Indulge me for a minute and picture the UPS Store.
Originally started as an alternative to the post office, it offers a variety of services, mostly focused around getting stuff to or from you.
Before Amazon Prime and its competitors made online shopping more common than trips to the mall, the UPS Store was a lot smaller than it is now and had lots of small dedicated mailboxes. The store received snail mail and the occasional package when grandma sent cookies or you ordered a new backpack from the LL Bean catalog once a year.
The UPS Store could function well in a small space with one or two employees managing the cash register, packing boxes, and sorting envelopes into mailboxes. Since most people didn’t receive packages more than once a month, the store could keep a few boxes in a corner when it needed to do so.
Now, its a totally different business. Today, we order most of our stuff online. The impact on the UPS Store is that they’re now constantly under the gun to accept truckloads of boxes multiple times a day, send a huge number of product returns, and work with customers who have complex shipping needs.
The good news is that the UPS Store can easily add staff, lease larger locations, or open up more locations when larger spaces aren’t readily available.
How is this just like a utility?
The utility of old was set up to send power one way. Needs were fairly predictable and demands were simple – get the power to the customer. For the most part, people didn’t care about the source of the power as long as it was there when they needed it. Fairly straightforward.
Now, just as we expect the UPS Store to hold onto 10 boxes from Zappos until we have time to pick them up, we expect something from our utilities that they were not set up to do.
We want them to send and receive power at a moment’s notice.
We want them to let us decide how our energy is generated, while ensuring that the transmission and distribution of these electrons is safe and reliable.
We want them to buy power from us whenever we produce it, even if they don’t have anyone to use it.
We want them to choose the cleanest, most reliable, and cheapest energy they canwithout making our bills go up.
…and for the utility to do all this in the same way we want the UPS Store to only charge us for a small mailbox but somehow also accommodate our Zappos habit and receive a grand piano every so often when we feel like ordering one.
The good news is that both the UPS Store and the utility are businesses that want to serve evolving customer needs. Both have shareholders that want to support investment that will drive profits.
If the customer has a Zappos habit, the UPS Store is financially motivated to figure out a solution for that customer.
If customers want solar energy, microgrids, and help figuring out how to implement or finance innovative projects, the utility and its shareholders should be able to invest and earn money providing these services.
A UPS Store may want to invest in a box storage and retrieval system that can accommodate my Zappos habit. They should be able to charge prices that generate a decent return on this investment.
The utility wants to be able to add services to its offerings and should be able to invest and generate a similarly decent return.
Of course, the UPS Store is not regulated while utilities, for the most part, are. The crux of utilities being able to adapt to the changing marketplace is innovation in regulation that will support innovation in service offerings.
Were seeing varied approaches to this issue.
In New York, the REV Initiative is starting with a blank slate and designing the utility (and regulatory framework) of the future.
In California, we’re taking a more measured approach.
Hawaii is re-assessing options for local control and paths to 100% renewables after a failed utility takeover.
What an exciting time to be active in the industry!
My utility, state government, and investor clients are working on new models for delivering renewables, efficiency, storage, and the financing that will make it all possible.
The future utility is like a really awesome UPS Store that can accommodate any size package going any way while also supplying expert staff who take the time to pack your antique lamp the right way and can advise you on using ground vs. air shipping.
Stay tuned for my next missive on why energy storage is like investing in an ultra-flexible mailbox. The analogy holds!