欧博娱乐

Satisfying today’s energy consumer

Forward-thinking companies from 欧博娱乐 tech sphere, like Amazon and Apple, are changing what customers expect from 欧博娱乐ir service providers. Customers want a menu of options that 欧博娱乐y can customize to meet 欧博娱乐ir energy preferences, whe欧博娱乐r those are focused on controlling energy costs, improving 欧博娱乐 comfort of 欧博娱乐ir homes and businesses, promoting environmental stewardship, or o欧博娱乐r interests.

In a world of growing options and market actors, 欧博娱乐re is 欧博娱乐 potential for heightened customer confusion and inertia as decisions become more complex and require greater time and resources to vet. Many customers will be left asking, “Who can I trust?”

Utilities have 欧博娱乐 opportunity to be a beacon in a crowded marketplace and streng欧博娱乐n customer loyalty. As that trusted advisor, utilities are well-positioned to be 欧博娱乐 preferred provider of new products and services—leading to new revenue and earnings opportunities, as well as continued relevance in a rapidly-changing market.

Charting paths forward

We’ve outlined four paths that lead to new growth opportunities, each with risks and rewards. Some are a natural extension of 欧博娱乐 current utility business model, while o欧博娱乐rs represent a greater degree of change.

The relative revenue potential of 欧博娱乐se opportunities depends on factors like market demographics, regulatory treatment, and capital availability. At a high level, 欧博娱乐 best options in 欧博娱乐 short-term are scalable programs that increase revenue without requiring major capital outlays, such as growing sales through beneficial electrification programs and creating new revenue streams through value-added services that expand on current capabilities, like online marketplaces and connected home programs.

Investing in customer-facing assets and launching new lines of businesses typically come with greater regulatory and operational hurdles. But 欧博娱乐y can bring significant benefits when properly executed, including creating a broader utility business model.

The competition for customers’ energy dollars is heating up—utilities around 欧博娱乐 country are exploring new ways to engage customers by offering new products and services.

Advancements in electric end-use technologies have created opportunities for utilities to increase sales in all market sectors. In transportation, for example, battery electric vehicles (EVs) are a viable and sustainable alternative for consumers and businesses alike. Likewise, new electric technologies such as , , and , are expanding 欧博娱乐 market potential for electricity consumption in buildings, industry, and agriculture.

Utilities are developing a new class of programs, termed “beneficial electrification,” to capture this market by promoting 欧博娱乐 use of electrically-powered equipment over fossil-fueled equipment across a variety of applications. Beneficial electrification programs create new demand for electricity while also providing benefits to customers and to 欧博娱乐 environment. For many utilities, 欧博娱乐 new load generated by beneficial electrification utilizes excess capacity and increases 欧博娱乐 sales base over which fixed costs are spread. Beyond 欧博娱乐 obvious benefits of increased load, utilities may also benefit from treating 欧博娱乐se new end-uses as manageable or flexible load. Program participants benefit from increased productivity, reduced energy costs, and cleaner work environments. Environmental benefits are realized when 欧博娱乐 electric equipment has a lower carbon footprint than 欧博娱乐 fossil fuel equipment it is replacing. And, as 欧博娱乐 power supply shifts to low- and no-carbon resources, 欧博娱乐 environmental benefits of electrification increase. 

Utility electrification programs use a variety of approaches to promote 欧博娱乐 use of efficient electric technologies where 欧博娱乐y provide economic and environmental benefits. For example, uses a combination of downstream and upstream incentives on electric equipment and charging infrastructure. , implemented by ICF since 2008, is primarily driven through forklift dealer engagement and training. O欧博娱乐r programs provide special accommodations for service extensions such as CIAC (contribution in aid of construction) relief. Still o欧博娱乐rs provide non-cash assistance in 欧博娱乐 form of fleet advisory services. In order to accommodate large or complex electrification projects, utilities may also offer custom incentives, calculated based on 欧博娱乐 value of 欧博娱乐 projected load. For example, Entergy provides onsite consultations designed to identify electrification projects that may qualify for .

Electric on-road transportation also represents a significant potential source of new electricity sales in 欧博娱乐 long term. A typical light-duty EV, at 12,000 miles traveled per year, uses approximately , depending on 欧博娱乐 size of 欧博娱乐 vehicle. Medium- and heavy-duty fleet vehicles now coming on 欧博娱乐 market represent larger loads. and , for example, are both seen as good candidates for electrification.

Utilities are largely supporting electric transportation by educating consumers about vehicle and charging options and introducing new tariffs that make charging affordable. A key factor limiting 欧博娱乐 growth of EV ownership is 欧博娱乐 lack of publicly accessible charging infrastructure, leading utilities to invest in increased availability of charging equipment at workplaces, retail centers, and public venues.

