The past lessons have gotten us to this point. We know that the electric utility market is in a state of flux, and with this comes some pretty significant challenges, as well as opportunities. For the past 100 years, electric utilities have balanced safety, reliability, and affordability to provide service to their customers. The Regulatory Compact provides oversight, and in return, utilities are able to earn a return on the electric grade assets in which they invest. Some of the biggest changes include the influx of distributed energy resources, whose adaption is encouraged by tax credits, net metering and other incentives. The incorporation and integration of massive amounts of data and more active involvement from customers and third parties, including potential competition to utilities, is also reshaping this market. At the same time, there is no room for error or slippage when it comes to providing electricity that is safe, reliable and affordable. The electric grid continues to be a major backbone in ensuring these three things. Right now, even as you're watching this, regulators are trying to figure out how to compensate utilities in the future for the value of the grid in a changing world. >> We live in a wonderful time, because there's so much technology and so many advancements being made. But at the same time, there are some that are affordable and effective that can be adopted early, and then there's others that the costs are high. But the technology keeps going on, and as greater production happens, the costs go down. So we live in a really exciting time. Technology is not free. And so it's a matter of which technologies to deploy, which one's are cost effective, and safe and reliable. >> There's been a lot of discussion by regulators, and utilities, about how an industry, that was founded on a centralized approach, can accommodate or transform to include more decentralization. As you've seen, thinking about the complexities of how this industry works is really important. Preserving the electricity we have become so dependent upon. There are a number of business models already in place right now. Some electric utilities own generation, transmission, and distribution. That's a very traditional vertically integrated approach. Others manage only the transmission and distribution systems. And in Texas, independent power producers market electricity to users. Many electric industry executives see value added opportunities around distributed energy resources. But there is no clear path forward about a business model that makes the most sense. In the state of the electric utility study, utility executives were asked which model they thought would be the best for the utility sector moving forward. 28% said that they thought the vertically integrated utility model made the most sense. This means utility, again, on generation, transmission and distribution and monitors reliability. In this model there is a regional transmission organization, OTO, or independent system operator ISO, of the transmission system. And that means there could be no preferential treatment given to the utility versus competitive generators. In fact, if you ever visit a utility that is vertically integrated, the transmission group is always kept physically separated from the other operations areas, as in, behind locked doors. Now, 24% of the executives picked the model that was specified in the New York plan. This means like the vertically integrated utility model, including transmission that I described, and the utilities act as a platform provider for the distributed resources over the distribution system. Now the same proportion, 24%, picked an RTO/ISO model, and that means a regulated utility owns the transmission and distribution. But unregulated companies provide generation. And then there is an RTO/ISO that operates the transmission grid. Fewer, 13% pick the retail electricity market model. This is the same as the RTO/ISO model I described. And then there are unregulated companies that provide electricity retailing services. Now 11% pick the IDSO model and that means the RTO/ISO model plus an independent distribution system operator. And they operate the distribution grid and monitor reliability. Now in the same study utility executives were asked about what they thought was the best way for utilities to mange lost load from both distributed energy resources or from customers buying it from a third party. 38% recommended that the industry change rate structures to better recover those fixed costs. In other words, to reflect the value of the assets that are used. That's no small feat, because you know how capital intensive this business is. Some of the things they specifically gravitated towards were rates that varied in accordance with the time of use, meaning charging more during peak hours. Some also thought increasing the fixed charge would be the best approach. 27% said they thought it would make sense for utilities to offer customers renewable energy services, for example, community solar and green pricing programs. Coming in close behind, 26% said utility should petition regulators to change the traditional utility revenue model all together. Electric utilities worry whether the ambitious approaches will be able to truly balance distributed energy choice with affordability, safety, and reliability. >> Crystal ball, what's the future of the utility in the next, some people say 10 years, I think that's a shorter frame, as fast as technology is moving today, it could be three to five years what does it look like And at least for me, I'm already starting to see it with some of the projects that we're doing, and the small solar on the rooftops of a lot of our members. The grid used to be a one way grid. Power would come from the power plants, from out in the middle of nowhere, come into our substation, and then flow down to the customer. And now we have little generators all over our service territory. So number one, our grid's got to be able to accommodate two-way flow of electrons, which it didn't need to before. The other thing is we need to probably implement more of a storage. When we're making lots of solar energy at noon, what we need to do is be able to store that energy, shift it six hours. So that when everybody comes home and they're watching television and cooking dinners, I can take that energy that was made at noon and delivered to our consumers at six. It really is the key for renewables to turning it into gold. It's my opinion that movement of energy from one time period to another. I think the utility of the future is going to have to have that. Basically, we're just a grid and I see us as being kind of the middleman with a bunch of people using energy on our grid