New report identifies perfect storm of challenges facing electric utilities

Fri, 2015-08-07 06:00 -- SCC Staff

A new study --  2015 Strategic Directions: U.S. Elecric Industry Report -- from Council Associate Partner Black & Veatch illustrates the complex changes electric utilities are grappling with today. Among them:

  • Shifts in regulatory focus
  • Increased environmental concerns
  • Rising customer expectations
  • Availability of increasingly inexpensive and appealing alternatives to grid-provided power

These developments, and others, are quickly turning the old utility business model into a relic of the previous century.

"According to our report, a majority of utilities responding to our survey believe that distributed generation, particularly solar PV, represents a serious challenge for their business," said Dean Oskvig, President and CEO of Black & Veatch’s energy business. "The ambitious standards for renewable energy set out in the Clean Power Plan add to the cost challenges influenced by distributed generation. Though renewables will play a significant role in a reliable and environmentally friendly power grid, we believe any strategy must involve the hard work of determining how these changes will work technically and financially."

As the Black & Veatch report notes in its closing commentary, "For service providers around the world, the traditional utility model faces a "perfect storm" of challenges. New technologies, environmental pressures, regulatory drivers and changing customer preferences are threatening the stability of a century-old business model. At the same time, stagnant growth exacerbates capital planning challenges as growth of distributed generation erodes the revenue base. Costs for customers who remain 'on grid' are rising, given those that can greater incentive to pursue self-generation options."

Major concerns for utility executives
And that's not the half of it. According to a survey included in the report, C-level utility executives also have other things they consider to be extremely important. Among their top concerns are:

  • Aging infrastructure
  • Reliability
  • Cybersecurity
  • Aging workforce

Also on their list of worries are the growing strength and influence of independent power producers and, globally speaking, major market shifts in Africa and the Asia-Pacific region.

If utilities need to change, what will they become?
The Black & Veatch report also provides a definition of what utilities of the future will look like, suggesting they will recognize the value of smart and connected cities, economies and marketplaces. "Getting there," it suggests, "will require collaboration and the ability to take a frank look at the state of current assets and markets with an eye toward management, improvement and efficiency."  Get the free report >>