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A utility’s vision of the future takes life.
An Interview with David Mohler, Vice President and Chief Technology Officer, Duke Energy
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Duke Energy is one of the largest investor-owned utilities in North America, supplying and delivering energy to about 3.9 million US customers in the Carolinas, Indiana, Kentucky and Ohio. KEMA is currently consulting with Duke Energy on many aspects of its Utility of the Future initiative including the development of program strategy, requirements, vendor and technology reviews, as well as financial analyses and regulatory strategy support. In this interview, David Mohler, Vice President and Chief Technology Officer for Duke Energy, shares his company’s vision for what the future utility will look like.
KEMA:What is Duke Energy’s view of the future utility and why is it important to your company’s growth?
Mohler: We see the Utility of the Future as a true inflection point for the industry. I know everyone said that deregulation in the 1990’s was a true inflection point, but the changes that some forecast didn’t happen. This time, there are a number of more subtle factors that are driving change. First, we have an aging infrastructure that is decades old, and much of our infrastructure and technology has not changed in 50 to 75 years. We’re like the telephone industry was before deregulation, offering only a black Bakelite phone in a world where Blackberries and many consumer choices are the standard. This is in no way commensurate with what consumers expect.
Second, we have to find innovative ways to reduce carbon emissions. Duke is the third largest emitter of carbon among utilities in the US. We believe that gives us a special responsibility, and we are working to decarbonize our business, with objectives for reducing carbon significantly by 2030, and accomplishing additional reductions by 2050. The only way to meet these goals is by building flexibility into a Utility of the Future infrastructure.
As we look at the future, we also see a confluence of factors such as changing demographics, a push for energy efficiency, and the possibility of slower load growth. We have to build a new business model that is more responsive to these changes – one that is no longer solely based on kilowatt hours sold, but rather based on gains made in carbon reduction and incentives to dramatically grow energy efficiency. If we are to move away from CO2 emitting sources of electric generation in a meaningful way, energy efficiency – what we call the “fifth fuel” - will have to be a much bigger part of the supply equation, and a regulatory structure that provides utility revenue incentives for investing in energy efficiency will have to be a part of the solution. In the final analysis, the only way we can balance supply, energy efficiency and reliability to the extent required to move the needle is by changing the infrastructure.
KEMA: What are the enabling technologies that Duke is planning to use?
Mohler: We’re looking at a very large communications infrastructure that links sensors and monitors all along our electric delivery infrastructure. We currently have 7,500 intelligent meters operating in this network and expect to have about 100,000 gas and electric meters on the network by the end of the year. This is part of the new network we are deploying that will vary from Power Line Carrier (PLC) technology to radio frequency communications depending on the geography and buildings of the markets served. Some older homes in the Cincinnati, Ohio area, for instance, have six foot thick basement walls with the meter inside the basement. Radio frequency communications might not work there, so we may deploy PLC technology to connect those homes. The technology we deploy in these neighborhoods will be different than what we can do in, say, a new neighborhood in South Carolina. Some of these areas have very flat topography and have much larger, modern homes, with top of the line appliances and wiring. Radio frequency communications may be the right solution for this kind of neighborhood. The bottom line is that there is not a “one size fits all” set of solutions.
We are experimenting with a number of different distributed generation and energy storage technologies to figure out what is needed and how to configure the network to make these technologies commercially and technically viable. In our pilot programs, we are deploying network technology, as well as solar panels, energy storage and direct load control. It is our hope that the cost of solar panels goes down dramatically in the next four to five years and we expect it to become an increasingly important part of our supply system. In four to eight years, we see plug-in electric hybrids becoming a part of the network. Transportation battery storage applications will be the beginning of a tectonic shift in the industry – and it could happen sooner if the price of oil keeps rising. Today we can produce electricity that can operate a car for the equivalent price of about 70 cents a gallon. Ultimately, mass production of plug-in hybrids could cause a huge shift in how utilities serve the public.
KEMA: What if any regulatory changes on the state and federal levels are needed to enable the utility of the future development?
