Future of Electric Models

The past lessons have gotten us to this point. We know that the electric utility market is in a state of flux, and with this comes some pretty significant challenges, as well as opportunities. For the past 100 years, electric utilities have balanced safety, reliability, and affordability to provide service to their customers. The Regulatory Compact provides oversight, and in return, utilities are able to earn a return on the electric grade assets in which they invest. Some of the biggest changes include the influx of distributed energy resources, whose adaption is encouraged by tax credits, net metering, and other incentives.

The incorporation and integration of massive amounts of data and more active involvement from customers and third parties, including a potential competition to utilities, is also reshaping this market. At the same time, there is no room for error or slippage when it comes to providing electricity that is safe, reliable and affordable. The electric grid continues to be a major backbone in ensuring these three things. Right now, even as you're watching this, regulators are trying to figure out how to compensate utilities in the future for the value of the grid in a changing world.

We live in a wonderful time because there are so much technology and so many advancements being made. But at the same time, there are some that are affordable and effective that can be adopted early, and then there's others that the costs are high. But the technology keeps going on, and as greater production happens, the costs go down. So we live in a really exciting time. Technology is not free. And so it's a matter of which technologies to deploy, which one's are cost effective, and safe and reliable. 

There's been a lot of discussion by regulators, and utilities, about how an industry, that was
founded on a centralized approach, can accommodate or transform to include more decentralization. As you've seen, thinking about the complexities of how this industry works is really important. Preserving the electricity we have become so dependent upon. There are a number of business models already in place right now. Some electric utilities own generation, transmission, and distribution. That's a very traditional vertically integrated approach. Others manage only the transmission and distribution systems. And in Texas, independent power producers market electricity to users.

Many electric industry executives see value-added opportunities around distributed energy resources. But there is no clear path forward for a business model that makes the most sense. In the state of the electric utility study, utility executives were asked which model they thought would be the best for the utility sector moving forward. 28% said that they thought the vertically integrated utility model made the most sense. This means utility, again, on generation, transmission, and distribution and monitors reliability. 

Future of Electric Models

In this model, there is a regional transmission organization, OTO, or independent system operator ISO, of the transmission system. And that means there could be no preferential treatment given to the utility versus competitive generators. In fact, if you ever visit a utility that is vertically integrated, the transmission group is always kept physically separated from the other operations areas, as in, behind locked doors. Now, 24% of the executives picked the model that was specified in the New York plan. This means like the vertically integrated utility model, including a transmission that I described, and the utilities act as a platform provider for the distributed resources over the distribution system. Now the same proportion, 24%, picked an RTO/ISO model, and that means a regulated utility owns

the transmission and distribution. But unregulated companies provide generation. And then there is an RTO/ISO that operates the transmission grid. Fewer, 13% pick the retail
electricity market model.

This is the same as the RTO/ISO model I described. And then there are unregulated companies that provide electricity retailing services. Now 11% pick the IDSO model and that means the RTO/ISO model plus an independent distribution system operator. And they operate the distribution grid and
monitor reliability. Now in the same study utility executives were asked about what they thought was the best way for utilities to manage lost load from both distributed energy resources or from customers buying it from a third party. 38% recommended that the industry change rate structures to better recover those fixed costs. In other words, to reflect the value of the assets that are used. That's no small feat because you know how capital intensive this business is.

Some of the things they specifically gravitated towards were rates that varied in accordance with the time of use, meaning charging more during peak hours. Some also thought increasing the fixed charge would be the best approach. 27% said they thought it would make sense for utilities to offer customers renewable energy services, for example, community solar and green pricing programs. Coming in close behind, 26% said utility should petition regulators to change the traditional utility revenue model altogether. Electric utilities worry whether the ambitious approaches will be able to truly balance distributed energy choice with affordability, safety, and reliability.

Crystal ball, what's the future of the utility in the next, some people say 10 years, I think that's a shorter frame, as fast as technology is moving today, it could be three to five years what does it look like And at least for me, I'm already starting to see it with some of the projects that we're doing, and the small solar on the rooftops of a lot of our members. The grid used to be a one way grid. Power would come from the power plants, from out in the middle of nowhere, come into our substation, and
then flow down to the customer. And now we have little generators all over our service territory. So number one, our grid's got to be able to accommodate two-way flow of electrons, which it didn't need to before.

The other thing is we need to probably implement more of a storage. When we're making lots
of solar energy at noon, what we need to do is be able to store that energy, shift it six hours. So that when everybody comes home and they're watching television and cooking dinners, I can take that
energy that was made at noon and delivered to our consumers at six. It really is the key for renewables to turning it into gold. It's my opinion that movement of energy from one time period to another. I think the utility of the future is going to have to have that.

Basically, we're just a grid and I see us as being kind of the middleman with a bunch of people using
energy on our grid and a bunch of people producing energy on our grid. And we're the ones they're linking everybody up with everybody else. And that's a more sophisticated grid than what we have today. And we talk about infrastructure in this country, this is one of the infrastructures that
I think really needs to be focused on. It's also going to be a benefit to the solar industry because until I get this more sophisticated grid, I will have limits as to the amount of solar that I can bring into the system. At any particular location. So I would encourage that the solar industry actually helps the utility industry lobby government to support the infrastructure of the grid, improving it. Because at the end of the day, our improved grid means more solar can be deployed, which is helpful for
the solar industry at the end.

I think what we see in our society a lot are folks that are unhappy with the pace of change, and
folks want to change overnight. Typically though, decisions that happen overnight are rarely good and you look at the net outcome of where we're at, and utility space. We have the cleanest, most reliable, most economical, affordable and agile products and services in the electric utility space in the world. I think we're getting it right for both parts and we can continue to have some vigorous
debate on the margins about what on to change and where we need to head in the future. But, when you look at the end results, we're sitting here in the well-lit space right now. Students watching this, whether watching it home or watching it in a classroom. They're watching with dependable power
making it all happen at relatively affordable rates, depending on where they're sitting and that's a good thing.

To meet the utility of the future question, one of the things Xcel Energy has done here in the Colorado jurisdiction is, is we're broadly talking about what we're calling the R energy future initiative And we have three components of the Our Energy Future Initiative. And we sat back, and we looked at what do we think our utilities should be. What service should we be providing
to our customers five years from now, ten years from now. We came back and said there are three
things we really need to focus on. The first thing we need to focus on is customer choice. Being able to give our customers a little bit more control and little more choice about what they're looking at, how they're looking to consume their energy.

Giving them more information about it so they know more about how they're driving the costs of energy. Secondly, we need to be embracing the technology that's developing in our areas. So in our industry, we've had a lot of technological innovation in the past several years, and it's going to continue on into the future. How do we bring that into the fold in a way that makes sense for our customers and really embraces? And then finally, we want to provide those choices and we want to embrace that technology, but you've gotta balance that with economic development. We need to make sure that we're empowering our states to have strong and robust economic development to attract businesses so that our citizens can be employed by those businesses. And to attract people that can come and work in those businesses, and they want to live in our areas. So it's a balance of the three that we're really looking at and is really important to us. The utility of the future is going to
have more choices for its customers. It's going to be a little bit more adept and nimble at adopting those technologies and presenting those options to its customers in a way that makes sense.