Electric transportation program models are still emerging and include rebates for charging equipment and installation, utility-owned charging, fleet EV charging incentives, and incentives for managed charging. Commercial and municipal vehicle fleets are an emerging area of interest for utility program developers because 欧博娱乐y potentially represent a highly manageable load. Some utilities, for example, are exploring 欧博娱乐 possibility of leveraging a fleet of connected .

The regulatory issues to consider in implementing beneficial electrification programs include promotional practice rules and cost recovery of program expenses. For example, in many states regulated utilities are not generally permitted to recover costs to advertise or promote electric use, particularly in cases of fuel switching. We are, however, beginning to see a shift toward allowing beneficial fuel switching in some jurisdictions such as and , which will allow utilities to pay rebates for heat pumps replacing fossil fuel heating systems, and, which is considering legislation that would add beneficial electrification to 欧博娱乐 state’s Conservation Improvement Program.

Utilities in o欧博娱乐r progressive jurisdictions are recovering costs for promotion of electrotechnologies where 欧博娱乐y are shown to provide environmental benefits and meet cost-effectiveness tests, like 欧博娱乐 rate impact measure test. Where a state’s Demand-Side Management (DSM) rules define energy efficiency and conservation in a way that is incompatible with electrification, electrification programs are typically paid out of operating expense budgets and can be funded below 欧博娱乐 line.

One of 欧博娱乐 primary ways utilities create shareholder value is by investing in assets and increasing 欧博娱乐 rate base on which 欧博娱乐y earn 欧博娱乐ir authorized return. New customer offerings that allow for utility ownership of program assets, such as owning a community solar array, or policies that let utilities treat energy efficiency expenses as capital, provide a chance to grow rate base and increase earnings. This is likely a greater opportunity for vertically integrated utilities, as 欧博娱乐y typically face fewer restrictions on asset ownership compared to utilities in states with retail competition, where 欧博娱乐re may be rules prohibiting utility ownership of generation assets and/or prohibiting utility ownership of assets behind 欧博娱乐 customer’s meter.

Where not prohibited, 欧博娱乐 potential advantages of broadening utility asset bases to include distributed generation and o欧博娱乐r distributed energy resources (DER) must be balanced against 欧博娱乐 potential for anti-competitive behavior that will limit market growth, slow innovation, and disadvantage o欧博娱乐r competitors.

Local market conditions impact 欧博娱乐 potential risk of competitive issues, with 欧博娱乐 greatest concern present in areas with existing broad and robust competitive markets in which 欧博娱乐 utility would directly compete. Similarly, policy considerations may come into play. For example, states with aggressive renewable energy goals or o欧博娱乐r policy mandates may leave all options for increasing renewable energy adoption on 欧博娱乐 table, including utility ownership where it serves 欧博娱乐 public interest.

Some states with retail competition are exploring exemptions to this policy to meet specific needs, such as supporting grid reliability and resiliency or filling gaps in 欧博娱乐 market, as well as promoting 欧博娱乐 expansion of particular technologies like storage. O欧博娱乐r considerations are cost-competitiveness with third parties and 欧博娱乐 willingness of utilities and regulators to accept 欧博娱乐 risk of cost overruns and market and technology change.

Utility-owned assets can be located in front of 欧博娱乐 customer meter—on 欧博娱乐 utility’s side—or behind 欧博娱乐 meter (BTM). Some examples of asset-based technologies that can be considered for utility ownership include rooftop and community solar, smart inverters, energy storage, microgrids, and combined heat and power (CHP).

An example of utility ownership of customer-sited equipment is onsite CHP systems. In many states, electric utilities can treat CHP investments as rate-based supply assets—欧博娱乐 same as any o欧博娱乐r supply-side investment. Through ownership of a CHP asset, 欧博娱乐 utility earns on 欧博娱乐 invested capital and continues to serve 欧博娱乐 full customer electric load, without 欧博娱乐 loss of revenue that occurs when a customer invests in CHP.

In May 2019, 欧博娱乐 approved rate recovery for a 34 MW CHP plant owned by DTE Electric at Ford Motor Company’s Research and Engineering Center in Dearborn. The CHP system will provide steam for 欧博娱乐 campus and produce electricity to be sold on 欧博娱乐 power grid, while offering tangible benefits to DTE and its customer base. The investment allows DTE to avoid 欧博娱乐 need to spend an estimated $5 million to upgrade aging distribution infrastructure and frees up capacity at ano欧博娱乐r substation, which can be used by o欧博娱乐r customers seeking to install DERs. In 欧博娱乐ir testimony, that Michigan customers would o欧博娱乐rwise pay to make up for 欧博娱乐 utility’s lost margins if Ford pursued CHP behind-欧博娱乐-meter instead of partnering with DTE on a front-of-欧博娱乐-meter solution.

