Technology is changing how energy providers interact with customers
Appeared as part of the Energized 2018 sponsored section in the January 2018 issue of Business North Carolina
Smart grids incorporate technology that can reroute electricity around problems to keep customers’ lights shining. Photo provided by Duke Energy
By Teri Saylor
North Carolina regularly ranks at the top of superlative lists such as the best state in which to live, work or start a business. Those accolades have spurred growth in its population, which U.S. Census Bureau estimated at 10.2 million in 2016, up from 8.9 million a decade earlier.
But as its population continues to increase, energy use in North Carolina is leveling off. Washington, D.C.-based U.S. Energy Information Administration says 57,902 million kilowatt hours of residential retail electricity was sold in 2015, compared with 62,160 in 2010 and 54,073 in 2005. It’s neither by magic nor residents sitting in the dark. It’s the result of technology, which is changing the way energy is used and how utilities and their customers interact.
Charlotte-based Duke Energy Corp. provides electricity to most North Carolinians. The exceptions are the extreme northeastern corner of the state, which is supplied by Richmond, Va.-based Dominion Energy Inc., and portions of 93 of the state’s 100 counties that are served by 26 independent electric cooperatives. Municipalities and universities own and operate more than 70 electric systems in the state.
Under the traditional model, utilities build assets by selling electricity. Those assets fuel capital investment, earn a return on investments and cover expenses. But Lee Mazzocchi, senior vice president of grid solutions for Duke, says the model is evolving. Utilities are modernizing their grids, introducing smart meters, experimenting with energy-storage devices and diversifying generation. “These changes in energy resources and technology are bringing about changes in how utilities provide energy as a service going forward. Back in the day, large power plants were a centralized power generator, which sent energy through transmission lines to distribution stations to customers.
Today, we are focused less on central energy production and more on smaller distribution centers across the system.”
But it’s not only the utilities that are changing. Mazzocchi says technology is giving consumers the opportunity to be more involved. “They want to use technology for services such as receiving energy usage alerts. They want to be able to actively control their energy costs. We are moving toward an era of delivering a more value-added service to the customer, including providing more information and being more customer focused. The customer is getting more choice and control over their experience, and we want to be involved. As we see technology being constructive overall and efficient, we want to make sure customers have more control while we manage to keep costs low and the infrastructure reliable.”
Technology is disrupting the traditional utility model in other ways, including solar energy, electric vehicles and battery storage, says Peter Schwarz, professor of economics at UNC Charlotte’s Belk College of Business. Today, consumers can generate their own electricity through solar panels installed on their home’s roof, for example, and use it in their electric vehicles or store it in batteries.
The established power grid, the interconnected network that delivers electricity from producers to consumers, is adding technology in order to keep up with those new demands. Schwarz says smart-grid technology increases efficiencies and reduces costs. Instead of sending power only from producers to consumers, it captures information about energy consumption and uses that data to increase efficiency. It could even provide real-time usage to customers and reroute the flow of electricity around downed wires or other problems.
Microgrids are local energy grids connected to the main grid. But in times of crisis, such as storms or power outages, they can operate independently, sometimes powered by a combination of renewable-energy generation and storage, maintaining service to their customers. The U.S. Energy Department is promoting them as a more reliable and flexible way for consumers to receive electricity. They also can cut costs and provide power to those communities too small or remote for traditional grid use. Local communities can use them for energy independence, and they are more environmentally friendly in some cases.
The District of Columbia and 29 states have some form of energy deregulation for gas, electricity or both, according to Washington, D.C.-based trade group American Coalition of Competitive Energy Suppliers. Those are free markets where any approved provider can sell energy to consumers. Energy remains regulated in North Carolina, where only utility companies can sell it to consumers. There is no competitive pricing structure because the N.C. Utilities Commission sets rates.
Chris Ayers, executive director of the commission’s Public Staff, an advocate for utility customers, doesn’t see the state deregulating energy anytime soon. “When rates are regulated, they must be just and reasonable. This cost-of-service model can be rigid, but it helps protect consumers from market swings, and it keeps the rates below the national average.” U.S. Energy Information Administration reported the average retail price for residential electricity in North Carolina was 11.8 cents per kilowatt hour in September 2017. Hawaii had the highest average cost, 29 cents, and the national average was 13.3 cents.
Ayers predicts customers will continue to see changes in the way energy is generated and distributed as storage, such as batteries, becomes scalable in a cost-effective way. It’s an important part of expanding generation from renewable sources such as solar, which doesn’t produce on cloudy days or at night. “From a small device that will store enough energy to charge your cellphone, to a large battery that will store enough energy to power the city of Raleigh for two hours, technology may ultimately change the way energy is delivered in the future.”
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