The fact is that the cheapest integration solutions, the cheapest way of solving the intermittency problem if you want to see it as a problem, are obviously going to be found if you've got an entity that can look across the entire system, look at all of the resources available in the system. And integrate the different operating characteristics of all those resources, you need an orchestra conductor, which is I think the best way to understand one of the most important functions that utilities have. If you don't have an orchestra conductor, you end up with the absurd situation where the individual solar and wind developers are called upon to provide their own energy storage on their own sites. And in some parts of the world and in some parts of the country, that's actually happened. But it greatly increases the cost of the resource. And what on earth would be the reason for thinking that the onsight solution would be less costly than the whole cluster of solutions that are available to an orchestra conductor that can look out over a much bigger system?

So the future of renewability, as they say, is very bright. And we are really looking forward to continued deployment. It has been, if you look at the recent history, we've doubled the capacity of deployment every year and investment as well. So that I believe will continue and the technologies will continue to get cheaper, and more efficient, and more optimal. But I think one of the really interesting things about renewables is they become a greater and greater part of the energy mix is that we're really going to start seeing more decentralization and what some people have called the democratization of energy. So just as the internet has brought changes to the music industry and the transportation industry, it's bringing changes to the energy industry. And we're going to see
more distributive energy, people with solar panels in their homes, small wind turbines, utility building utilities scale power plants in different areas and communities.

Depending on the resources, we'll see geothermal, we'll see small hydro that takes energy from pipes and conduits in different ways from decentralized energy and we're going to see more and more of this become more of a community industry based mix. And people will really be able to understand how the energy is generated, they will be interconnected with how they use energy and then how it's actually generated themselves. So we going to see the utilities and the energy industry really
become much more dynamic, much more integrated, much more customer driven and customer focused. As the renewables and other types of energy become more and more part of our lives.

To sum it up, technology improvements and cost reductions, and distributed solar and energy storage, mean the likelihood of their increased integration into the existing grid. Electric utilities are looking at these and developing products and programs to benefit customers. At the same time, they know the importance of regulation to handle these changes in a way that protects reliability and affordability. The fact remains, we as customers demand all of this.

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Clean Electrical Power Planning For the Future

One of the things to watch, because it will hold a significant impact on the future of this industry and
its model, is the Clean Power Plan. This plan was a cornerstone of the Obama administration's focus, on mitigating climate change. It has also has been a lightning rod. As you may recall from a previous lesson where we touched on it, the plan called for cutting carbon dioxide emissions from coal-fired electric plants by 32 below 2005 levels. And states needed to meet this goal by 2030. A really critical part of the plan is that the EPA plans to regulate power plant emissions under this act. Each state has its own specific goals to meet under the Clean Power Plan. Almost half of the states
in the US are using. And the case against the Clean Power Plan is compromised of 38 separate cases. I know you're thinking that math doesn't add up, but the states aren't the only ones suing. Utilities and
coal companies have also issued lawsuits.

The states believe this plan is illegal and even unconstitutional, and feel that it is a way to
reorganize the US electric grid. They also believe it's an all-out attack on the coal industry that will drive electricity costs, sky high. The EPA fired back saying, the plan will lead to lower residential bills. Remember how earlier we talked about the fact, that states had jurisdiction over electricity generation and distribution? Well, this gets to the very heart of the controversy. The states are protecting their authority, to regulate carbon emission for their states. New Jersey Environmental Protection commissioner, sums up many of their concerns in three words, unprecedented regulatory overreach.

With the EPA, they're clearly looking at increasing and more restrictive standards, specifically on coal fire generation. But not just coal. When you look at where regulation is in the extractive industries, well that impacts any sort of baseload power we have in this country. And it drives cost. One of the frustrations I think the industry has with the EPA right now, is sort of the laundry
list of regulations.

Before one is finalized, you are met with an additional regulation. And there's no harmony between them. And the cross counting of benefits, counting the benefits of one regulation under the requirements of another. And really, that is an area where I think our country is really ripe for some reforms and just some common sense rethinking. That you can accomplish the same goals and achieve the same ends, without as being disruptive to industry and business as we are right now. because frankly, a lot of companies when they're looking at making long-term resource decision, their hands are tied. Because you just don't know what the regulatory future looks like in this country, because of the volume and diversity of regulations coming at US EPA right now.

The EPA defends its position saying, carbon emissions from coal fire plants represent a huge threat to the health and welfare of the US citizens, because of the impact on climate change. They support their right to do this because they have regulated other forms of air pollution from power plants, and other sources for decades. Now, on the other hand, some states, cities, and scientists support the plan. And they say that since pollution and emissions don't respect state borders, that the EPA's plan will help ensure emissions are truly reduced across the US. In February of 2016, the US Supreme Court
issued a stay of the Clean Power Plan. A legal stay means that a judicial proceeding is temporarily stopped. They can either be temporary or indefinite.

This means that the Environmental Protection Agency is not allowed to enforce any of the requirements of the rule until all of the lawsuits against it have been resolved. The outcome of this controversy will have considerable impacts on all of us. Meeting the standards would mean more renewables, greater promotion of energy efficiency and a greater reliance on natural gas. Of course, you know that natural gas is not without its own controversy, namely fracking. There's no magic bullet and the sound bites that come out of the media and social media, just don't do this issue justice. It's one that bears a closer look by all of us since the impact will be so significant.

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NET METERING - Future of Electricity

We talked in an earlier article about distributed generation. As a reminder, this is when electricity is generated near the location where it's being used. We also talked about the fact that with some energy sources being used for generation being more intermittent, for example, the sun doesn't shine all the time and the wind doesn't blow at the optimal speed all the time, you know that a connection to the grid is still needed. Otherwise, these customers would not have electricity 24/7. Another reason the grid is still needed is that many users sell energy back to the utility. And for this, you need a good connection.

They benefit in two ways, one is when their generation is not operating, obviously the greatest providing them power. But the grid also supplies them the capacity for their storage. Essentially, they're storing energy in the system and then using it when they have loaded and their generation is no longer on. So, there are two benefits there for customers with solar generation. 

Back in the 70s, there was a push by the government to increase penetration of rooftop solar. This is the genesis of net metering which is an approach to charging customers with rooftop solar. This approach was designed to encourage adoption and so it served to make rooftop solar more affordable through subsidies. Fast forward to today and solar rooftop penetration is going strong. So the question is being asked, does it still need government subsidies to grow, or could and should this market be able to stand on its own? At the center of the debate is the fact that those who don't have solar are subsidizing those who do. Let's dig into this in more detail.

So for a residential customer that has some solar generation, the watt outer meter runs forwards and backward, depending on whether or not the customer's using more load than the solar is producing or when the sun isn't shining. Or it runs backward when the load at the house is not enough for, is too much for, not enough for the solar capacity that's coming into the system. So the meter runs both ways. So, when the meter runs backward, there are negative kilowatt hours, and then when it runs forward there are positive kilowatt hours. So, according to the commission rules, customers can install a system up to about 120% of their annual kilowatt hours. So, if a customer has one these systems where it's designed and it actually produces 120% of their annual kilowatt hours, then the meter in large terms, ran backward 120% of the time. And so, what happens then is utility didn't get paid any money for the system that's being connected and then has to pay the customer for the energy that was produced in the system.

NET METERING

Net metering is approached a little differently in every state. Usually, here's how it works. Customers with rooftop solar or other distributed generation get credit for the extra electricity they sell back to the grid. Utilities are generally required to buy this electricity at the full retail rate. Now if that same utility were buying power on the open market from other utilities, they would pay wholesale rates. But net metering specifies that the utilities must buy the power at a retail rate or a premium rate

from net metering customers. The net, it's more expensive. Also, all of the fixed costs of the poles,
wires, meters, advanced technologies, and other infrastructure still has to get covered somewhere. So the bottom line is that the net metering customer doesn't pay for this stuff, but they use it. So, who pays for it? Customers without distributed generation or rooftop solar.

