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2015 Electric Industry Report Defining the Electric Utility of the Future

The 2015 Electric Report explores the intersectionof market forces that are transforming electric power markets around the world. New technologies,environmental pressures, regulatory mandates and changing customer preferences are threateninga centuryold business model. To meet their mandate to provide reliable power as the roleof distributed and renewable resources grows, utilities must evolve. The Utility of thefuture, or Utility 2.0 will be those entities that can provide the logistics, security andcustomerfacing services for electric suppliers and power purchasers across the nation.These electric service providers are also a key element of Smart Integrated Infrastructurenetworks. These systems will change how communities

operate. Waves of data flowing through robustcommunication networks will provide actionable intelligence to improve efficiency. Electricutilities have a reputation for resisting change and being slow to adapt. But, the realityis that the industry has witnessed great change throughout the last decade. Technology andthe Shale Gas Revolution are transforming the sector. In this period of fundamentalmarket change, regulators, customers and service providers will have to work together. Thiswill ensure that our reliable, robust electric market has the flexibility to support futuregrowth and development.

2015 Electric Industry Report Industry Outlook

In recent years, the Black Veatch StrategicDirections reports on the electric industry looked on as disruptive technologies and businessmodels approached on the horizon. But this year's report finds these changes have fullyarrived and are actively rewriting the rules for power supply and consumption in the U.S.and abroad. Aging equipment and the importance of asset management have always ranked highamong industry executives, and 2015 is no different. Recent forecasts show investorownedutilities are expected to spend nearly $60 billion through 2017 on grid modernizationand other system improvements. Utilities understand the risks of waiting on equipment to fail.But one of the most dramatic data points in

this year's report revolves around distributedgeneration. More than half of our survey respondents believe that six to 10 percent of all U.S.power generation will come from distributed generation by 2020. That would effectivelydouble the nation's current DG output and even further raise the profile of customergeneratedenergy. In turn, that puts new attention on the nation'sregulatory model, which many believe is struggling to keep pace with changes in the marketplace.Utility policy is built around the notion of a fixedgrid operator selling power toits customers. But in a time when customers can generate their own power, as well as sellit back to the grid, host utilities must maintain

their complex infrastructure to meet governmentmandates for reliability. That raises questions about cost recovery and investment return.Utilities are actively looking for ways to address these competing challenges. We believethey will continue engaging stakeholders and regulators in ways that take advantage ofthese important new technologies all while maintaining the reliable grid that consumersexpect.

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