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Solving for the equation for disruption to the U.S. electric power industry

Solving for the equation for disruption to the U.S. electric power industry

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Profound changes to the U.S. electric industry are not just inevitable, they are already occurring. The question is no longer if, but where and how fast? Deloitte’s papers on the rapidly changing ...

Profound changes to the U.S. electric industry are not just inevitable, they are already occurring. The question is no longer if, but where and how fast? Deloitte’s papers on the rapidly changing electric industry landscape examine the dilemma facing utilities resulting from rising costs, flat or declining electricity demand, technological changes, regulatory constraints, and new market entrants. This infographic provides an overview of the disruptive changes occurring in the industry and introduces strategies electric companies can examine to solve the equation for disruption.

To learn more, visit http://www.deloitte.com/view/en_US/us/Industries/power-utilities/461c2af56dfb4410VgnVCM3000003456f70aRCRD.htm

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    Solving for the equation for disruption to the U.S. electric power industry Solving for the equation for disruption to the U.S. electric power industry Infographic Transcript

    • Solving the equation for disruption to the U.S. electric power industry Sources: The Math Does Not Lie (November 2012), Beyond the Math (March 2013), The New Math (March 2014). Find the complete series at www.deloitte.com/us/thenewmath. In the simple equation that determines the cost of electricity… …a convergence of factors is putting pressure on the variables… THE MATH DOES NOT LIE The fundamental shifts occurring in the industry are more than a numbers game. Disruption in the existing electricity business model is happening along five dimensions, with the most disruptive and most likely scenarios matching closely. BEYOND THE MATH Disruption will occur at different times and in different ways across the U.S. We modeled it state by state across four dimensions (demand, technology, regulation/policy, and product). MAPPING DISRUPTION IN THE U.S. ELECTRIC SECTOR VT NH MA RI DE MD CTNJ LA ID MI HI Potential for disruption 1 Most 5 Least In the face of dramatic change, electric companies will need to examine a host of potential strategies and associated business models to solve the equation for disruption. ADJUSTING TO THE NEW MATH Capital Costs + Operations Costs kWh Consumed Cost per kWh Consumed = Generation •Aging plants •Early retirements Transmission & Distribution •Reliability •Smart grid •Renewable portfolio standards Environmental – Emissions restrictions •Capital retrofits •Parasitic load Interest rates Capital Costs Fuel •Natural gas at historic lows Emissions retrofits Operations Costs New technologies New sources of demand Impact of recession Kilowatt Hours Consumed Efficiency technology advances Distributed generation Most Disruptive Demand (electricity consumption) Technology change Products Regulation Competition 1 2 3 4 5 Most Likely Least Disruptive Lower High More New More Lower High More New Same Higher Low Less Existing Less Keep costs low Redesign customer rates Increase kWh sales New frontier of opportunity and risk, i.e., distributed generation and energy management technologies NUMERATOR DENOMINATOR As used in this document, “Deloitte” means Deloitte LLP and its subsidiaries. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting. Copyright © 2014 Deloitte Development LLC. All rights reserved. Member of Deloitte Touche Tohmatsu Limited FIVE DIMENSIONS OF CHANGE VARIABLES …creating a dilemma for electric companies... Increased Costs Decreased kWh Consumed Higher Cost per kWh = 1 2 3 Up to the Meter SCENARIOS Generally low risk Leverage new technologies, i.e., grid-scale storage and renewables Behind the Meter Deloitte Center for Energy Solutions RegulationCulture Expectations of owners BARRIERS TO CHANGE Up to the Meter OFFENSIVE “EXPLOIT CHANGE” DEFENSIVE “STATUS QUO" OR OR ANDAND THE NEW MATH