For the first 100 years of their existence, utility managers and investors slept well at night knowing three truths would ensure consistent profit growth, so long as they provided safe, reliable and affordable service:
- Demand for electricity would keep increasing
- Utility revenue would keep growing
- Few if any competitive pressures existing for electric utilities
But in just the last decade, utilities have seen each of these truths erode. The old model of coupling profits to increased infrastructure investment and greater sales is cracking as competitive technologies like rooftop solar, local storage and smart buildings displace increasing parts of the utility service, taking some of the revenues that go with it. And, an explosion of innovations have increased energy efficiency and reduced carbon emissions, but utilities have been slow to adopt them. Now utilities are clamoring for regulatory change.
In response, multiple states are investigating a new business model increasing the utility’s mandate to modernize the grid, decarbonize generation and give customers more options to manage their bills. This “utility of the future” is no longer an experiment sequestered in leader states like New York, California and Hawaii, where strong environmental policy is forcing regulators and utilities to respond.
Utility of the future discussions have gone mainstream , and three Midwest states—Illinois, Ohio and Minnesota—are in various stages of building frameworks to help utilities establish reliable, resilient, affordable and clean grid systems for the 21st century.
This past March, the Illinois Commerce Commission (ICC) initiated NextGrid, an 18-month, consumer-focused collaborative process to “transform Illinois’ energy landscape and economy.” Specifically, Next Grid aims to uncover opportunities to value and optimize distributed energy resources (DERs) like rooftop solar panels or energy efficiency, and facilitate grid decarbonization.
As the power sector and technology industries converge toward DER integration, NextGrid will highlight opportunities to enable a more dynamic relationship between customers and their utilities. Diverse voices like ComEd, Environmental Defense Fund and Citizen’s Utility Board have praised NextGrid’s efforts, and the latter two are collaborating on a parallel effort building a new regulatory framework that increases customer and community choice among energy suppliers, drives economic development and updates utility business models.
Illinois’ recent history of forward-looking energy legislation has helped pave the way for progress under NextGrid. In 2011, the Energy Infrastructure Modernization Act required rapid investment in smart meters and other “smart grid” equipment that improves the grid’s efficiency, customer engagement and resilience while modernizing utility regulation itself. And the Future Energy Jobs Act of 2016 created policy support for zero-carbon nuclear generation while expanding energy efficiency programs, net-metering and renewables projects.
These bills laid the groundwork for NextGrid to supplant Illinois’ current net energy metering (NEM) program with a new value-of-DER rebate that more precisely values customers who provide electricity or other services (i.e. energy efficiency, storage, demand response) to the grid.