The future of the electricity utility – decision time for US stakeholders

Solar panels with wind turbines and electricity pylon at sunset. Clean energy concept.
(C) mayichao

Last month, Grantham Affiliates Dr Jeffrey Hardy and Dr Chris Mazur travelled to Chicago to run a ‘Decision Theatre’ workshop with participants from the US energy supply chain as part of the Utility 2050 project. Here, they consider the findings of the workshop, the differences across the pond, and the potential for collaboration.

The Utility 2050 project, originally conceived by the Energy Research Partnership, offers insight and guidance to policymakers, regulators, investors and consumers to help them navigate the uncertainty faced by the UK energy sector as it undergoes transformation to a low-carbon model.

As part of this project, a team of researchers at Imperial, the University of Leeds and Energy Systems Catapult (ESC) are using innovative interdisciplinary approaches to explore the big questions facing the energy industry: future market sizes, regulatory priorities, enabling technologies, customer preferences and more.

ESC, which is soon to take ownership of the Utility 2050 project, has a bold vision for UK energy – that the sector overcomes systemic barriers, and delivers the innovation, products, services and value chains required to support a growing economy. International collaboration will be critical for this – both to share learning and help build solutions for the future. That’s where the workshops come in…

‘Decision Theatre’ workshops are an important way for us to test the findings of our research with international stakeholders – we present our work, invite them to interrogate its findings, and ask them to come to decisions based on the information presented. The key findings tested at these include our recent paper on “Valuing energy futures; a comparative analysis of value pools across UK energy system scenarios” and our forthcoming paper on consumer preferences for alternative energy utility business models.

In Chicago we were joined by Paul Jordan, Director of Business Development at ESC. Together with nine North American participants representative of established utilities – a state regulator, an international oil and gas company, an energy distribution network, a power generation developer, an investment bank, and an energy stakeholder platform company – we gathered round the table to discuss clean energy futures and, in particular, how utilities can break into new markets.

So, what are the most important changes needed to enable utilities to access new markets in the energy transition?

One thing is for sure, the United States, European Union and United Kingdom are all seeing similar transformations within their energy system, and recognise the importance of accessing new markets. We will be writing up in full the findings of the workshops for an academic journal, so we can’t reveal too much of what was said yet, but in all, some common themes arose:

  • The need to place a cost on carbon to provide utilities with investment certainty
  • The need to create markets that allow supply- and demand-side flexibility to monetise the value they represent to the electricity system

There were also some notable differences between the voices from the UK and EU, and those from the US. First, in Chicago, workshop participants focused on finding the right triggers and incentives to ensure all consumers “do the right thing”; whereas in the UK and EU groups, there was an emphasis on “protecting consumers”, particularly those in vulnerable situations, from harm through regulatory and other approaches.

Secondly, in the US workshop, there was a strong emphasis on deregulation at a Federal and State level, aiming to drive innovation and efficiency. In contrast, in UK and EU-based events, discussion was focused more on how to protect consumers against market innovation – for example, if a company is bringing a risky proposition to market.

Case study: The utility of the future – as seen by experts in the US

In Chicago, we also met Professors George Gross and Peter Sauer, academics at the Electrical and Computer Engineering (ECE) Department at the University of Illinois and lead facilitators of a study into the utility of the future, called NextGrid. Led by the Illinois Commerce Commission, the 18-month consumer-focused project aims to identify, research, and develop options to address issues facing Illinois’ electric grid, its users, and the utilities who operate it. Whilst the study is in its early stages, it is already clear that Illinois is facing many issues in common with the UK, including:

  • A rise in distributed generation and behind the meter devices
  • A need for smarter grids
  • Data and cyber security issues
  • The role of regulation in managing the above

In the UK, we are tackling these issues through projects such as Open Networks (Energy Networks Association), Future Power System Architecture (ESC) and the Smart Systems and Flexibility Plan (BEIS and Ofgem). With shared goals and challenges like these, we’re looking forward to lots more collaboration with our colleagues in the US. Watch this space!

The Chicago Decision Theatre was organised by the UK Science and Innovation Network (SIN) and the Department for International Trade, led by the team based at the British Consulate General in Chicago. Dr Kyle Dolan, SIN lead at the Consulate General, did a terrific job in attracting senior stakeholders to the event and was a wonderful host for our visit. A huge thank you to Kyle and the team at the Science and Innovation Network and Department of International Trade for making the trip a success.

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