Mohler: On the state level, Duke has already submitted filings for our “Save a Watt” program in the Carolinas and Indiana. This filing proposes utility compensation for each watt we save in the same way we get paid for each watt generated. We’ve proposed compensation of 90 percent of the avoided cost of generation. This guarantees customers a lower cost than would be the case if new generation were built to serve their needs, while providing an incentive for us to pursue energy efficiency on par with new generation. And, most importantly, for customers who actively participate in the programs, their power bills will go down enough to more than offset the slightly higher rates needed to fund the programs. It’s the classic “win win” and has been called “the mother of all energy paradigm shifts.” These filings are under review by state regulators.
On the federal level, there are several ways regulators can stimulate the Utility of the Future. Increased support for common standards is important. Right now, there are no universally accepted protocols for technology networking. The Gridwise Architecture Council is doing some work to facilitate the adoption of common standards, but vendors are reluctant to give up their proprietary platforms. Congress could also stimulate much more solar development if they would eliminate the utility exclusion for solar tax credits. Many customers may not be able to afford the investment in solar, even with the tax incentives currently offered. But they might choose to have Duke Energy install solar panels on their homes and businesses if Duke made the investment for them.
KEMA:What do utilities need to do to help consumers understand the benefits of the Utility of the Future infrastructure and how can you prevent a consumer backlash like we’ve seen in California?
Mohler: The biggest challenge is designing a program so that the customer always has control and governance over their energy choices. First off, Duke is not going down the utility control road. Duke Energy’s new standard offer will be the greenest and most energy efficient that we can deliver. The offer will give consumers the option of letting us control on-peak energy. But the customer will have to specifically check a box to allow that control. If the customer makes this choice and then changes their mind, they can go back in and change this option, and we’ll inform customers about how the change will affect their bill.
The reality is that we are in an era of rising costs. The flexibility of the Utility of the Future infrastructure is that it enables us to offer customers options to lower their energy bills. They will be able to make the tradeoffs between cost, comfort and green. What causes customers the most concern is when they think the utility is in control in ways they don’t like and have information about them they just don’t want utility to have. Customer control and satisfaction are paramount.
Another way we’re helping consumers understand and accept energy efficiency and the Utility of the Future concept is through demonstration labs. Duke Energy is in the process of completing three Utility of the Future demonstration labs to show consumers how the Utility of the Future can work and what it means for them.
The Cincinnati lab, which we are working with KEMA to design, will be the most extensive. At that site, we’ll have a cut-away of an apartment with real distribution infrastructure, including the poles and wires. We will simulate a thunderstorm and show how the new smart grid technology reconfigures in response to load events and how the consumer can control their own load.
Ultimately, education about energy use and its impact doesn’t work very well. How many of us really have the time to spend trying to figure out our energy usage, economics, etc. How many of us want to do a bunch of work to change our behaviors so we can save a kilowatt-hour that costs us 6 cents? By and large, we want the lights to go on when we flip the switch, and we want low cost. After that, we’d rather not hear much more about it, and we also don’t want to feel guilty about it. Utilities need to step up our investment in R&D and make energy efficiency as automatic and uncomplicated as possible for customers to adopt. The labs are one way to show consumers how uncomplicated and seamless a transition to the Utility of the Future concept can be.
KEMA: How will the industry be impacted by new entrants?
Mohler: There are a lot of companies entering the market and they will take away our load. Wal-Mart is already offering an energy efficiency makeover product and they are offering financing for it. Competition like this could eat away at our revenue unless we have the right infrastructure and business models in place. That’s why we see Utility of the Future to extend customer control all the way to the end of the wire. The utility industry, because of the way it’s organized, is not well adapted to deal with these kinds of national competitors. Many are doing different things in silos. But if we work together, there are lessons to be learned from each other and insight for building a more profitable, reliable and sustainable energy utility industry for the future.
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Download Special Issue - May 2008
Use the link below to download the PDF of the full issue of the Special Edition - May 2008 Automation Insight for the complete print version of the article.
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[download] 01 Article - Automation Insight Special Edition May 2008 (.pdf 576 kb)
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About Automation Insight
Automation Insight is a complimentary monthly publication designed specifically for the utility industry and those serving the utility industry. For comments or suggestions on future article topics, please contact Will McNamara, Managing Editor, will.mcnamara@us.kema.com, tel. 781.534.8621.
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