So when you take a look at the bill and it says a service charge, it's all over the place. Well, what's included in that service charge? And then we start talking about residential customers as it relates around to the energy rate. And this is where we get into a lot of these conversations about net metering, what's the cost-effectiveness? Who's paying for what? Are they paying their full share or not?

Right now there's a pretty heated discussion going on about the need to relook at net metering. At the heart of the discussion is how to ensure fair compensation for solar companies as well as utilities.

Then you turn the corner, evolution of technology, you come to the solar industry. You have the rooftop installations. They're using what is known as net metering. Net metering is you measure the amount of energy that's coming out of the home, you measure the amount of the energy that's being consumed by the home, and you get to net the two together. The problem is, is that the infrastructure
that's still behind that, that's based on them, how much is everybody using at the same time, is still needed, is still being utilized, but because of that netting, it isn't necessarily being paid for. And so that's, once again, back to that debate that's raging across the country right now on how do you really balance these factors and the benefits that come from the installations? What's going to happen? And we have, I think, still a number of years before we really know what the outcome of that debate is.

So the industry is changing. That puts pressure on the regulatory side. For the last 100 years, most of utility fixed costs have been recovered in variable rates because it worked. And because there was either consistent load or increasing load. With the distributed generation that turns it upside down and the variable amount of usage or sales is declining for many utilities which puts pressure on them to recover their fixed costs in different ways, and then that creates some backlash. 

The cost of producing solar power has gone down since net metering was first rolled out. The original purpose was to incent market growth. With that in mind, state legislatures and utility regulatory commissions are looking at outdated net metering policies. The solar industry has countered saying
that the subsidies aren't material and that the prevalence of rooftop solar helps to alleviate the strain on electric grids during summer days when demand soars. What we do know is that increased penetration of distributed energy technologies, particularly solar, is creating a fundamental shift in the US electricity system, and public policy must respond to this. Policy over the previous one way
street approach no longer suits this complex market.

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Future Electric Vehicles Technology

Let's talk about another hot topic, electric vehicles. The US electric industry has significantly
focused on electric transportation. This includes electric vehicles and charging stations to modeling the way by changing out some of their own fossil fuel power utility fleet vehicles for those that require electricity to run. There are some plug-in hybrids that have an electrical motor powerful enough to produce electricity beyond just for use in that vehicle. That means the power can be exported, so there you have it, storage, PG&E in California has done some amazing work with their own plea incorporating vehicles that can service generators to power their worker's tools and potentially even an entire neighborhood. Right now utilities use generators in areas that are down and connect these generators to grid sections to bring neighborhoods online one at a time. And they're looking at the plugin hybrids to fill this role. While this is extremely exciting news, we do need to keep in mind that at this point, it's more for isolated applications.

Most people that are really earnest about climate change will say that the first step is to decarbonize
the electric sector. In other words, have a larger percentage of renewable resources so that the carbon footprint is fairly small. And we're already there in the northwest. The step two that they will usually
point to is electrifying transportation. If you really want to make an impact on the carbon footprint of our society, you need to go after transportation and electric utilities want to be part of the solution. And I think electrification of transportation is a worthwhile effort. There are a lot of institutional barriers though, that keep utilities from participating. There are, in some cases, laws or regulations that prohibit utilities from encouraging electrification. In some cases, there are regulatory tests of cost-effectiveness. Just how far you can go to try to promote electrification of transportation, so it's not an easy thing. But that's a realistic second step for making a significant impact on climate change efforts. 

National Renewable Energy Labs is doing some extensive research on EVs. I was able to take a look at one of these projects in their lab. 

So this vehicle in this lab is being used to understand how vehicles interact with a residential system. So when you're plugging your electric vehicle in, how does it interact with the grid? How does it interact with the home and a building? And so, that's why we have this little vehicle here in this lab. We do a wide variety of research on electric vehicles, everything from developing the battery systems, the drive trains, the overall system of the vehicle itself and to prove its efficiency. And then also how to improve the different types of charging operations as well.

We're working on building energy codes in our states and cities. We're working on transportation
policy to increase support for mass transit systems to increase support for electric vehicles which is
an energy efficient and clean vehicle technology that's just emerging in the marketplace. We're quite, Bullish on the future for electric vehicles. Moving off of petroleum fuels, on to electricity for our cars and trucks.  There's no doubt the future is getting more exciting when it comes to EVs. This is one for us to keep an eye on.

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Future of Electric Storage

The concept of storing electricity is clearly not new. Since the 1930s pumped hydroelectric power has played an important role providing electricity here in the US and around the world.

The Energy Storage Association, which is a national trade association, identifies that storage falls into four main buckets. Those are number one, mechanical which is where pumped hydroelectric falls. Number two is thermal and ice is probably the most common in that area. Number three is electrical which is superconducting magnetic energy storage and capacitors. Try and say that four times fast. And number four is chemical which is basically batteries. 

We're going to talk about battery storage specifically since it's getting a lot of attention lately. With the influx of interment renewable energy sources, the possibilities associated with it are considered key to customer and utility cost savings. In fact, industry experts believe that the combination of energy storage solutions, smart grid, and renewable energy are key for our future. You already know that large-scale wind can be very challenging to integrate into the grid because of its intermittent nature. The wind tends to blow at night when demand for electricity just isn't as high. The hope is that storage can help smooth out the variability.

It becomes an issue of how you store the energy to make work, storing daylights power for night time usage is one thing. Storing summer power for winter usage is quite a different thing. So I think the pace of change will be different in different parts of the country.

You also know, probably even from looking around your own neighborhood, that people are using more rooftop solar as a way to lower their bills. You also know that these customers still rely on the grid. Otherwise, they'd be sitting in the dark come nightfall. At this point, there is no energy solution
storage that has been proven to work with solar that provides an affordable and reliable option.

 Electricity is this crazy on-demand resource. We don't have a place where we can just pump it and use it later, with the exception of pump storage hydro. And when you have for example say the wind picks up, the power has to go somewhere, so somebody else on the system has to back down. And that's typically again where you see the natural gas sort of in that intermediate role. Coming off the system and allowing those resources to come on to the grid.

The good news is that technology is evolving. It's getting better. You can do more ins and outs and in fact, we're experimenting with batteries here in Colorado as well. We have a project that we're doing for Microgrid where we're combining a battery and solar array. And then we have smaller projects where we're actually working with homeowners that have rooftop solar to install batteries and test how they can help with managing the system so that we can install even more distributed energy resources. We've got a few ways to go but it's good to learn the technology so that you can take advantage of it when it's cost effective.

While a lot of private companies, national labs, and electric utilities themselves continue to work on storage solutions that are reliable and affordable as well as scalable, it's still very much a technology that is evolving.

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MICROGRID - The Future Electric

You may have heard the term microgrid before. You know how the grid works to connect
bulk power to our homes and businesses. Well, a microgrid, as you can probably tell by the name, is a smaller scale system. It can power a single facility or it can power a larger area.

A microgrid is just a small version of a grid, but it is, in the case of a microgrid, designed to provide a local solution. So you can actually design a microgrid to meet the needs of something like a 100-year flood, for example. 

For example, in Fort Collins, Colorado, the community has a microgrid attached to the larger grid as a key way for them to meet their goal. And that goal is to be a community that produces the same amount of energy it uses.

