'America's Power Plan' Envisions New Business Model For Utilities

The Obama Administration has been putting the coal industry's feet to the fire with new carbon-cutting initiatives, and a new report certainly won't help coal's case. Under the title, America's Power Plan, the authors argue that the U.S. already has the technology in hand to make a rapid transition to renewable energy. What is needed, they argue, is an overhaul of utility regulations, with the aim of promoting growth in the more diverse, flexible and decentralized arena of renewable energy.

The report has some solid credentials behind it, having been produced by the energy policy firm Energy Innovation along with the Energy Foundation, a member of the Midwestern clean energy consortium RE-AMP. It was also peer reviewed by scores of experts with diverse affiliations including government agencies, academic, nonprofit and private sectors.

Coal power and carbon emissions

When announced last week, the Obama Administration's new proposals for limiting carbon emissions from coal fired power plants were met with vociferous criticism by the coal industry and its supporters, who made the case that the new rules would all but ban new coal power plants.

However, the new limits are not nearly as disruptive as they would have been just a few years ago. The construction of new coal power plants is already on the decline, and stiff competition from natural gas is not the only reason.

At least five other powerful trends are rocking, or will soon rock, the U.S. energy market: new utility-scale wind and solar power plants (to be followed by geothermal), new long distance transmission lines like Kansas's "Grain Belt Express," new energy efficiency and energy management tools, new energy storage systems including EV-to-grid connections, and an explosion in distributed power generation.

Regarding that last item, rooftop solar arrays and on-site wind turbines are the first things that come to mind, but biogas and other renewable energy opportunities are also available to large sectors of commerce including brewing, food processing, and livestock operations.

Against that backdrop, let's take a look at the new plan.

America's Power Plan

The report presents a case that today's regulatory framework has evolved around large, centralized power plants, with the result that it "penalizes utilities for every kilowatt-hour not used, and for every generator put on the customer side of the meter."

In other words, the current structure primarily rewards growth in sales. In an era where energy customers are increasingly focused on conservation, efficiency, reducing emissions, and  generating renewable energy on their own property, traditional utility companies are bound to hit a wall.

Some states are already moving toward an alternative model, in which rates are structured to reward utilities for hitting performance goals, instead of a "rate of return" structure that binds their profitability to power sales. These performance goals could include lower rates, greater reliability, and lower carbon emissions.

Other alternatives proposed in the report are:

1. Hiking renewable energy requirements to let the marketplace know there will be a long-term demand for renewable energy
2. Encouraging and formalizing distributed generation
3. Treating new generation as equal with energy freed up by efficiency measures
4. Creating a marketplace to buy and sell new energy-related services, such as the ability to quickly increase or decrease power production

Under this scenario, the typical utility would no longer focus on owning and operating power plants. It would act more like a packager or a brand, choosing and bundling power from different sources.

That transition would dovetail with President Obama's Smart Grid initiatives, including more agile transmission as well as increased energy storage capacity.

In any case, there is no turning back the clock. Coal will never disappear entirely from the U.S. energy landscape (neither has firewood, for that matter), but it has also begun to loosen its grip, and it is only a matter of time before it is marginalized by safer, less polluting, and less costly forms of energy.

[Image: American flag with wind turbine by Nantaskart!]

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