POWER May 2014 - 8

SPEAKING OF POWER
Disruptions vs. Status Quo
T
here's been a lot of talk in the past
couple of years about " disruption " to
the long-established status quo in
the electric utility and power generation
sector. But I would argue that both terms
in this latest " battle " are inflated.
Whether the issue is central station
versus distributed generation (DG) or renewables
versus fossil fuels, the future
likely won't declare clear winners and
losers but something closer to frenemies
(Google it).
The Status Quo Is Short-Lived
Even in the " traditional " utility industry,
business and technology have seen major
shifts over the past century. Technology
and fuel availability are often the disruptive
forces, as they are today with new
and cheaper sources of both natural gas
and renewable generation-plus all the
digital tools that enable smarter grids
and microgrids. But overall, on a capacity
basis, nuclear energy was the most momentous
fuel/technology change in the
past 100 years.
Policy can also change how and where
power is generated. The deluge of new
and pending federal environmental regulations
may seem unprecedented, but
previous policies also had notable, sometimes
widely swinging, consequences:
The 1920 Federal Water Power Act encouraged
hydropower development, while
the 1978 Power Plant and Industrial Fuel
Act (repealed in 1987) put restrictions
on new plants fueled by oil or natural
gas (because of concerns about national
energy security) and encouraged those
fueled by coal, nuclear, and alternative
fuels. Today we take for granted that the
U.S. is fully electrified, but that's only
because of the 1936 Rural Electrification
Act, which provided federal loans
(yes, they've been around that long) to
encourage the building of distribution
systems in rural areas.
Disruption Will Be Less Dramatic
Than Billed
Industry outsiders (entrepreneurs and
their venture capitalist pals) and minor8
ity
players (including renewable energy
developers) have reason to claim that
their technologies and business models
will end the stranglehold of familiar
generation behemoths and distribution
companies. It's how they get attention
for their ideas. Similarly, media and consulting
companies promote in-person
and virtual events to discuss disruption
in the industry. Is all the noise about the
D word just marketing hype? No.
Though knowledgeable people may
disagree about the degree and speed of
change ahead, there's no question that
the industry is already changing, so if it
takes a bit of hyperbole to get everyone
focused on what their future roles might
be, that's a good thing.
This issue of POWER has multiple articles
on technologies, including new and
cheaper modes of energy storage, that
promise to change how electricity is generated
and delivered. Also in this issue,
Contributing Editor Kennedy Maize offers
an article titled " David Crane and the Coming
Utility Apocalypse " that looks at the
hype and reality of increasing amounts of
DG. As I was preparing that piece for production,
I was struck by an irony buried
in the now-familiar story of DG overtaking
the traditional utility.
DG is typically thought of as small-scale,
usually renewable generation that is under
the control of the owner of a residential,
commercial, or industrial site or-as is
becoming more common-an aggregator
or lessor of that generation. NRG CEO David
Crane predicts a future in which these
distributed energy resources (DER) partner
with onsite natural gas-powered fuel cells
for greater customer independence. However,
he also envisions a super-utility-
not a traditional utility, but nevertheless,
one that he controls. Unlike most current
scenarios that frame DG as something the
utility doesn't own, Crane wants NRG to
own and control this DG. So, ultimately,
he isn't anti-utility; he has his eyes set on
creating a new-fangled monster utility-
albeit a distributed one.
To control DER, NRG (or like-minded
utilities) would still need access to some
www.powermag.com
sort of communications line-the gas
pipeline won't suffice-so a smart grid, or
at least microgrid, infrastructure will still
be essential.
In the meantime, NRG is building scale
the old-fashioned way: On Apr. 1, with the
acquisition of Edison Mission Energy and
Dominion's competitive retail electricity
business, NRG became not only the largest
U.S. independent power producer but also
the second-largest generator overall, with
a total of 53,000 MW of capacity. (That
same week, other NRG executives were
speaking at the ELECTRIC POWER Conference
in New Orleans. See our coverage of
that event in the next issue.)
Slow-Motion Disruption
As the articles on efforts in the United
Kingdom and India to advance a low-carbon
economy demonstrate, achieving that
goal isn't easy or fast, even with the latest
technology innovations and aggressive
policy support. Consequently, industry
leaders globally agree that fossil fuels will
continue to play a critical role in delivering
reliable, affordable electrons for at
least the next few decades.
Nevertheless, the nature and extent of
change on both business model and generation
source fronts is likely to be greater
than what you might call incremental.
And really, if you don't expect your industry-any
industry-to be affected
by the larger shifts in technology and
culture, you're in denial. Google seems
to announce some new digital device or
service nearly every month, and in the
space of a decade, Elon Musk (cofounder
of the ambitious all-electric car maverick
Tesla) has taken SpaceX from fantasy to
reality and is now the only U.S. entity to
send rockets into space (NASA is using
SpaceX rockets to send astronauts to the
International Space Station).
The question is whether today's utilities
and regulators will be sufficiently
proactive to avoid being largely overtaken
by young upstarts. It may be time to
embrace the concept of frenemies. ■
-Gail Reitenbach, PhD is POWER's
editor (@GailReit, @POWERmagazine).
POWER | May 2014
http://www.powermag.com
POWER May 2014

Table of Contents for the Digital Edition of POWER May 2014