You look at a very innovative utility up in Fort Collins, for example, where they're very aggressively exploring sort of distributive generation in the terms of microgrids. And their Fort Zed project where the community utilities working with the research university up there. Pushing the envelope on what's possible.

Microgrids can be powered by distributed generators, batteries, or solar power. Which is why it's at the forefront of some area's plans for deploying more renewable resources. It operates while connected to the larger grid as I mentioned. The main benefit of this is if there's some type of an issue like an emergency situation a switch can separate the microgrid from the main grid, and then it acts independently. Some communities have opted for a microgrid to be used in case of an emergency backup power system. Others use it to connect a local power source. So If they feel that this power source is too small or too intermittent for them to use on the main grid, they're able to use it through a microgrid. In this way, communities will make this choice to become more environmentally friendly.

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Smart Grid - Future of Electricity

What is Smart Grid and what effect can we expect it to have on the future of electric utilities? We hear about it a lot. If you were at a party and asked 20 people, you probably would get 15 different
answers about what Smart Grid is. And the other five people would probably back away, and look for someone else to talk to. I wouldn't, but some people would. I may or may not know this from personal experience.

Basically, the smart grid is all about combining providing electricity with information technology or IT. And this can happen almost anywhere along the grid structure, from generation to our meters as customers. Why do this? Well, it's so the system can be monitored and controlled. And that means better efficiency, more reliability, and an easier time balancing demand with supply. There are many highly technical applications using powerful computing and information technology that helps manage operations and data.

It's extremely technical, but these systems basically do things like help reduce electric losses along the system. And as you can imagine, less loss means a more efficient system, and that generally means less expense for the utility and customers, so it's a total win win. Smart devices also can detect when there's an equipment fault. Because these faults can get isolated by the smart technology, power can be rerouted. This means greater reliability in general, and faster restoration if there is an outage. As you already know, our system is very old in some areas.

In fact, General Electric reported that the average age of a power transformer in the US is 40 years old. Smart technology makes it possible to get the most out of our aging equipment because it can monitor, so little things don't become big things. And this helps a lot when planning to replace equipment.

You know that for over 100 years, electric utilities and customers had mostly a one way relationship. Electricity came from the utility to us, the customers. And information generally flowed one way too. The utility provided us information. We provided information. Basically just to let them know when we were out, or maybe to sign up for a program. You also know that this relationship is changing. The concept that has gotten regulators attention, is how smart technology can be used for demand optimization. You remember in an earlier module, we talked about how energy efficiency programs and other programs that reduce peak usage work, well this is kicking it up a notch. Fundamental to smart grid is smart meters, these are meter that are installed on your house and measure how much electricity your home or maybe your business uses. They do this in intervals of an hour or even less.

If you compare this to an analog meter, those are read about once a month by a meter reader.  Which is a person that would probably win any fitness track or fitness challenge he or she entered. If your gate is locked or Precious the pit bull is out, the utility typically has to do an estimated bill. The information from the smart meter is sent back to the utility on an ongoing basis for monitoring. So not only do you get a more accurate bill, you also know that your liability is being monitored. Believe it or not, with old school meters, there's a reason why electric utilities used to tell you to call if you're out. Because they didn't always know.

There are actually two electric smart meter types, one way, or automated meter reading, AMR, which allows utilities to read meters for billing. And there's two way, or AMI, which stands for advanced metering infrastructure meters, and these allow utilities and customers to interact. So this allows smart consumption applications. You can see on this chart that there is a switch that occurred. And that's what AMI surpassed AMR and that occurred pretty rapidly.

When we think of AMI in our space we just thinking of the meters and there is an advantage to the utilities on automated meters and being able to remotely read and know what's going on on our systems from headquarters. Not having to have folks walking door to door checking meters, dealing with dog bites, and maybe unhappy people when you're trampling through their yard. There's just the advantage from the utilities perspective of that. From the customer's perspective on that, the ability for me to potentially hop on my phone, dial up or down my air conditioning. Dial up or down my toaster may be in the future. Who knows what that home of the future, that smart home is going to look like. But being able to do with my electric consumption that I do with any other of my apps on my phone. It's just such a cool thing to think about. 

The advanced technology like an automated meter reading, or now the basically, the AMI. So we have two-way communications to meters, is something that we didn't have five years ago, ten years ago. And now it means we're able to actually more fairly allocate the cost, and move them Into the right areas with rate design. Which causes problems because everybody knows what we were and not necessarily where we are heading or what those real costs are.

 I think the exciting thing about AMI is the potential for greater choice and control for us as customers. These include special pricing for peak time or time of use, green power options, voluntary control of high energy use things in our home like air conditioning. And home energy management and usage management of your appliances. That's how it looks at an individual level. But what if thousands of customers chose to do their laundry, wash dishes, or run a manufacturing
line at a non-peak time?  We already know that utilities build their capacity to meet the peak. Remember the example of a church on Easter Sunday? Or a mall parking lot, for the busiest day of the year? Well if you can reduce how much electricity's consumed during these peak periods, that lowers the need for costly standby power plans or purchasing power on the open market. This means less expense, which is passed onto us as customers. This greater agility proves really helpful when we're looking at putting some of the less predictable renewable energy power onto the grid. As you know the more predictability we can build into this system, the easier time we have to balance customer need for electricity with supply.

The US Energy Information Administration reported that there were about 58.5 million AMI meters in the US in 2014. 88% of those were on residential homes. Sounds like a no brainer, right? Not so fast. There are opponents to smart meters, and they have tried hard to put a halt on them. The response of regulars has been more about giving customers who don't want them the ability to opt out and keep their old analog meters. To present a balanced view why would people have an issue with these meters? 

Basically, it boils down to concern with health, privacy, and/or security. Kind of like those concerned about cell phones. Some people are concerned about the radiation coming from the radio frequencies that allow communications between the meter, utilities, and smart appliances, like a thermostat. Even though our cell phones are largely glued to our ears and smart meters obviously are not, this is something that people are concerned about. And smart meters don't transmit data all of the time, only brief pulses. I did some research from a reputable source, the American Cancer Society. On their website, they say, smart meters give off RF radiation, which is low energy radiation and doesn't have
enough energy to move charged particles. And so it's called non-ionizing radiation. Non-ionizing radiation has enough energy to move atoms in a molecule around or cause them to vibrate, which can lead to heat, but it can't damage DNA directly.

The American Cancer Society goes on to point out that the International Agency for Research on Cancer classifies RF radiation as a possible carcinogenic to humans. Based on a finding of a possible link in at least one study about cellphone use and a specific brain tumor type. We're exposed to multiple men and non-manmade RF radiation all the time. But if you want to learn more, I recommend you look at a reputable source like the American Cancer Society. And beware of sensationalized or any reports that are sponsored by an organization that could introduce bias. Beyond the health concerns, some other customers worry about our shift of yet another industry to reliance on computer technology. They're nervous that this would make our electric grid highly vulnerable to cyber attacks, with some really dire consequences.

 As you can imagine, a move to smart meters entails an exponential increase in data points. Think about it for a second, if your electric company used to read your meter once a month, that's 12 reads annually, but if the meter is reading every hour, that's 8,760 reads. I totally did that math on my head and that is if it's only once an hour, many of these meters are capable of reading meters in much smaller time increment. So for example, every 15 minutes, and if you think about the fact that utilities can have millions of customers, that's a lot of data. Customers worry about their information being breached, exposing some of their personal habits related to usage. And in this age where credit
cards get breached all the time, this really increases their sensitivity. Because of the concerns, states do allow customers to opt out, but so far, that's been relatively few who have decided not to have those smart meters. So what's the hold up for smart meter adoption? Well, remember the module on regulation? Rate-based funding for smart meters is one of those things that typically goes through public utility commission approval.

