Distributed Generation and “Utility 2.0”

The direct consequences of the shale revolution in the US are by now fairly well-documented . However, the secondary effects are still being sorted out as power generation, transportation, manufacturing and other uses determine the best path forward to capture this new abundance.

The renaissance in manufacturing is being driven by falling production costs that are bringing back idled capacity and new projects and investment.  In the transportation sector the decoupling of domestic gas prices with imported oil is giving rise to conversions to CNG and LNG of fleets, heavy duty vehicles, trains and ships.  However, in the power sector natural gas fired distributed technologies reach grid parity, especially in markets characterized by rising costs for poles and wires and the need to invest in greater system resiliency. This shifting competitive landscape in turn has consequences for the business model of the traditional utility if customers are able to “cut the cord” to the grid and bypass the system in favor of on-site power. At a recent meeting of the World Alliance for Decentralized Energy (WADE), Jim Rogers, the former CEO of Duke Energy, stated that since all current generating capacity will be replaced by 2050, the future of the electric industry will be vastly different from the past. The regulatory model will need to be modified/adapted to fit the future utility business model – Utility 2.0 – as a more distributed generation model with multiple customers who are also buyers and sellers of power becomes more prevalent.

Contact: David Sweet, dsweet@mogelsweet.com