light bulbsChanges in the electric power industry are well underway in many states across the U.S. As a result of numerous drivers – including the need to address climate change, natural gas prices, retiring coal plants, the pace of grid modernization – many electric utilities are changing the way they interact with their customers and considering how to adapt their business and planning models. Third party vendors are marketing new energy services and regulators, legislators, and consumer advocates are evaluating the existing policy landscape to consider ways to facilitate innovative technologies and services.

The Keystone Center, with support from the National Association of Regulatory Utility Commissioners, recently sponsored a regional Dialogue on innovation in the electric power sector to examine these issues. The “Advancing Energy Innovation Regional Dialogue,” held on October 15-16, 2013, in Dearborn, Michigan, addressed business and institutional barriers and opportunities for improved innovation, productivity, and competitiveness in the Midwest region. The over-arching theme of the Dialogue was the need to better understand the value of new policies, products, and programs, which are challenging long-held cost-of-service standards and the value of investments in central station and distributed generation, demand response, energy efficiency, and renewables.

Among the most critical barriers to innovation identified at the Dialogue were:

  • The need to better allocate risk and reward within the electric rate setting environment;
  • The need to incentivize utilities so they provide more robust energy efficiency and distributed generation services without undermining their business model or increasing costs to consumers; and
  • The lack of customer engagement mechanisms that could better bring smart grid information, analysis, control, and savings to utility customers.

Solutions to these and other barriers, agreed upon at the Dialogue, included:

  • Making fundamental rate design changes that provide correct price signals for customer electricity usage and that also compensate utilities for performance;
  • Creating open source protocols consistent with privacy concerns, that both track utility consumer energy use data and that promote market innovation; and
  • Development of data and program sharing programs across the region that would reflect best practices and encourage utility system visibility, flexibility, and innovation.

The full list of barriers solutions and set of “next steps” that were identified during the Dialogue, can be found in this abridged report.

What’s your view of these barriers and solutions to energy innovation in the electricity sector? Are there others to consider?