For some states that didn't do a particularly good job of educating communities and the consumer, this hasn't always been easy. But we're seeing more and more of these and we'll likely see more in the future. By the way, if you're interested in knowing if you have a smart meter, many of them actually say smart meter right on the device or you can always call your utility.

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Electric Regulation and Environment

The state plays such an important role in this industry and in particular with environmental policy. Let's start with something called Renewable Portfolio Standard or RPS for short. Basically what an RPS does is it requires that a certain percentage of electricity that is sold to customers has to come
from approved renewable energy sources. These differ by state as you would have imagined. The state has different overall goals with some being mandatory and others being voluntary. Within states themselves, some different goals are applied based on the size of the utilities, whether or not they're an IOU versus corp or annuity. Often times the coops and the immunities have lower targets than the IOUs. But some common themes exist.

Most have some type of penalty if the utilities don't make the goal. They often have the option for the utilities to use renewable energy certificates or RECs to meet that goal. Let's hear more about RECs
from one of our experts.

So in terms of where we stand in the world, Colorado is a real leader. We have the National Renewable Energy Lab for the United States. They host hundreds of delegations from all over the world to go there and take a look at energy. In Colorado, we've also been a leader in terms of policy. In 2004, we're the first state in the United States to actually have the citizens vote upon an initiative to have 10% of our electric generated by renewable energy. So, we're a leader in terms of the renewable portfolio standards. Other states have followed, other states had renewable portfolio standards but didn't have it come from the voters. So it was a real Interesting to have a groundswell to earn a 52% vote to get that started. But again it comes back to Colorado has so many of all renewable resources and also a balance of fossil fuels. That we are, we're like a global petri dish. >> The Berkeley Lab publishes an annual report that details where states are with respect to having and meeting their RPS.

As a national lab this is a really good source of information. As you can see from this map, as of the time of this report 29 states have RPS policies in place. Most are well on their way to meeting them. In looking at this map you may think you can easily eyeball it to see which states are more aggressive than others but that's not really the case at a glance at least. You aren't really comparing apples to apples. More like comparing a combo platter to another combo platter. The requirements are so
different from one another. And this map doesn't necessarily, immediately lend itself to the discussion of what the incremental change would be for the states. Some states have more renewable or
other types of generation than others due to the problems of that resource located within the state boundaries. For example, Washington state has lots of water and, therefore, hydro.

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For those not intimately familiar with utilities, one of the tidbits of information I get about utilities is something that many states have called a Renewable Portfolio Standard. And that tends to increase over time and it defines an amount of renewable power that has to be part of their overall mix or
portfolio of power. That little bit of information can be misleading. For example, the state of Washington has a renewable portfolio standard says we have to get 9% of our power from renewable resources today. In 2020 that would grow to 15%. California will be at 33% in 2020. So you might expect that wow, California is much more renewable than the state of Washington. It's misleading though because the standard, at least in Washington and Oregon, and I know other states, does not include existing or older renewable resources. And so the state of Washington, based on reports to the state, something like 67% of the energy is renewable. But we're only 9% new renewable. And so it's a little misleading and a little confusing. So, we're actually more renewable, more sustainable power supply than California, but you wouldn't know that by just looking at the Renewable Portfolio Standard numbers.

We're focusing on the US but the RPS type approach is also found globally. Countries in Europe, Asia, and South America do something pretty similar. Now is a pretty logical time to talk about what a feed-in tariff is, which is also an approach found frequently abroad. A feed-in tariff guarantees
the purchase of all renewable energy, regardless of what it costs. The reason many people prefer the RPS approach over feed-in tariffs, as you can imagine, is because the RPS depends on the private market to make it work and supporters like the idea of this spurring competition and innovation. While the overall goal of the states is to protect the environment, how it's done is beyond
just the goal setting. States will have a different focus on carve-outs, multipliers, or some combination of the two. To keep it simple, a carve-out means that the state has specific requirements about the renewable energy source.

For example, there may be a solar carve out. This means that there is a specific goal for electricity generation coming from solar panels. Distributed generation is also a focus area of a number of carve-outs. You can see that carve-outs, either with or without a multiplier, are the most prevalent. A multiplier might exist to give more credit, and therefore, more attention, to certain ways of meeting the goals. For example, one might encourage early installation of renewable energy or in-state manufactured components. Another multiplier may assign a higher value, say, to solar or distributed generation, or maybe even wind. Critics of the multiplier say that this can cause an imbalance in the portfolio mix which, as you know, is not something that this market benefits from.

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Aging grid & the rise of Federal Transmission Regulation in Electric Future Industries

We've been talking about the grid, which includes the network of the 300,000 to 450,000 miles of transmission lines, depending on who you ask. Whether it's the lower number or the higher number, if we stretched it end to end, that's a distance that is longer than it is from Earth to the moon. Which only about 250,000 miles in case you're wondering. That is a lot of wires, poles, and equipment over long distances of diverse terrain to maintain. Add to that, the grid also includes substations, transformers, and distribution lines. And I'm sure you can appreciate the amount of expertise and effort it takes for our lives to stay on. And to pinpoint and fix a problem if one arises in all sorts of weather is really difficult. I've had the opportunity to go on a lot of ride alongs in my career, and something I've always found interesting is the fact that the linemen can always point out the older equipment. It's kind of like hanging out with a docent in a museum. That is from the 1950s, over there, that is from the 1920s.

The fact is parts of the grid are getting old. It doesn't mean it's not valuable, it doesn't mean it's not reliable. It just means that we need to pay attention to continuing to invest in our grid and the policies that influence this process. It's kind of like your car while no one ever says, wow, I love what you did with your oil change. Or hey, those new struts are pretty sweet. We know it's important to maintain our car, so we don't end up on the side of the road. Well, the electric system is the same way. As our country and the world have become much more dependent on electricity and the grid has expanded. It becomes even more important than ever to maintain and replace what we have, and this includes the older infrastructure. We can all have the slick and cool gadgets we want. But if you think about it, having a strong backbone is the key to providing reliable and save electricity. Utilities know stuff happens when it comes to reliability. Equipment can fail, cars, unfortunately, hit poles. And no kidding squirrels are super cute, but they have been known to take down entire neighborhoods. And those aren't squirrels on steroids, they are just plain old squirrels. You've heard me compare the grid to a system of roads before. It's a good analogy to start us out, but electricity doesn't really work like trucks or cars on road. Vehicles follow the specific route as you know which is the road, at least that's what we hope that everyone follows the rules of the road.


Electricity though moves through the wires based on the laws of physics. If it's been awhile since you've taken physics, I'm talking about the path of least electrical resistance. Also at this point in time, power can't be stored cost-effectively on a large scale.

Operations of a power utility are more complex than they were many years ago. Today, we do wholesale trading on an hourly basis, as well as further ahead. We also operate our hydro facilities. We try to balance the reservoir balance against a load of our costumes and the market prices as they move.

This moves that utilities are constantly monitoring and adjusting generation to make sure everything is operating as it should. If you ever had a chance to see a control room. It's really impressive with screen upon screen of real-time data, and experts making sure our light is always on or responding to liabilities issues really quickly. This data is really important for system reliability and it is used to manage electricity, within a company service territory. And even more interestingly to coordinate
electricity with other players. A lot of people compare this to an orchestra leader making sure all of the instruments play their parts at the right time. In the early 60s, a lot of utilities had already voluntarily started coordinating their generating plants and transmission systems. This really helped with strong reliability in keeping costs low. Then in the mid-60s, a big blackout happened in the Northeast.