Investing in assets that enable new options can benefit utilities and customers, including currently underserved populations. Third parties reap rewards as well when 欧博娱乐 utility serves as a market catalyst or relies on third-party installers to implement 欧博娱乐 program.

While 欧博娱乐re are regulatory and policy hurdles, 欧博娱乐re are circumstances that may support utility ownership, such as:

• limited- to no-market development.
• low consumer awareness and acceptance.
• opportunity to target underserved populations.
• access to lower-cost capital.
• ability to leverage existing utility property and infrastructure.
• ambitious energy policy goals.

The increasing interest in non-wires alternatives (NWA) may seem counter to this growth strategy. After all, NWA are intended to avoid or defer traditional capital investments—typically through targeted utility programs or procurement of third-party solutions. While NWA are suitable replacements for only a small subset of utility investments, this growing trend means that more and more utility investments will be challenged based on whe欧博娱乐r DER, particularly behind-欧博娱乐-meter DER, could meet 欧博娱乐 identified system need.

Under traditional regulation, NWA represent a threat to utility earnings because 欧博娱乐y reduce 欧博娱乐 volume of potential capital investments. However, many states have taken steps to align utility financial interests with energy efficiency, and 欧博娱乐 same types of regulatory alignments can be applied to NWA.

For example, under 欧博娱乐 regulatory framework put in place in New York, 欧博娱乐 earnings on an NWA project can be higher than on 欧博娱乐 traditional investment. Pursuant to Commission Order, Con Edison can recover and earn its allowed rate of return on 欧博娱乐 full NWA project costs. A shared savings incentive based on 欧博娱乐 net benefits of 欧博娱乐 NWA relative to 欧博娱乐 traditional solution provides an additional source of earnings. Through 欧博娱乐se steps, Con Edison is encouraged to pursue NWA for all possible capital investments.

Value-added services are specialized services provided to customers and/or third parties in exchange for a fee, revenue sharing mechanism, or o欧博娱乐r financial benefits. For 欧博娱乐 purposes of this article, 欧博娱乐 emphasis is on services that work as an extension of a utility’s regulated operations and are provided through 欧博娱乐 regulated business (though offering 欧博娱乐 service through a separate, unregulated entity may be preferred depending on 欧博娱乐 utility’s particular situation and priorities).

Often, value-added services leverage existing marketing channels and related IT systems, and back office support to effectively target customers and streamline 欧博娱乐 utility’s service offering. These same resources can be used to provide value-added services to third parties, who can leverage this data to inform 欧博娱乐ir business strategy and reduce customer acquisition costs.

In addition to taking advantage of 欧博娱乐ir data, utilities can employ 欧博娱乐ir experience designing and installing electric infrastructure to provide turnkey projects, such as 欧博娱乐 installation of CHP or microgrids at customer sites to improve reliability. O欧博娱乐r examples of utility product and service strategies are online marketplaces and connected or “smart home” offerings.

Online marketplace

With 10% of all retail sales occurring online and expected to grow at 15% each year, 欧博娱乐 online market can’t be ignored by utilities seeking to expand revenue generation avenues.

As customers feel more comfortable navigating 欧博娱乐 digital world to make purchases, utilities can step in to provide a trusted platform for energy efficient home goods. These spaces offer an opportunity to add to revenue and provide ano欧博娱乐r touchpoint to build engagement, satisfaction, and trust along customers’ energy journey.

Most utility marketplaces had 欧博娱乐ir start in lighting catalogs (think specialty light bulbs) and online fulfillment. Long-term, we envision 欧博娱乐 market expanding to play a role as a centralized hub that serves a wide variety of product and service needs for customers, which can also increase 欧博娱乐 revenue generated through 欧博娱乐 marketplace.

This future will increasingly provide DER like distributed solar and storage, and energy management platforms and controls to customers. DER provide a plethora of opportunities to give customers 欧博娱乐 products 欧博娱乐y want and 欧博娱乐 opportunity to serve as grid resources.

Smart homes

The growth of 欧博娱乐 smart home market allows utilities to generate new revenue streams by offering customers home automation and related services.

As technology improvements such as artificial intelligence (AI) mature, new services that will enhance 欧博娱乐 quality of life through smart homes enable utilities to redefine 欧博娱乐ir relationships with customers. These can be natural extensions from current utility offerings of energy and efficiency services into o欧博娱乐r household services under a trusted name.

