertainties and communications challenges:
I don’t find really the energy business as turbulent as it is trying to explain what it is. Our business is so complex and people don’t want to talk complexity, they want a yes or no, or a black or white. And you can say just about anything you want to say, but it comes with a host of caveats, things that you have to explain about it, and so it’s always challenging for me to speak in any kind of clarity. But I am pleased with the direction that the Tri-State board and our members have gotten us.
During that session, the top executives of Xcel Energy Colorado and Platte River Power Authority also discussed how they are responding to growing calls for 100% renewable energy from Colorado communities like Fort Collins and Denver, as well as gubernatorial candidate Jared Polis.
CREA kicks off its annual Energy Innovations Summit with a panel of utility leaders: Kent Singer, CREA executive director; Jason Frisbie, CEO of Platte River Power Authority; Alice Jackson, president of @XcelEnergyCO; Mike McInnis, @TriStateGT. #CREASummit
McInnes noted that Tri-State has moved to benefit from the declining costs of renewable energy, and said that “as these tax credits are trailing off, developers are getting unbelievably aggressive in their pricing. And so the last time we’ve gone out, we’ve been able to justify adding renewables simply because of the economies of that.”
McInnes did not provide further details about the types or prices of renewable energy bids that Tri-State has received, but the power supplier said in August that it is "currently soliciting for additional renewable energy supply, and has received more than 100 proposals totaling over 10,000 megawatts."
In January 2018, Xcel Energy filed a report with the Colorado Public Utilities Commission (PUC) that showed the median prices of hundreds of new wind and solar power proposals. Those renewable energy bids attracted national attention, because they indicated that new wind and solar power in Colorado is now cheaper than existing coal plants. The Colorado PUC approved the Colorado Energy Plan in August, green lighting Xcel’s plan to shut down two units at the Comanche coal plant in Pueblo Colorado and replace that power with a mix of new wind, solar, and battery storage projects and existing natural gas plants.
Electric cooperatives urged to plan for increased competition
But cheap renewable energy is only part of the broader shifts underway in the electric utility industry, according to Collier, who described the changes as a decline in electric utilities’ control of the industry:
All of a sudden, instead of everything happening in our industry on our side of the meter - we build the generation, we build the transmission, we build the distribution, we’re in control of the game - all of a sudden, things are happening on the customer’s side of the meter. And it could happen without us knowing it, other than seeing the decline in load, without seeing it and knowing that it’s happening.
Steve Collier’s presentation noted: “Your customers did not sign the long term all-requirements wholesale power purchase agreement!”
Collier also noted that those changes are being driven by companies outside of the utility sector, including major technology companies like Amazon that already have relationships with many residential electricity consumers.
Business Insider reported last month that Amazon is expanding its focus on smart home services, including as a way to reduce electric power bills:
The e-commerce and tech giant has partnered with clean energy startup Arcadia Power to sell "home efficiency bundles." The bundles will include smart devices to upgrade customers' homes to be more efficient, including smart thermostats, smart outlets, and smart LED light bulbs.
Arcadia Power says the service is currently available in San Diego, San Francisco, Phoenix, San Jose, Miami, Charlotte, Raleigh, Chicago, and Los Angeles, and “will be expanding to additional cities in 2019.”
Other major technology companies have also already begun to enter the electricity sector, which Collier argued should prompt strategic planning and more conversations among electric cooperative officials:
You don’t think Google has an energy strategy? Who owns Nest? You think they don’t know about the EnerNOC model? Apple has a wholesale power trading license. And they are already dealing with your customers. They’re already credible. And all of a sudden, if they start offering energy either because of carbon, or just because of price, or convenience or reliability, we’re going to be in trouble. What do you do? Well you might want to have a conversation with Amazon, or Google, or Apple, or with your G&T, or with each other, about strategies for dealing with this in the future.
Read the whole story and learn more at CleanCooperative.com.