When I say big, I mean big, an incredible number of people were out, 30 million were impacted. What's even more mind-boggling was the cause. Reportedly a perfect storm originated from a failure of one piece of equipment at a hydroplane and things went south from there. Enter the North American Reliability Council or NERC which was created as a result of this incident to improve
reliability by making sure utilities and transmission providers coordinate to avoid and minimize such big outages.

While significant weather events like snow, rain, flooding and even wind can and due cause reliability problems, the increased coordination between electric companies have made big outages much rarer. Of course, when we're out in our house, it doesn't feel like that does it? It feels like a pretty big deal. The thing I find really interesting about NERC is that until 2005, the reliability standards were actually voluntary. Now keep in mind the utilities and transmission companies have a vested interest in keeping the grid up, which you know now requires a lot of science and know how.

In 2003, there was another pretty significant blackout. 50 million people were impacted, you'll never believe what caused it. A downed transmission line that had brushed against overgrown trees. This is exactly why electric companies spend a significant amount of effort on vegetation management or
as we know it, tree trimming. So the next time you witness a utility going about trimming the trees, you now know the reason behind it. And you know that a problem that occurs over there, can impact thousands or even millions of customers.

NERC was renamed to the North American Reliability Corporation, from Council. And they were empowered to develop specific reliability and operational standards to make sure the power system is operating in a way that is reliable and safe. The FERC or Federal Energy Regulatory Commission actually does the enforcing of the standards that NERC develops. I bet I know your next question. So what happens if utility doesn't comply with the standards?

Well, it's a big deal, if a company fails an auditor if a violation is detected following an incident. There are significant financial penalties and sanctions associated with non-compliance. So on top of it not being desirable by the utility itself to have reliability issues, because their customers get pretty mad, they would also face some very tangible penalties. Many companies have developed specific job functions that deal solely with NERC compliance because it is just so important. This enforcement falls under FERC's bigger role in regulating bulk or big power systems that move
electricity across state lines. And this includes the rates transmission owners charge for this transmission of high power electricity service. Texas, which is one of the grids I mentioned when we were talking earlier is a little bit different. Because it operates almost like an island and it's not connected to anyone else. FERC also oversees wholesale electricity sales.

Most wholesale markets are actually competitive. So what FERC does is allows companies that are selling at wholesale markets the ability to sell power at whatever the market will pay. Like us as consumers in competitive markets like the cell phone industry, we can choose who to buy our service from. And because there are multiple players, they know that they have to keep costs there or they risk losing business to the competition. This is something that many people don't know about, and that's because we are retail purchasers of electricity, not wholesale customers. In other words, electric providers aren't able to influence the prices in the market. So then the wholesale customers or the
market are ultimately setting the rate. They do this by choosing to purchase from that provider or not. If you're getting flashbacks to price theory in economics, then you're on the right path. That being said, some companies actually do have the ability to influence rates and this is called market power. So for these companies, FERC sets up a maximum price they can charge. Like we heard in the rates lesson, in the absence of true competition, the rate or the price is regulated.

Now we know FERC's role, but let's talk about what they can't do. Things the FERC cannot do is
make transmission system owners build new lines. They also can't tell states that have ruled not to allow transmission that they need to allow it. Let me give you an example of this. A state might decide that they don't want transmission lines running through one of their state parks, and the FERC
cannot readily force them to do this. This can get messy when we consider the transmission lines run across state boundaries. There may be a plan to run a transmission line across several states to connect a state to an affordable power source. But if just one state decides that it's not going to happen when they have the right to veto it.

As I'm sure you can guess, states prioritize their own residents. So do they always place value on getting customers the best deal on electricity in a state over there, not necessarily? A big topic of discussion in the industry is not that there is a shortage of electricity generation. It's that there is congestion on the transmission grid. Where do we fall into this equation as customers? Often citizens and communities do not want transmission limes in their conceptual or real if you're back into open space, backyard. This means, the delay of construction or even the outright cancellation
of the transmission project. Which as you know might be a project that is being done to support economic growth, reliability or affordable electricity. The interesting thing is that there are
state and federal mandates that call for large-scale wind generation and solar power. And we know that this is not located in populated areas. Without the transmission to move the electricity this poses a problem as I'm sure you can imagine. Add to that the fact that wind, in particular, is very variable as is the sun. This means the electric utilities have to balance the power source back to those control rooms I told you about on an ongoing basis. Speaking of natural resources, we'll talk more about federal regulation and the environment in the next article, So for more, Keep visiting Smartelectricfuture.blogspot.com.

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Electrical Technology & Customer Expectation for Power Sector

Technology is one of the areas that gets a lot of attention. And also is surrounded by a lot of confusion as to what can and cannot be done today and why. I will tell you that some of the most
innovative technology is being developed behind closed doors. Especially by entrepreneurs as well
as federal laboratories supporting commercialization efforts in this space. It's being worked on, but there's not a lot of information about it because developers are looking for the dream of introducing something truly revolutionary and won't reveal trade secrets. From what I can tell you, some of them are airware. Meaning there's nothing really there yet other than a promise of potential once it's commercialized. And some of them, if developed, well, can really revolutionize how we think about and use our electricity.

What do we know about how the intersection of technology and customer expectations can reshape a market? Well, we have already seen some changes in other industries that might give us a hint as to what could happen.

Think about what some of us that are old enough to actually remember landlines saw happen in the telecommunications industry. As you can imagine, telecom is another asset-intensive and heavily regulated industry. In fact, there's a lot of overlap between electricity and telecommunications regulatory bodies and oversight. Looking at this could provide some hints as to where this industry may go. It used to be that phone companies provided wired service to people's homes nearly universally.

Now, I'd venture to guess that some kids today have never even seen a landline and wouldn't know what to do with a corded phone. I happen to live with a few of those vertically challenged and technically gifted people known as kids. Now how many of us don't even have a land line, but only have a mobile phone? In case you're curious, the Center for Disease Control did a pretty
comprehensive study about just that. And right now, it's less than half.

As an aside, if you're wondering why the Center for Disease Control would even track it, it's because they were looking to figure out how many US households had access to 911 Emergency Response services. To get back to our example, our expectations of what phone service meant to us, as well as what we've valued in it, changed. And the telecommunications companies changed along with it. A pretty clear picture of how expectations change is obvious in the messages or promises the phone companies were putting out to the market versus how they're currently talking to you and to me as customers.

Telecommunications companies used to stress call quality and clarity above all else
in their advertising. Now, how many of you have cell service that is always available and always clear? I'd bet not many. And if you do, please tell me who you use. You can even see it in the cell phone companies' advertising now. It often features maps showing where their service is available, sometimes even in direct comparison to the competition. Why is this? It's because this is what matters most to the markets, and cell phone companies know it. Our rules for these companies have changed. We now value being able to bring our cellphone anywhere we are over the sound
quality of the calls we make.

We also want enough functionality to support our critical applications. Pokemon Go anyone? And as proof, that's what the ads are stressing. But is the electricity market the same way? Now that many of us expect and get always available electricity service, would we really be okay with accepting anything less?

From all the research I've seen, not many at all would tolerate this, and it would be a tough sell to all but some small customer segments. But could this change? Maybe, but I think since we are already so reliant on our electricity that type of change would occur in more specific customer pockets versus
a more ubiquitous market. That's my personal opinion, but what do you think? I would love to hear your opinion on our discussion boards

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Electrical industry is becoming more Customer Focused

Why Electricity is Important for Us?

