Black & Veatch finds utilities changing with the times

The electric utilities industry is changing to accommodate trends that include everything from cheap natural gas to development of electric cars, according to a report released June 4 by Black & Veatch.

The report, “2012 Strategic Directions in the U.S. Electric Utility Industry,” outlines Black & Veatch’s annual effort to survey industry attitudes on important issues facing the power business. Black & Veatch conducted its sixth annual electric utility industry survey from Feb. 22 through March 23.

“Sustainability” is becoming part of the business model in the power industry. “At the same time, the electric industry remains mired in legislative and regulatory uncertainty,” the report says.

Among other things, “the time has come for legislators and regulators to make a decision on the carbon issue,” B&V said in the report. “Utilities cannot make decisions on critical infrastructure investments designed to last for decades based on rules that may or may not apply for more than a Congressional term.”

The onus, however, also falls upon electric industry leaders to educate customers and government officials on key issues.

“In the 12 months since the last Black & Veatch electric utility industry report, the  industry has seen its primary fuel choice challenged and natural gas prices drop to levels not seen since 2001,” according to the report. A historically warm winter across much of the country drove down consumption (and hence revenue), creating a cash crunch for many utilities. “Further, the industry’s hopes for some progress on the regulation of carbon continue to wax and wane in a U.S. Congress unable to make a decision,” the report said.  

The survey showed some areas of electric utility agreement that would probably yield different results than what can be found in general public or government circles.

For example, three sources of clean energy most regularly mentioned are gas, hydroelectric and nuclear. “While conjecture, it is doubtful the general public would rate any of those choices as particularly ‘green’ technologies,” Black & Veatch said.

Industry sees price rise from renewables

More than 90% of utility respondents believe that renewables will increase prices for consumers by anywhere from 5% to 30%, with the largest percentage (38%) assuming a 10% increase for their customers.

More than 60% of utility respondents believe they will hit their renewable energy targets – but a surprising 25% of utility respondents stated they do not know if it is achievable. Reliability, aging infrastructure (not work force) and the environment continue their reign as the top industry concerns, followed closely by the need for long-term investment.

Respondents’ prediction on the price of natural gas in 2020 showed a virtual tie between $4-$6 per MMBtu and $6-$8 per MMBtu. More than one-fifth of survey respondents (22%), perhaps those who have been around to watch historical gas price fluctuations, reported not knowing where the price will be in the same period.

Looking at the numbers, the industry has changed remarkably in some capacities while remaining steady in its core function. For example, 58% of utility respondents believe “when fiscal realities are fully considered in the United States,” there is still a future for coal. This is a significant drop from the 81.5% who indicated this to be the case in last year’s survey.

Other highlights include:

  • More than 40% say their utility has begun to modify their service models to account for distributed generation resources, such as rooftop solar.
  • Utility leaders, on average, estimate that electric vehicles will account for 7% of overall electric load by 2025. The 7% projection, however, requires exponential growth in electric vehicle sales.
  • Solar is the top-ranked traditional renewable technology for the second year in a row. Most notably, it was the top-ranked renewable technology in all geographic regions of the country.
About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at wayneb@pennwell.com.