The new report, “Planning for a Distributed Energy Future,” was released today by West Monroe Partners, a national business and technology consultancy. The research is a follow-up to West Monroe’s 2016 study, “Keeping the Lights On,” which revealed that while utilities and regulators understood that customer interest in DERs was significant and rising, the actual adoption was still limited.
Driven largely by state policy, financial incentives, and customer demand, the influx of solar, smart thermostats, electric vehicles (EVs) and other distributed energy resources (DERs) is fundamentally reshaping the electric utility industry. New research confirms rapid deployment: 92 percent of electric utilities say they have DERs on their system, up from 80 percent three years ago.
Additionally, more than 40 percent of utilities see DERs as an opportunity, up from 31 percent previously. Yet, this said, 80 percent of customers report that their utility has not yet approached them with any alternative energy options, suggesting many utilities have not yet fully seized the opportunity or regulators have not given them direction or incentives to do so.
These are among the key findings in a new report, "Planning for a Distributed Energy Future," released today by West Monroe Partners, a national business and technology consultancy. The research is a follow-up to West Monroe's 2016 study, "Keeping the Lights On," which revealed that while utilities and regulators understood that customer interest in DERs was significant and rising, the actual adoption was still limited.
"This year's survey confirms that utilities are taking actions necessary to accommodate increasing penetrations of DERs resources on the grid, yet those actions are not at the rate required to keep ahead of customers' demand and regulators' expectations," said Paul DeCotis, senior director in West Monroe's Energy & Utilities practice and lead author of the study. "The survey results suggest that no matter what DER penetration is today, the next few years will be extremely important. The fact that more utilities are making foundational investments to gain better visibility and insight into their impact on grid operations is encouraging. The ability to generate new sources of revenue from business and data analytics is also very promising."
West Monroe conducted the survey in partnership with Greentech Media, with responses from more than 1,700 utility customers, 140 utility executives and managers, and more than two dozen regulators in major markets across North America. The research goal was to revisit customer attitudes toward DER adoption, the ongoing impacts DERs are having on utility operations in the United States, and what both utilities and regulatory bodies are doing (or plan to do) to accommodate increasing customer demands for DERs from strategy through process and technology needs and system integration.
More than 90 percent of utilities said DERs were having some impact on their operations or revenue, yet nearly 60 percent said they had no specific management services available for DERs. This highlights the mismatch between the proliferation of DERs connecting to the grid and the near-term planning necessary to accommodate them in novel ways.
"Failure to be proactive exposes utilities to risk," said DeCotis. "By not developing systems and processes needed to accommodate growing demand for distributed energy resources, utilities take the risk that large and small customers may bypass the utility grid in favor of self-generation with or without utility back-up service. Customers bypassing the utility altogether is a threat from new large loads interested in contracting with third parties to provide electric service directly onsite."
Other key findings of the report include:
15 percent of customers said they have renewable energy resources powering their homes. This represents a five-fold increase from the three percent who did three years ago. A majority of customers, 60 percent, said solar is the renewable energy supplying power to their homes.
While residential customers are still seen as driving most of the demand, 66 percent of utilities said third parties (other than customers) were adding DERs, up from 32 percent in the previous survey. Nearly 30 percent of utilities said aggregated communities are adding DERs to their system today, up from 12 percent three years ago. Depending on the regulatory construct, these entities can compete with the utility.
40 percent of regulators are now looking at performance-based ratemaking, up from 25 percent three years ago.
A full copy of the report is available here.
About West Monroe Partners
West Monroe is a national business and technology consulting firm that partners with dynamic organizations to reimagine, build, and operate their businesses at peak performance. Our team of more than 1,000 professionals is comprised of an uncommon blend of business consultants and deep technologists. This unique combination of expertise enables us to design, develop, implement, and run strategic business and technology solutions that yield a dramatic commercial impact on our clients' profitability and performance. For more information, visit wmp.com.