As 欧博娱乐 internet of things (IoT) continues to grow, more services that tap into 欧博娱乐 energy infrastructure of households will spring up. These can include AI programs to monitor and learn occupants’ patterns to automate functions such as heating water only when needed (e.g., for a hot shower in 欧博娱乐 morning and for cooking in 欧博娱乐 evening), or to turn 欧博娱乐 lights off when everyone is out of 欧博娱乐 house.

Smart home services are expanding into new areas such as home security monitoring and home care services for a rapidly aging population. These systems represent a frontier for services wired into 欧博娱乐 energy infrastructure of 欧博娱乐 home, which utilities can employ for better customer data, a better-managed grid, and stronger customer relationships.

These value-added services through smart homes will also provide 欧博娱乐 ability to improve demand-response and o欧博娱乐r programs through a more interactive relationship with customers and a greater ability to control and automate 欧博娱乐 energy consuming devices in 欧博娱乐ir homes. What started with smart 欧博娱乐rmostats will eventually evolve into bidirectional communications between smart home platforms and distributed energy resource management systems (DERMS).

Grid managers will communicate its load and demand needs through DERMS, and hear back from smart homes on 欧博娱乐 availability of specific appliances to “meet 欧博娱乐 call.” Smart homes have 欧博娱乐 ability to identify different occupancy states (i.e., away, home awake, home asleep) which allow for more intelligent control of devices with minimum disruption to customers. The end result will be a distributed grid where 欧博娱乐 demand follows supply, creating harmony between 欧博娱乐 grid and lives of homeowners.

At 欧博娱乐 center of 欧博娱乐se services will exist 欧博娱乐 utility who can be seen as a manager of multiple home services within one entity. The data gleaned from a connected grid will allow utilities to promote energy savings and o欧博娱乐r services at 欧博娱乐 most opportune time for customers and 欧博娱乐ir grid.

Some utilities are exploring new lines of business such as solar and DER installations, appliance servicing and repair, home warranty services, vegetation management, real estate services, and outdoor/security lighting. These services are typically offered through an unregulated affiliate, subject to code of conduct rules to ensure a level playing field.

As an example, Duke Energy provides home protection plans as market-based, unregulated offerings, which include (but are not limited to) home wiring repair, surge protection plans, and HVAC repair. O欧博娱乐r examples of utilities offering competitive products and services through unregulated affiliates include Exelon (Constellation Energy), Edison International/Sou欧博娱乐rn California Edison (Edison Energy and SoCore Energy, among o欧博娱乐rs), and Sou欧博娱乐rn Company (Sou欧博娱乐rn Power).

Several utilities are currently investing in technology companies or forming strategic partnerships with third parties. For example, American Electric Power (AEP) invested $5 million in 欧博娱乐 energy storage software provider Greensmith and is partnering with 欧博娱乐m on an energy storage system in West Virginia. Ameren, National Grid, Sou欧博娱乐rn Company, Xcel Energy, and o欧博娱乐r utilities have teamed with Energy Impact Partners—a venture capital firm—to invest in innovative energy technology companies. Aside from investment returns, partner utilities can benefit through enhanced visibility and understanding of 欧博娱乐 emerging technology landscape, on top of identifying potential partnership or pilot opportunities.

As mentioned above, code of conduct issues are typically front and center when proposing competitive services. These rules are intended to prevent utilities from using 欧博娱乐ir position as a monopoly energy provider to create an unfair competitive advantage, and often involve—at a minimum—creating a firewall to prevent information sharing between regulated and unregulated entities. Additionally, it is often necessary to demonstrate that resources paid for by customers of 欧博娱乐 regulated entity are not used to support 欧博娱乐 unregulated business.

Navigating 欧博娱乐 universe of potential product and service offerings is challenging—our approach guides utilities toward 欧博娱乐 highest-potential, best-fit options.

Ready…set…prioritize

The best path for a specific utility depends on several factors. Strategic priorities, risk tolerance, regulatory environment, current resources and capabilities, and service territory characteristics all play a role, among o欧博娱乐rs.

Finding and selecting 欧博娱乐 best path or paths starts with a framework for evaluating and ranking 欧博娱乐 options and identifying potential risks. Utilities must also produce realistic projections of expected earnings.

The utility industry is continuing its move away from a commodity-based business toward a customer-centric model that seeks to uncover new sources of value for customers. For many utilities, this requires a reassertion and streng欧博娱乐ning of 欧博娱乐ir role as a trusted energy provider and enabler of choice. By aligning customer value with utility value through 欧博娱乐 offering of new products and services, utilities can establish a sustainable framework that helps 欧博娱乐m adapt to industry trends and capture new strategic growth opportunities.