ComEd doesn’t deliver any solar energy to its Chicago-area customers, and California-based SolarCity doesn’t do business in Illinois, but from distant reaches of the country, and from opposite ends of the power grid, the two companies have come to much the same conclusion about the future of utilities.
Their respective CEOs, Anne Pramaggiore for ComEd and Lyndon Rive for SolarCity, urged legislators from all 50 states Monday to write laws that would help utilities shift from energy-delivery pipelines to energy-sharing platforms.
“We’re initiating our delivery system’s shift from today’s pipeline architecture—moving central-station power across wires to customers at the other end—to a platform architecture, which is the business architecture of the 21st Century,” Pramaggiore said at the National Conference of State Legislatures’ Legislative Summit in Chicago.
A platform architecture would allow utilities to use their infrastructure, which connects to almost everyone, to create a market that customers could access to buy and sell energy and energy services (like storage). In such a model, which she called “the ultimate Uber,” utilities would be compensated with fees on transactions and charges for services they provide.
“Right now the way we’re compensated—the way we manage our business and price our product—is based on volume pricing of kilowatt-hour sales. And that really has to change because it’s clear that our customers want to use less kilowatt hours, and not all the kilowatt hours will be moving through our system in the same way that they have in the past.”
It’s unusual, Rive said, for utilities to accept change so readily.
“Oftentimes when you add a disruptive technology to an old legacy infrastructure, the incumbents will do everything they can to slow the adoption,” said Rive, who heads the nation’s largest installer of residential solar systems. “Now, Anne Pramaggiore seems to realize that they need to change. It’s rare to see a utility executive speak as she has, embracing the new infrastructure.”
Rive urged legislators to create a revenue model that gives utilities an incentive to embrace distributed generation. Right now, some regulations forbid utilities from earning anything when they buy and resell energy generated by consumers, he said. In other words, if a utility pays a customer $10 for homegrown energy, the utility must sell that energy to another customer for $10.
“We’re a big advocate to allow utilities to start making money off of someone else’s infrastructure,” he said.
Then utilities would be more willing to serve as a platform for consumers who want to generate and store energy and share it with their neighbors, Rive said. Rive also issued a warning to legislators. Distributed generation is coming, he said, because people want it and it’s the right thing to do. If regulators don’t change the current infrastructure to accommodate it, a new infrastructure will develop parallel to the old one.
“If that continues, you’re going to end up with stranded assets.”
And the outcome, according to both CEOs, is up to the states.
“State policy has never been more important,” Pramaggiore said. Renewables policy is set at the state level. Energy prices, important to the competitive success of different energy sources, are set at the state level. Carbon pricing, seemingly gridlocked at the federal level, seems to be shifting to the state level. And the business model of the future utility will be determined by the states.
“States have within their purview the ability to respond to the major issues of our industry over the next 20 to 30 years,” Pramaggiore told legislators. “So you really have the ability to shape this.”