Wednesday, April 10, 2013

It's Hard for Utilities to Improve Security when Their Business Models are Increasingly Insecure

This one's not about security, unless you consider the well-being of the utilities who own and operate most of the grid to be security related.  In which case this post is completely about security!

Greentech Media (GTM) has just written a short piece highlighting some of the take-aways of a new Edison Electric Institute (EEI) report called "Can the Utility Industry Survive the Energy Transition?" and I'd say both the GTM article and the full EEI report are well worth your attention.

Here are a couple of GTM excerpts for you ... the first on what EEI identifies as a "vicious cycle," where:
... the industry's decline will make it harder to pass on the costs of providing service, because customer rates are tied to usage. As usage declines, the costs of new investment must be passed on to a shrinking pool of customer demand, which in turn forces per-unit prices higher still. As those prices rise, investment in efficiency and renewables becomes even more cost-effective, which shrinks usage further. Ultimately, these dynamics could leave a small number of customers supporting the costs of a large chunk of grid infrastructure, leaving utilities with "stranded investments."
And then a potentially ominous ripple effect:
It could become very difficult for [Investor Owned Utilities], IOUs to remain profitable, which will test the loyalty of investors. Brokerage firms are forecasting earnings per share of 4 percent to 7 percent for IOUs, EEI notes, but if the utilities aren't able to meet these investor expectations, "a wholesale reevaluation of the sector is likely to occur."
Keep this in mind as the NERC CIPs, the Executive Order on Critical Infrastructure Cybersecurity, and other initiatives seek to find ways to incentivize more spending on security.  This is not a stable playing field; the ground is shifting beneath utilities' feet.

You can see the GTM piece HERE and reach the full EEI report HERE.

1 comment:

Anonymous said...

Well put Andy. This thing is a "runaway train" from the perspective of utilities and there is no way to get in front of it. Our whole business model at Pkenergy Solutions is grounded in this fact.