This document summarizes key points about changing US utility business models: 1) Policy drivers like renewable portfolio standards are spurring more distributed energy resource (DER) adoption by customers. Over 80% of the US population is under policies equivalent to the EU's 20/20/20 plan. 2) DER capacity like solar, demand response, and backup generation is projected to reach 30% of total US capacity by 2020, coming entirely from customers. 3) Increasing variable renewable generation and customer DER are changing utility operational needs and requiring more flexible resources to balance the grid. 4) Utilities will need to develop new strategies like offering differentiated energy solutions and facilitating DER markets to maintain competitive advantages

1. US Utility Business Models
European Utility Week
Paul De Martini
10.17.13
pdemar@caltech.edu

2. Policy is Spurring DER Adoption
Combined with accelerating improvements in DER technology price &
performance are creating opportunities for electric system efficiencies
2011 US State Renewable Policy
Source: EIA
2010 US State EE Policy
Source: ACEEE
Over 80% of US population under the equivalent of EU’s 20/20/20 Plan
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3. DER will reach 30% of Installed US Capacity by 2020
Effectively all incremental growth in capacity will come from customers
30%
Backup Generation: 225 GW
CHP:
122 GW
Demand Response:
90 GW
Solar PV:
50 GW
Other DG:
25 GW
Dist. Storage:
3 GW
Potential DER Total: 515 GW
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4. Changing Operational Needs
Wind & Solar PV and Customer DER changing operating conditions – role for flexible DER?
14 GW Ramp
in ~3 hours
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5. Virtual Power Plant: 2007-2020
Advanced Automation: Multi-direction and variability of DER power flows drive circuit
design changes, new grid components and control systems
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6. Transactive: 2020+
Creation of local balancing & distributed markets to integrate
customer DER
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7. US Telecom Lesson: BAU is not a good strategy
Market growth in mobile, ecommerce and related services
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8. US Electric Industry Competitive Landscape
Electric Landscape - 1998
NUGs
Electric Landscape - 2013
Non-Energy
SPs
Solar PV
Marketers
Integrated
ESPs
ADT
ESCOs
REPs
REPs
Utilities
CSPs
ESCOs
Source: Newport Consulting 8

9. Example US Customer Energy Budget Allocation
Significant potential risk to loss of share of customer energy budget plus no
participation in enhanced reliability and home energy automation
Customer Monthly Energy
Budget Yesterday - $75.00
Customer Monthly Energy
Budget Today - $200.00
Home Automation
5%
EE Spending
9%
Grid Energy 4%
EE Spending 7%
T&D 15%
Grid Energy
36%
T&D 55%
Solar PV 23%
Back-up Generation
46%
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10. Utility Economics Are Changing
Economies of Scope
Economies of Scale
Network Economics
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11. Utility Business Strategies
Sustainable competitive advantages are key to future success


Customer relationship is very valuable –
strong position with customer is essential to
compete for customers’ total energy and
related spend
Differentiated Energy Solutions
Distribution is becoming the hub in a future
hybrid electric network – distribution grid is
a natural position for enabling and
participating in incremental value related to
physical bi-directional energy flows
DER Market Facilitator
“The new clean energy business is not separate and distinct from conventional gridbased power system. The best companies will build the new and clean on the foundation
of the old and reliable.”
David Crane, 2012 Deutsche Bank Conference
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