US Utility Business ModelsEuropean Utility Week

Paul De Martini10.17.13

pdemar@caltech.edu

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Source: ACEEESource: EIA

2011 US State Renewable Policy 2010 US State EE Policy

Policy is Spurring DER Adoption

Combined with accelerating improvements in DER technology price & performance are creating opportunities for electric system efficiencies

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Over 80% of US population under the equivalent of EU’s 20/20/20 Plan

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DER will reach 30% of Installed US Capacity by 2020

Effectively all incremental growth in capacity will come from customers

30%

Backup Generation: 225 GWCHP: 122 GWDemand Response: 90 GWSolar PV: 50 GWOther DG: 25 GWDist. Storage: 3 GW

Potential DER Total: 515 GW

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Changing Operational Needs

Wind & Solar PV and Customer DER changing operating conditions – role for flexible DER?

14 GW Ramp

in ~3 hours

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Virtual Power Plant: 2007-2020

Advanced Automation: Multi-direction and variability of DER power flows drive circuit design changes, new grid components and control systems

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Transactive: 2020+

Creation of local balancing & distributed markets to integrate customer DER

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US Telecom Lesson: BAU is not a good strategy

Market growth in mobile, ecommerce and related services

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US Electric Industry Competitive Landscape

Electric Landscape - 1998

NUGs

Marketers

REPs

Utilities

ESCOs

Electric Landscape - 2013

Integrated

ESPs

Non-Energy

SPs

ESCOs

ADT

Source: Newport Consulting

CSPs

Solar PV

REPs

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Significant potential risk to loss of share of customer energy budget plus no participation in enhanced reliability and home energy automation

Grid Energy 4%

T&D 15%

Solar PV 23%

Back-up Generation 46%

EE Spending 7%

Home Automation 5%

Customer Monthly Energy Budget Today - $200.00

T&D 55%

Grid Energy 36%

EE Spending 9%

Customer Monthly Energy Budget Yesterday - $75.00

Example US Customer Energy Budget Allocation

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Utility Economics Are Changing

Economies of Scope

Network Economics

Economies of Scale

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Utility Business Strategies

Customer relationship is very valuable –strong position with customer is essential to compete for customers’ total energy and related spend

Distribution is becoming the hub in a future hybrid electric network – distribution grid is a natural position for enabling and participating in incremental value related to physical bi-directional energy flows

Sustainable competitive advantages are key to future success

“The new clean energy business is not separate and distinct from conventional grid-based power system. The best companies will build the new and clean on the foundation of the old and reliable.” David Crane, 2012 Deutsche Bank Conference

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Differentiated Energy Solutions

DER Market Facilitator