If you happened to have read my column in the Intelligent Utility Daily last week (actually, I just realized it won't be published until Monday, 12/28), you may recall that I was predicting the passing of the smart grid “hype wave” from the utility industry. One of our editors reviewing that column asked me this question: “What do you see as being the next hype wave in the utility industry?”
My response to her was this: “I always tell people I'm a (part-time) pastor, not a prophet (in addition to being an industry analyst). However, yours is a good question and I have been giving some thought to it. I just haven't yet come up with the answer. When I do, I'll write about it for IU Daily.”
I still don’t have the exact answer about the next hype wave, but as I promised, I have been thinking about it. And those thoughts led me to this post here. I thought this was as good a time as any to make some predictions about the industry for the new year while I continue to mull over her question. After all, new year predictions are an old tradition in the media. Here are some of mine:
· From last week, I believe the smart grid hype is at its crest and will begin to wane. That will have major effect on utilities this year. I think this is true because of what didn’t happen in Copenhagen, what did happen with Climate-gate, and what I believe will be the inability of certain elements in the current Congress to pass cap-and-trade or any other global-warming type legislation. Too many states depend upon coal-fired generation for even this Congress to cripple the U.S. electric utility industry and further wreck the economy. The mid-term elections loom large (in their eyes) and even though nationalization of the health-care industry was rammed through on Christmas Eve, I don’t believe those same forces can get away with something similar again. Fortunately, Congresses change and mid-term elections loom…but I mentioned that, didn’t I.
· If my first assumption proves true, where does that leave us? Well, it likely leads us to a long-rumored and long-predicted revival of nuclear energy. We’re still going to need more base-load generation over the next decade or two. Nuclear energy is the cleanest, most-realistic currently available alternative to carbon-based energy and the environmentalists aren’t going away. They don’t like nuclear either, but may be forced to compromise, particularly with a new-generation of smaller nuclear plants that can be located closer to the electric load and offer some additional safety-related capabilities (it’s already a very safe industry). Yes, the environmentalists have kept nuclear applications balled up at the NRC for years, but I feel like that logjam might be broken this year.
· Ah, you say, but the EPA already has declared carbon dioxide a hazard to the public (despite its ubiquity in the atmosphere and the very small portion generated by man). Yes, but that declaration warps the Constitution all out of shape, as well as the EPA act it was based upon—not to mention common sense. My prediction is that this effort at railroading the industry will be tied up in court for so long that the current generation of politicians will be long-gone before it ever is resolved. There are a few advantages to having far too many lawyers and a court system that takes forever to resolve anything! As an aside, I’m not sure the health care nationalization will withstand inevitable Constitutional challenge, either.
· I predict that residential demand response will get no further this time than it did in the 1990s. In the first place, according to surveys by even eco-friendly firms, as I wrote last week, most of the general public isn’t interested in greatly altering their lifestyles to reduce demand for electricity. They recognize that electricity built those lifestyles and they don’t have much patience with forces that try to tell them they need to make serious changes and use much less electricity. As a practical matter, residential consumption is only about 30%-40% of demand and most of the peak-demand reductions to this point have come from commercial and industrial customers. There may be some additional savings realized there, but most of that low-hanging fruit already has been gathered. And throwing residential consumers into that particular alligator pit is going to draw increasing resistance. To date, there are only a few thousand residences on demand-response programs, mostly in pilots, and I don’t think that number will grow greatly this year. The public doesn’t like it and utilities aren’t too fond of it either.
· AMI will continue to grow, but much more slowly. Without residential demand response to drive it, and without the catastrophic global warming scare to constrain base-load generation and drive residential demand response, it really isn’t that immediately necessary. You can enable demand response through broad-band communications (if you must) without a smart meter and installing smart meters on every house is very expensive for utilities. It’s not a bad idea, but it just isn’t as imperative as it was when the global warming movement (before Copenhagen and Climate-gate) seemed such a juggernaut. And already there is resistance to AMI in California (of all places). Meters have to be replaced anyway and there’s no reason to replace them with the old electro-mechanical type, but the replacement is likely to be at a much more reasonable and cost-effective pace for both utilities and the public.
· Utilities will continue to keep the lights on (most of the time) and at rates that won’t bankrupt everyone. Yes, rates will go up to pay for the residual pressure from environmentalists to change everything at once, but the pace of the increases will be slower than once feared. That 70%-80% of the general public I mentioned above, still gets listened to at state public utilities commissions and I think this is the year they will begin to apply brakes to the runaway environmental movement, even at the national level, but certainly at state public utilities commissions.
· Renewable energy will continue to languish in the recession-induced doldrums. Without government subsidies and purchase requirements through renewable power standards (RPS), it is not economical and utilities will buy only what they’re forced to. I don’t believe there will be a national RPS, for the same reasons I don’t believe cap-and-trade will fly. Renewable energy isn’t a bad idea either, but as I wrote last week, it isn’t yet ready for prime time. Until it becomes reliable and economical, utilities will install only what they are forced to by governments. Many politicians have been overreaching and the general public is beginning to react on several fronts. Some big wind farms and solar plants are meeting resistance and some of that resistance is even using earlier environmental laws as ammunition. I expect that reaction to continue and to gain strength this year in a number of areas where certain politicians seems to think they know best. The general public is beginning to disagree and, fortunately, they still have the final say.
One of the things I have noticed in my 60-plus years, is that the utility industry continues to evolve, but remains strong and effective at delivering electricity to every nook and cranny of the U.S. Politicians have tried to remake it as a competitive industry and failed. Now politicians are trying again to remake it to fit within the constraints of a pseudo-scientific political movement, global warming. I think that, too, will fail and the industry will go on learning and adapting at a realistic pace and keeping the lights on consistent with their 100-year-old mandate—reliable electricity at relatively low prices.
I’m actually quite optimistic for the new year. However, as I wrote last week, there will be another “hype wave”. I still haven’t quite figured out what it may be. This one hasn’t quite yet run its course, but it will. By the time it does, the next one will become evident.
My advice to the industry and the vendors that serve it is look to the long-term this year, things seem likely to be returning to quasi-normal. Keep the lights on and continue replacement of older technology with newer (both hardware and software), but don’t be stampeded into bankruptcy by doing too many things too fast that aren’t called for. But then utility personnel know that, they’ve been doing it for more than 100 years. Now if only certain politicians could learn that principle!
Happy New Year.