Hi and welcome back. I just have to tell you that while I pretty much love talking anything about electricity, yeah, I know that's not exactly going to get me invited to many dinner parties. But I'm most excited to talk to you about customers. It's hands down one of my favorite topics. True confession here I might be just a little bit biased because I'm a career marketer. What I've personally seen is that when industries give the customers a seat at the table not necessarily literally of course, but some actually do invite them in then some really good changes occur. I believe companies and industries make some of the best decisions when they take the time to understand and engage customers when it comes to making decisions. But I think is truly exciting is that a lot of the transformation that's occurring in this industry is happening for exactly that reason, to meet evolving customer needs. It's really cool that when we're hearing about the unprecedented pace of change going on it's our needs and expectations as customers and utilities and regulators responding, that's really driving a lot of this.

Customer Choice of Electricity

It's no secret that competitive industries have understood the value of the customer in the equation for a really long time. Just think about retail stores, banking, mobile phone service, hospitality, and entertainment. They figured it out a long time ago. They know customers have a choice each and every time they make a decision to buy. And these companies really focus on the customer, as a way to gain competitive advantage. Even companies that traditionally haven't focused on customers directly like prescription pharmaceuticals in the US and healthcare are caring more about attracting and keeping customers. That's why you see mass advertising directing us to patients to tell our doctors what to prescribe. And even billboards encouraging us where to go to seek medical attention for specific conditions. It hasn't always been like this, we used to put all of our trust in others namely doctors to make this decision for us, and now companies are encouraging us to choose them.

Electrical Market and Competition

We've already talked about the fact that by definition as natural monopolies, many electric utilities generally have a set market. I know what you're thinking, so then why would they even care about customers? Electric utilities care about customers because when a company has satisfied customers it means it's more easily able to make the investment it needs to maintain and operate its current assets. Building constructor, infrastructure and of course remain financially healthy. We all know that it's important not just for those electric utilities with investors, but also utilities like co-ops and municipalities that have other requirements in place to make sure they spend their money wisely. 

There have actually been studies that link sustained customer satisfaction to better financial returns. So why would this be? This is because regulators really view themselves as customer advocates. And when we see the customers' needs are being met, they feel more confident in the decisions that company is making. The net of it is, well-run companies take good care of their customers. Drew Bolan of the Colorado Public Utilities Commission talked to me about how commissions look out for the best interests of the public, and what they look for when utilities are seeing their approval.

And what's really important, I can't stress this enough. But the guiding principles for the Public Utilities Commission is safety, reliability, and affordable cost for the services that are provided by all utilities. Ranging from the electric ones all the way up to the transportation utilities. And so those principles guide a lot of the decision-making, but it also sets the stage For what the utilities want to do and what they want to propose. But along those lines, it's very important that the rates in the different technologies aren't benefiting a few, at the expense of others. And there's a real tough balance there. So that's why the decisions that the commissioner made are so very, very important.

Public Safety Commutation

 The regulators now are auditing public safety communication. This isn't just safety communications and this does have a direct impact on rate cases. So, they're coming in and they're saying what are you doing to communicate with the public. And ten years ago, this used to be a check in a boxing exercise. We're sending out these communications, we're collaborating with the ten utilities in our area. And now regulators are asking smarter questions. And they're saying, do you know that the end user is receiving them and reading the information? And do you know what impact that is having on their safety knowledge and awareness? And can you quantify behavior change? It basically comes down to how effective is what you're doing. And that's why we have to keep doing ongoing research to make sure we're using the effective channels to reach these end users, and that it's target audience specific, and that we collect follow up information to make sure that there is behavior change.

Positive Changing in Electric Utilities

Let's be honest here, electric utilities might be late to the game by some standards. But the good news is we are seeing a positive change of more electric utilities giving the customer a seat at the table when it comes to major decisions and I do mean this literally and figuratively. More electric utilities are listening to their customer through market research and including them in stakeholder processes beyond what they're required to do. Let me give you an example. There was a survey conducted among 144 executives by Utility Dive on behalf of NTC Corporation. The survey found that over half of the executives say they've already moved towards becoming a more customer-centric business. And then an additional 20% said they are considering it. Now the truth is it hasn't always been this way. Jo Ann Newton an industry veteran who is public policy executive at Southern California Edison and PNM which are two fortune ranked publicly rated utilities paints the picture of how the industry has evolved and changed and how it thinks and how it treats its customers.

For the electric utility industry specifically, customer paradigm is not natural and for all regulated companies, because of the monopoly position of the companies. Traditionally customers have been seen as ratepayers. So the price takers and essentially the companies primary relationship was with the regulator. And the customers are just the price takers so we always even referred to them as ratepayers. And as the industry has begun to change as parts of the industry have become deregulated or even where it's still fully regulated but with new forms of electricity generation, such as solar and wind and new market entrance who can play around the edges and provide electricity from other sources. We recognize that we have to build relationships with our customers. That they're not just price takers. In addition, all of our stakeholders can impact the outcome of regulatory proceedings, can impact the perception of the company, publicly in the media.

Let Customer to Say – Public Power

Like investor in utilities, municipalities care about what their customer has to say. Let's hear with Dan Hodges, Executive Director of Colorado Association of Municipal Utilities thinks about how public power or municipalities value the critically important customer relationship.

Anyone of those legs of the stool, if you pull it out the stool, will collapse. And especially in the municipal utility space, I can't speak directly to how it's viewed with our peer utilities, but I would imagine it's not much different. Our job one, our concern one is our customers because they are our shareholders. And if our customers aren't able to pay their power bill, we're not doing our job, as municipally owned utilities, because at the end of the day, we're there to provide that public service to them. And that includes making sure that we're doing our operations as efficiently and as cost competitive as possible. To ensure that our communities stay powered and that the power does stay affordable. In fact, we live in those communities too. So, it's not just an esoteric or academic conversation for us. These are pocketbook issues. We go home to our families in municipally owned communities, and talk about it's something I sit and talk about my family with, is when we're looking at our bills. What's the power bill look like?

What Customers are Looking for?

So, what are customers looking for and how is this reshaping the business? As customers, our expectations are pretty high and they're getting higher. Of course, underpinning everything customers overall demand reliable and affordable service. But let's talk about some of the trends around what we're expecting beyond that. As customers, we're looking for more options and choice to protect the environment and give us more control over our energy use. In the next lesson, we're going to take a closer look at this from the standpoint of topics you've liked and even see more off, energy efficiency and distributed generation. In fact, these are some of the game changers that are going to move some utilities away from being just a commodity to something a lot more valuable. I promise you these are the areas to keep an eye on because they will be so important as the industry evolves.

Check: Present situation vs Future situation of Electrical Industry

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Electrical Transmission and Distribution System - Details

Well, this is a simplistic view of how electricity gets to you after leaves the plant. The voltage is basically stepped up by substation transformer. It then goes into transmission lines. These are basically the superhighways that transport electricity over long distances. Structures are picked based on the amount of voltage that's being transported and the terrain it's being served. As you can imagine, that can vary widely. And transmission is built and maintain in some pretty tough spots. Significant stakeholder buy-in goes into transmission route planning and ongoing maintenance.

According to the Edison Electric Institute, the US electric transmission grid consists of approximately 200,000 miles of high-voltage lines. Those are 144 kilovolts or more. Redundancy or backups are built into the transmission system so that there are other power plant paths available in emergencies and to efficiently access electricity generation. This is even done across different power providers.

