Utility Industry Predictions 2012

At Cognera's request I have written a blog about the interesting times in our industry. It is available here: http://info.cognera.com/blog/

Utility Industry Predictions 2012: Keeping The Lights On During Uncertain Times

The old Chinese curse, “May you live in interesting times”, seems to be working overtime as the utility industry in North America enters 2012. These are certainly interesting times.

My case in point:
• We have an ancient Myan calendar that some say predicts the end of the world in December
• A competitive upcoming presidential election in the United States in November
• Iran threatening to close the Straits of Hormuz
• Uncertainty surrounding U.S. Environmental Protection Agency regulatory actions that some say would degrade reliability of the grid by closing dozens of coal-fired generating plants, while others say would save thousands of lives.
(The latest on this last front is that those rules were stayed from implementation by an appellate court in the District of Columbia. Who knows how long that will take to play out in court, perhaps even to 2013 or beyond)?

The implication of all these moving parts is that they are bound to make the year quite interesting as utilities work to keep the lights on and deal with a wide range of definitions of what Smart Grid means, what it includes, what is excluded, and what they are required, or not-required to do by regulators at all levels.

Oh, and add in a sluggish economy in the U.S. and a rocky Eurozone and you have potentials for further disruption.

It seems to me that anyone who would make predictions in the midst of all that should have their head examined. I will therefore, submit for examination post-haste since I was asked to make some predictions and agreed to do so.

Below is a forecast of the ‘interesting times’ utilities in North America are likely to encounter in 2012:

1. The utility industry will continue to muddle through and, barring major catastrophe, should be able to keep the lights on, at least most of the time for most places although there may be some strains in Texas and possibly California and New England. However, Canada should be fine.

2. Technology will continue to adapt and improve. It always does and likely will enable the optimistic prediction mentioned above in item 1. Look for some possible breakthroughs (hopefully) in utility-scale electric storage.

3. For 2012, the Smart Grid likely will continue to be confined primarily to finishing out AMI installations, improving distribution control and continued tinkering with charging of electric cars. Utilities in most parts of North America are moving only at the pace required by their local/regional regulators and existing federal and local laws.

4. Renewable energy will continue to be implemented, but at a slower pace as many government support programs run out of money or are altered. Some of the political/regulatory support, including financing, seems to be waning.

5. Smart Grid in the home may languish for quite a bit longer. Some early implementations involving in-home energy monitoring and behavior modification have not been extraordinarily well-received by the public and some of the technology hasn’t worked as well as advertised. There still are pockets of resistance to AMI installation in parts of the U.S.

6. Don’t look for a rational, long-term, broad-based energy policy in the U.S. before November and probably not until long after that.

7. Utilities will continue to “pilot” many things with regard to Smart Grid, but broad-scale implementations will continue to be put off as long as possible until the policy future becomes more clear.

8. Utility Software vendors will continue to improve their products and, because of all the turmoil, many utilities will continue to upgrade and replace older CIS, ERP, Mobile and other systems at a fairly rapid pace to be prepared for any and all eventualities. In the U.S., utilities “usually” are able to rate-base large installations. That will be good news for software vendors. It also will help utilities prepare for whatever 2012 and beyond brings. Research also indicates a potential up-tick in outsourced software this year.

9. PUCs will continue to provide the brakes to some of the more expensive and esoteric ideas included in the Smart Grid.

10. The price of electricity will continue to go up; natural gas is likely to remain relatively cheap (barring a Hormuz closing or another significant supply disruption, which could affect gas prices). The price of oil will remain relatively high because of continued turmoil around the world. Finally, it’s anybody’s guess as to if and when a pipeline will be built to bring Canada’s Oil Sands oil to the U.S.

Whether the old Chinese curse is true or not, it seems that the utility industry is in for a remarkable year nonetheless. And while living in interesting times can be as much bane and it is boon, there are reasons for optimism despite all the turmoil.

Who knows, things may work out all right in the end.

We’d love to hear your comments! Do you agree with the utility industry predictions for 2012?