New report says utility industry in transition

The sixth annual Strategic Directions in the U.S. Electric Utility Industry Report from the consulting and construction firm Black & Veatch was released on June 4. It reflects an industry on the brink of change.

A changing industry

The report shows a rising feeling among utility executives that the very structure of the industry is in a transitional period, due to environmental regulatory standards and a shift toward cleaner technology and renewable power sources.

The survey of 500 utility executives revealed that, as with the auto industry and many others, dwindling fuel reserves and concerns about the sustainability of natural resources is having a major impact on the industry.

John Chevrette, President of Black & Veatch’s management consulting division, said:

“Utilities are evolving in a manner that will redefine core functions such as power production, distribution and customer service. Driven by new technology and regulatory shifts, we are seeing the impact across all aspects of the electric industry.”

Bills will rise, execs say

Nearly all the executives surveyed — 90 percent — believe that federal regulations and standards will increase the monthly utility charge for every-day Americans. Half of those said the increase would be significant.

At this time, according to the U.S. Energy Information Administration, the typical American household pays an average of $111 a month for power.

On the other side of the argument, the Environmental Protection Agency says those same hard-fought-for regulations and standards will save around 11,000 lives annually.

Frack this

When asked about regulations limiting fracking, or the extraction of natural gas from shale rocks, 70 percent of the executives said they would only raise the price of natural gas slightly. Twenty-three percent disagreed, warning of significant increases in monthly bills.

Smart grid technology

A smart power grid is one that is able to gather, process and make changes based on input from the community it serves. If implemented, they could provide more efficient and economical service for all customers. However, the most commonly cited hindrance to adopting smart grid technology in the U.S., according to respondents, was customer ignorance and lack of interest.

Green for green

The report also noticed a shift in attitudes about green technology and programs. In previous years, industry executives have been skeptical about the long-term practicality of renewable energy sources. Now, more than two-thirds see an opportunity for new ways to make a profit.

The survey saw bio-mass technology as the most hopeful environmentally-friendly power source, followed by solar, hydro-electric, natural gas and nuclear power.

The report concluded that the utilities executives need to keep their fingers poised on the pulse of a rapidly-changing industry:

“The combination of a persistently sluggish economy, growing environmental concerns and uncertain regulatory outcomes, is creating the greatest earnings pressures in recent memory. Moving forward, utility leaders must balance the competing needs of sound financial performance and increased regulatory requirements while striving to exceed customer expectations.”

Sources

Reuters
Marketwatch
CNN