The US power grid is actually made up of three large interconnected systems. These are the Eastern, Western and Texas Interconnections. This is so the electricity can be moved around the country. In other words, electric transmission and distribution lines owned by an individual utility are no longer used by just that utility. Without a reliable transmission system, we would not have reliable power distributed to our homes. Standards are in place that has been approved by the Federal Energy Regulatory Commission.

They regulate the transmission system in the US. They're an independent agency that regulates interstate transmission of natural gas, oil, and electricity. Despite the backup paths, there are some pretty big challenges to managing a transmission grid of this size. This include getting approval from
multiple stakeholders to access the land including tribal land. Also, calculating a fair way to recover
construction costs when transmission lines are built in one state but benefit customers in a totally different state. Making sure transmission lines are constructed to reach renewable energy is another issue. A big challenge is that often wind and utility-scale solar are not built in population-dense areas
where the electricity is actually used. That means it needs to be transported, and in many cases the transmission lines don't yet exist. And last but not least, protecting the grid from natural disasters. Both physical or cybersecurity is also something stakeholders worry about including who has ultimate authority from a governance standpoint.

Until about 2005, we witnessed a decline in investment, a deterioration of the high voltage grid. At a time when the electric system and the economy were just beginning to become transformed into something we have today. We have of course more renewable energy and as capital cost come down and the cost of producing wind power, solar, bio mass power, there's more of it and it completely transforms the nature of the whole electric system and how it operates.

Right now transmission congestion is held up as one of the biggest issues or concerns in the US industry. Even if we built a lot of renewable energy, we need to figure out a way to move it across long distances, and even across state lines. After the transmission lines carry the electricity long distances, as you heard, the power is stepped down again, through a neighborhood substation transformer. It's then carried across distribution lines that carry the electricity to our homes and business. Transformers on the poles actually step down electricity once again. And that's to ensure it's at a safe and useful level in our homes and businesses. While beauty is in the eye of the beholder, many people don't like the appearance of distribution lines or transmission lines. They also feel that burying distribution lines not only solves this issue but also helps avoid outages. So weren't they all just buried? That's a question I get a lot. The simple explanation is that it's a matter of cost.

In many cases, it's cost prohibitive to bury power lines. According to the US Energy Information
Administration, the cost of underground power power lines could be five to ten times that of overhead. The amount varies considerably by geography though. So Florida has a high water table and the Rocky Mountain region has a lot of granite bedrock. This makes burying those lines not just
expensive but sometimes not even possible. Here are some real world examples of the impact that this could have on customers' bills. The effect of under-grounding on a customer's utility bill depends on the characteristics of each unique project. Let me show you a range of some effects.

There was a 2010 study that assessed under-grounding options requested by the District of Columbia's Public Utility Commission and they found that burying all overhead equipment would cost $5.8 billion. A local utility official later stated that this would add $226 to the average monthly bill over ten years or $107 a month for 30 years. Let me give you another example, after a
series of storms North Carolina looked at the cost of undergrounding the state's distribution infrastructure and they found it would raise electricity rates by over 125%. Anaheim, California decided to completely convert its system for aesthetic reasons. To minimize the impact on customer bills, undergrounding is taking place slowly over a period of 50 years, and it's funded by a 4% surcharge on electric bills. Another thing to consider is that underground lines are more difficult to locate and repair in the event of an issue. So as we've seen, there's more that
meets the eye even when it comes to the infrastructure of this industry and it pays to look at the impact of decisions on cost and reliability.

References and Links;
Expo 2016 - Policy forum panel
Diagram of Transmission, generation and distribution
Transmission line photos
Highway photo of National administration
FEMA High voltage line U.S.A Map
Three grid Interconnection map U.S. Energy Agency

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Electrical Generation Portfolio - History and Current Situation

While each fuel source has advantages and disadvantages, what we expect from electricity is for
it to be there when we need it, to minimize the impact on the environment, and to be sustainable, as well as affordable, since it's critical to our economic, social, and physical well being. That's a tall order. While industry experts don't necessarily agree on what is most important or how we get there, they do tend to agree that a balanced approach is a way to go.

Renewable Energy System

Let's take a look at how our experts feel about it. So the thing about renewable energy is that you're actually generating the electricity where the resource is. So unlike oil and gas, where you're transporting the fuel or coal to a power plant, you're actually generating the electrons in location. So therefore from a global perspective, each country needs to think about what resources they have and create that mix that's going to work for their country. So say the Southeast, or the southwest part of the US, the Middle East, North Africa has tremendous solar resources. So that's going to be a large
part of their energy mix.

Other places have very high wind resources, so they're going to have a higher part of the wind, geothermal as well. So each country as they begin to develop and diversify their energy mix is going to be choosing the type of energies that work for their particular location. And this really is a global movement. Again, as prices have come down Countries are really beginning to look at these types of technologies to diversify their types of energy generation. It's very important that there is a mix. Obviously, wind doesn't blow all the time and the sun doesn't shine all the time. Sometimes water in hydro projects, if there's a drought, they may not generate as much electricity, so it is very important. I mean, coal will still have a double-digit percentage as far as I can see in terms of baseload generation where it's always there and it's always dependable, but there does need to be a mix.

Solar System and Wind Energy System

Many other states in the northeast, they have very little solar and wind, down in the south used to have a little solar and wind. Certainly, in the northwest part, there is very little solar, but they have so much more hydro, and then obviously in the southwest United States there's a lot of solar, not so much wind. But in Colorado, we're so lucky and blessed to have all of it. 

So, when it comes down to it, you want to make sure that you can support the economic development of your state. You want to provide customers with the energy that they're looking for, but at the most affordable price, while you're still balancing the environmental attributes and the factors associated with it. So it really is the balance between those various factors that determine what type of resource you can build where. So it doesn't make sense necessarily to shut down a fossil-based plant if it still has a long remaining life, just to simply replace it with a renewable resource, unless there's some cost-effectiveness there. What we've really been seeing is prices are coming down on the renewable side. We've been able to transition over as we've been meeting the needs of our customers, or plants have been retiring or other PPAs have been coming offline. So it's really about finding that balance and making sure you can do it in a way that's not going to negatively impact the economic development of the states that you're located in. What we've been hearing from our members is that they want a more balanced portfolio, and we firmly believe in trying to offer all the solutions, not just one. Whether it's not a coal solution or just not a solar solution, but a blending. Because this way we can get hopefully the advantages of all the worlds and be able to bring it together. So we always talk about, in our business, we have a balancing act that we focus on every day. That's one, delivering reliable energy 24/7 to our customers. It's keeping the cost of energy affordable, so our economy grows. And it's protecting the environment. And every single day, every decision that we make in the utility industry, is looking at those three legs of the stool.

They're just critical about how we move forward. Utilities are putting in renewables at amazing rates. That's what we do, we build things to produce energy, and renewables are a very important part of that. Right now we still have to use other sources of energy to deliver energy to the grid 24/7. Our economy counts on that, our business and residential customers want that electricity 24/7. Renewables are an important part of that.

I'm sure you noticed the word balance, as it came up again and again in the interviews. While based on where they sit in the industry the opinions differ, we can be relatively sure that having a balanced mix is what we need to have sustainable energy.

References and Important Links

Photo of geothermal plant
Photo of coal pile cropped to fit
Wind photos - U.S. Govt. Works
Solar photos - U.S. Govt. Works
Hydr photos - U.S. Govt. Works
Natural gas plant photos

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