A recent topic on the Linkedin Utility Arboriculture group asking whether utility arboriculture would exist in 20 to 30 years caused me to reflect on my failed career as a futurist. In revealing my failings I am somewhat consoled by the fact that I am not alone. Indeed, I am a member of a rather large group. Just think of all the people who assured us that deregulation would lower the cost of generation and electrical service in general.
Fifteen years ago I set down in writing how I envisioned the future would unfold for the electric utility industry. Well I didn’t get all of it wrong, but in retrospect the future has not unfolded as I thought it would.
The basic premise was that electric utilities were facing a bleak future; that the regulatory changes resulted in customers being the primary asset and that utilities were ill prepared for this change as operating a monopoly had obfuscated a primary requirement of competitive markets, understanding customer needs. Their revenues were threatened by customer choice. After all, the heritage utilities were starting out with 100% of the customers and consequently, there was only one direction customer choice could take them. That loss, however, I saw as minor in comparison to the risk of customers choosing distributed generation (DG) and leaving the grid entirely. Imagine the impact of having to spread the fixed costs over a declining customer base. It would only accelerate the loss of customers. Would the regulators allow utilities to abandon uneconomic lines? California more or less answered that by capping the selling price of electricity generation and obligating the utilities to provide service while creating a structure that exposed the utilities to unlimited costs in purchasing the required electricity.
What ever happened to DG? Do you recall back in the nineties the promise of fuel cells and micro-turbines? The nascent fuel cell industry was projecting that by 2010 all the technical issues would be resolved and home installations drawing hydrogen from natural gas would provide all the electricity requirements of a house and use waste heat to supply hot water; all for $10,000. At that price I anticipated fuel cells would become the standard for newly built houses. I foresaw great potential in micro-turbines. I could foresee a clever developer getting into the electricity business. Install a box in the neighborhood housing a micro-turbine fueled by natural gas to supply six to 10 houses, all fed underground and have a new source of income into perpetuity upon completion of the development.
At the time, heritage utilities were slashing maintenance in an effort to reduce costs. I saw this focus as communicating that utilities believed cost to be the customers’ primary value driver. I asserted that this was only the case because the customers had not had a choice of varying attributes that may be valued. I predicted that reliability would emerge as the primary value attribute. The decreasing tolerance for storm damage and increasingly clamorous reaction to extended outages may be an indication I was at least partially correct on that point.
I really thought that new entrants to the electrical services market would bring innovative offerings that would leave the heritage utilities eating their dust. I don’t know how it is in your area but we still get people representing retailers knocking on the door, telling half-truths in an attempt to scare us into subscribing to their fixed rates for electricity and gas, even though the province has declared the regulated rate option to be permanent. Until recently the biggest innovation I encountered was that if you subscribed you would receive bonus points on a major rewards loyalty card. Wow! To say that falls short of the insight into customer values and ingenuity I expected is an understatement. However, this past month I came across an article that stated Honda Power and Light has set a budget of $65 million to lease rooftops for solar installations and has partnered with a solar installation company. It’s this type of thinking that recognizes barriers to adoption, such as the need for large capital outlays and difficulties in obtaining financing, that I expected would be in evidence in abundance with the new entrants.
You can access my failed futuristic thoughts in the "Highlights" section. Laugh if you will. It won’t hurt as much as the lesson I had to learn. At the time I thought all of what I wrote was inevitable. Even if it is, as my investment statements convincingly illustrated, inevitable does not mean imminent.
