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The 6 D’s Changing the Electric Utility Industry

March 28, 2019
Each of the 6 D’s presents both a challenge and an opportunity.

In many companies, the New Year brings new management structures and managements' desire to understand the business in more detail. When I present to our leadership the exciting challenges and opportunities facing the utility industry, I always frame the discussion in terms of the 6 ‘D’s’: how they are catalysts to each other and why they are important. My definition of the 6 D’s is as follows:

Distributed  — The old model was driven by size and economies of scale, resulting in relatively few centralized fossil-fired plants, which generated electricity that flowed in one direction down to the customer. That was then, this is now. The future is millions of carbon-free generation sources spread throughout the ever-changing network. Global capacity of these resources is expected to double over the next 10 years (IFS). The challenge of integrating these Distributed Energy Resources (DERs), including controlling the demand side of the equation, is complex. 

Decarbonization — Clean, green and sustainable is not the future; it’s today. Society, policy makers, regulators and companies are all-in on this, as they should be. The dramatic decrease in the cost curves for renewables over the last decade and batteries over the next decade has made the zero incremental cost of this generation class a solid investment option for both the financers and the customers.

Digitization — Much like the cost curves for clean generation, the ever-increasing affordability for monitors, sensors, smart devices, and communication networks is driving the Internet of Things (IoT). In the near future, everything is communicating with every other thing and working together to semi or autonomously operate the grid. Data storage and the increasing power of cloud computational power continue their dramatic declines as well. Many vendors at DistribuTECH this year spoke of their digital twin of nearly every major asset on the grid. These factors create a tsunami of data that utilities need to deal with, including the volume, velocity, variety and veracity of the data. Capturing, cleaning, storing, transforming and running advanced analytics on this data are muscles utilities need to build to compete in the future.

Democratization — Unlike ever before in our history, customers have real choices for their energy purchases, and these same customers are accustomed to and demand an “experience” they enjoy from digital brand leaders like Amazon, Google and Facebook. Several regions of the country are now seeing customers decide to go with the dynamic duo of solar plus batteries to get away from their local utility. Not only that, but these same customers have the ability to sell their excess electricity back to their utility or be part of an aggregation program to participate in the energy supply chain. If the customer is not at the center of your strategic vision, that will be a costly strategic error. 

Defensible — I needed another “D” to describe the ever-increasing importance of reliability and resilience. With the customers increasing dependence on a digital lifestyle, the importance of reliable, clean power is making electricity even more fundamental in digital societies. At the same time, we face the challenges of the changing climate. Combine that with the unprecedented challenges of protecting our critical infrastructure from cyberattacks, and you can see the many threat vectors on the “defensible” side of the equation. 

Drain — Our workforce is aging and nearing retirement. We are seeing more and more experienced workers walk out the door and potentially taking all their knowledge with them. How do we capture that knowledge and transfer it to the new workforce? Digital solutions help with this, but the new workers entering the workplace expect tools and technologies that are digital-first, like the toys and phones they grew up with. Not only do we need to fill this leaky bucket, but we also need to attract, hire and retain a new generation of worker that has the skillset for a cross-disciplinary power grid that incorporates the power engineering, cybersecurity, data analytics and communication networks.

On their own, each of these D’s presents a challenge and an opportunity. What makes the future more dynamic and uncertain is each of these D’s is a driver and catalyst for other D’s, creating an even faster pace of change. The industry is facing more problems than ever before, harder problems to solve than ever before, problems they have never dealt with before, and competition like never before.

My belief is this is “our” time: the moment in history where the industry is proactive, pro-consumer, pro-environment — to not only react to the 6D’s but proactively overcome them. Utilities are the fabric of a modern society, and we need to conceive and deliver on the future of the life-giving service we provide. To that end, we are adding a new section next month called  “Charging Ahead.” This section will cover the latest technology and business models electric utilities are seeing, and can expect to see, going forward. We will focus on topics such as electrification (for transportation as well as ports, warehouses and cities), storage, batteries, artificial intelligence, distributed energy resources, smart cities, advanced metering, machine learning and a host of other emerging topics, technologies and business models.

My final comment on the future is something that resonated with from me from a podcast I listened to last year. Navigant was interviewing Mary Powell, CEO of Green Mountain Power, and her mantra was getting the entire organization to NOT think of themselves as a utility. We might all want to have that mindset to open our aperture to future solutions and challenge the existing paradigms of who our customers are, what products and services we sell, and why we exist.

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