America’s energy needs have outpaced the modern utility, but not because of a rise in demand. Since Thomas Edison built his first power plant on Pearl Street in Manhattan, utilities have existed in a relatively stagnant state of regulated monopolies and vertical integration. However, technological innovations, combined with market forces and public support for increased sustainability and efficiency are changing the electricity landscape. Lower costs of distributed generation, increased interest in demand side management (DSM) and government programs to incentivize certain technologies are increasingly impacting the utility industry. These changes come with financial risks for utilities like declining revenues, increasing costs, and a more uncertain long-term viability.
The current utility model is like a VHS trying to compete with Netflix. It is just not going to succeed. And realistically, it shouldn’t. According to the Energy Information Administration, in 2013, the energy demand in the US was two percent lower than it was in 2007 and the EIA predicts that demand will only grow by one percent a year over the next 20 years. This is mostly due to gains in efficiency, both in devices and in their users. This trend is not endemic to the US by any means but our utility system makes it all the more apparent that a new era of energy use is upon us.
Historically, the only real choice consumers have when it comes to electricity is whether or not to turn on their lights. The industry has been traditionally passive, but passivity itself is becoming obsolete in modern society. Consumers will no longer settle for complacency in where their power comes from and how it is produced. The current utility structure does not encourage energy efficiency because reduced energy use means reduced revenues and profits for utilities. Sunrun Solar’s vice president Bryan Miller put it well when he said, “Utilities pretending to be ratepayer advocates is like Cookie Monster pretending to be a slow food advocate.” Utilities make money by investing in construction of traditional generation and raising rates to pay for it. The consumer pays the price, literally, for the utilities’ unwillingness to invest in a modern future.
It is not only the structure of the utility industry that should be concerning. Grid infrastructure has always been built as a long-term investment, but at this point America’s grid is old enough to be a great-great grandfather. The grid’s failing health is becoming more apparent and troubling. In April of last year, snipers opened fire on a PG&E substation in California in what the Wall Street Journal called “the most significant incident of domestic terrorism involving the grid that has ever occurred”. Electric grid officials scrambled to reroute power and avoid a blackout, but it took workers 27 days to get the substation back up and running. The US and EU have experienced massive blackouts due to grid error in the past, as anyone who was living in the Northeast in 2003 will no doubt remember, and the potential for sabotage and attacks on the grid is a growing concern. A Federal Energy Regulatory Commission analysis found that if a “surprisingly small” number of substations were knocked out at once, it could destabilize the system enough to cause a sweeping blackout across the US. The ’03 blackout only lasted two days, but it affected tens of millions of people and caused billions of dollars of financial damage. If an outage were planned, targeted, and sustained, it could be a major threat to US security.
Beyond an act of energy terrorism, the grid is highly susceptible to storms, natural disasters, and other unpredictable forces. When Hurricane Sandy hit the New York City, the city was virtually dark south of 14th street, save for a small cluster of buildings powered by NYU’s natural gas-fired cogeneration plant, which isn’t dependant on the larger grid system. Revamping the grid by promoting technological innovation through distributed generation and microgrids would increase the security, durability, and viability of the electricity sector.
We don’t need to demand for the complete overthrow of all utilities, I’m not trying to raise the Occupy Con-Ed movement, but their outdated, consumer-averse business model has to go. With advancements in technology, policy, and consumer preferences, the electricity industry is steadily changing. Whether this change will sound the death knell for utilities or if it simply heralds their reinvention and adaptation is yet to be seen.
Photo attributed to: Tony Webster
Bridgette Burkholder is a Masters candidate at New York University’s Center for Global Affairs focusing on energy and environmental policy. Bridgette currently works as the Energy Coordinator for the NYU Office of Sustainability.