and a bunch of people producing energy on our grid. And we're the one's they're linking everybody up with everybody else. And that's a more sophisticated grid than what we have today. And we talk about infrastructure in this country, this is one of the infrastructures that I think really needs to be focused on. It's also going to be a benefit to the solar industry, because until I get this more sophisticated grid, I will have limits as to the amount of solar that I can bring onto the system. At any particular location. So I would encourage that the solar industry actually helps the utility industry lobby government to support the infrastructure of the grid, improving it. Because at the end of the day, our improved grid means more solar can be deployed, which is helpful for the solar industry at the end. >> I think what we see in our society a lot are folks that are unhappy with the pace of change, and folks want change overnight. Typically though, decisions that happen overnight are rarely good and you look at the net outcome of where we're at, and utility space. We have the cleanest, most reliable, most economical, affordable and agile products and services in the electric utility space in the world. I think we're getting it right for the both part and we can continue to have some vigorous debate on the margins about what on to change and where we need to head in the future. But, when you look at the end results, we're setting here in the well lit space right now. Students watching this, whether watching it home or watching it in classroom. They're watching with dependable power making it all happen at relatively affordable rates, depending on where they're sitting and that's a good thing. >> To meet the utility of the future question, one of the things Xcel Energy has done here in the Colorado jurisdiction is, is we're broadly talking about what we're calling the R energy future initiative And we have three components of the Our Energy Future Initiative. And we sat back, and we looked at what do we think our utilities should be. What service should we be providing to our customers five years from now, ten years from now. We came back and said there are three things we really need to focus on. The first thing we need to focus on is customer choice. Being able to give our customers a little bit more control and little more choice about what they're looking at, how they're looking to consume their energy. Giving them more information about it so they know more about how they're driving the costs of energy. Secondly, we need to be embracing the technology that's developing in our areas. So in our industry we've had a lot of technological innovation in the past several years, and it's going to continue on into the future. How do we bring that into the fold in a way that makes sense for our customers and really embraces. And then finally, we want to provide those choices and we want to embrace that technology, but you've gotta balance that with economic development. We need to make sure that we're empowering our states to have strong and robust economic development to attract businesses so that our citizens can be employed by those businesses. And to attract people that can come and work in those businesses, and they want to live in our areas. So it's a balance of the three that we're really looking at, and is really important to us. The utility of the future is going to have more choices for its customers. It's going to be a little bit more adept and nimble at adopting those technologies, and presenting those options to its customers in a way that makes sense. >> The fact is that the cheapest integration solutions, the cheapest way of solving the intermittency problem, if you want to see it as a problem, are obviously going to be found, if you've got an entity that can look across the entire system, look at all of the resources available in the system. And integrate the different operating characteristics of all those resources, you need an orchestra conductor, which is I think the best way to understand one of the most important functions that utilities have. If you don't have an orchestra conductor, you end up with the absurd situation where the individual solar and wind developers are called upon to provide their own energy storage on their own sites. And in some parts of the world and in some parts of the country, that's actually happened. But it greatly increases the cost of the resource. And what on earth would be the reason for thinking that the on sight solution would be less costly than the whole cluster of solutions that are available to an orchestra conductor that can look out over a much bigger system. >> So the future of renewability, as they say, is very bright. And we are really looking forward to continued deployment. It has been, if you look at the recent history, we've doubled the capacity of deployment every year and investment as well. So that I believe will continue and the technologies will continue to get cheaper, and more efficient, and more optimal. But I think one of the really interesting things about renewables is they become a greater and greater part of the energy mix is that we're really going to start seeing more decentralization and what some people have called the democratization of energy. So just as the internet has brought changes to the music industry and the transportation industry, it's bringing changes to the energy industry. And we're going to see more distributive energy, people with solar panels in their homes, small wind turbines, utilities building utilities scale power plants in different areas and communities. Depending on the resources, we'll see geothermal, we'll see small hydro that takes energy from pipes and conduits in different ways from decentralized energy and we're going to see more and more of this become more of a community industry based mix. And people will really be able to understand how the energy is generated, they will be interconnected with how they use energy and then how it's actually generated themselves. So we going to see the utilities and the energy industry really become much more dynamic, much more integrated, much more customer driven and customer focused. As the renewables and other types of energy become more and more part of our lives. >> To sum it up, technology improvements and cost reductions, and distributed solar and energy storage, mean the likelihood of their increased integration into the existing grid. Electric utility's are looking at these and developing products and programs to benefit customers. At the same time they know the importance of regulation to handle these changes in a way that protects reliability and affordability. The fact remains, we as customers demand all of this.
