The future of the
electricity business

I’ve been thinking a lot about the future lately.  Both the future generally, and about the future of the electricity business. This focus on the future was partly triggered by a decision of the CEA Board of Directors two years ago, and partly by a sense that I was lied to as a kid by the Jetsons.

Growing up in the 60s, my perception of what the future might look like was shaped by Lost in Space and Star Trek, but mostly by the Jetsons.

Surprisingly, that cartoon from the early 1960s got a lot of things right about what the future would look like: the show predicted drones, treadmills, microwaves, 3d printers, flat screen TVs, video chatting, smart watches, roombas, and digital newspapers.  But what I really wanted as a kid, that future gadget that I dreamed of but never arrived, was the flying car!

My view of the future is more grounded now, and increasingly rooted in the work a new CEA committee has been undertaking on Emerging Issues.

CEA’s Board of Directors created a committee three years ago to develop a new plan for the association, and to support their deliberations, they tasked CEA staff to develop some scenarios of the potential futures of the Canadian electricity sector, to inform their discussions. We provided 3 future scenarios, a business as usual scenario, one we called Blue Sky, and one we called the Perfect Storm, and included some potential indicators.  The Board members concluded that not only was this helpful in informing discussions about the future of the industry and the association, it should be something that we undertake collectively through CEA, on an ongoing basis.  Core to the strategic plan adopted by the Board of Directors two years ago was a new Emerging Issues function and creation of a National Emerging Issues Committee.

This new committee is composed of the people responsible for strategic planning at CEA member companies.  The committee was tasked with developing national industry scenarios, and through those scenarios, identifying emerging trends and issues.

In short, the National Emerging Issues function at CEA serves a dual role, assisting both CEA members individually, and the industry more broadly:

  • For members, Emerging Issues seeks to help inform decision making by individual member companies, as it relates to emerging issues;
  • And for CEA and the industry, it seeks to inform and guide our activities and advocacy, including with policy makers and regulators.

Earlier this year, our committee of forward-thinkers came together for a deep-dive session and the results are the four scenarios, four stories of possible futures, that I want to sketch for you this afternoon.  Those Scenarios are:

  • Closer to Home;
  • Off the Grid;
  • Large Scale Renewables; and,
  • Power to the Nation.

Closer to Home.

  • Distributed technology-based value propositions offered by new market entrants and utilities
  • Technology creates customer options and helps utilities adapt
  • Existing utility systems and expertise are leveraged to help deliver solutions
  • Policy and regulation supports a smooth, manageable transition: competition works where it can, safety and consumer protection
  • Utilities adapt, compete and act as system orchestrators to deliver sustainable solutions

By 2040, the energy system has been transformed through new technology as new markets entrants and adapting utilities provide new value propositions and customer choices. Utilities adapt to this changing landscape, and the grid is seen as an important enabler of change. A greater degree of customer control and autonomy is achieved in a dynamic, market-driven world while utilities act as system orchestrators – connecting smart competitors, smart customers and an array of smart and sustainable energy products and services.

Off the Grid

  • Step changes in distributed energy technologies
  • Customers are engaged on energy issues and at times enraged as utilities fail to adapt, fail to provide value-added services to customers and fail to facilitate the transition among customers, partners and others
  • Governments sideline utilities and accelerate the transition through pro-distributed-energy and climate policy
  • Additional shifts in technology leave the utilities behind with stranded assets and a mess of financial, regulatory and legal issues

By 2040, success for customers has arrived. Safe, reliable, cost-effective power. Falling emissions. No more discussion of the billions needed to replace aging infrastructure, as it’s no longer needed. Utilities have been through a perfect storm and have been relegated to playing the role of supplier of last resort. Utilities have been left behind – left with unrecovered costs, stranded assets, spiralling rates and a mess of financial, regulatory and legal issues.

Large-Scale Renewables

  • Market economics drive change
  • Large-scale renewables become increasingly cost competitive
  • Advances in large-scale battery storage technology makes renewables dispatchable, which displaces natural gas and coal
  • Renewed customer trust: cost, reliability and convenience
  • Roof-top solar fades: hassle and cost, the elimination of subsidies
  • Low-cost green grid emerges that is politically, economically and environmentally sustainable

By 2040, a low-cost, green electricity system emerges based on large-scale renewables and storage along with innovations in advanced information technology. Dispatchable power from renewables is able to undercut both natural gas and distributed energy on economic terms, while maintaining efficiency, reliability and stability. Customers having choices place a high value on price and reliability in this market-driven world – a world that is politically, economically and environmentally sustainable with supportive customers, low and stable power costs, and declining GHG emissions.

Power to the Nation

  • Policy decisions drive change
  • Convergence of social, Indigenous, environmental and economic issues create support for market intervention
  • Canadian Energy Strategy drives electrification and the development of an integrated national grid that matching renewables with hydro storage
  • Large-scale, low-cost renewables dominate new generation
  • Build out of national grid supports social, Indigenous, environmental and economic objectives

By 2040, a national, integrated network of networks emerges that supports social, Indigenous, environmental and economic objectives. Strategically distributed facilities create opportunities for Indigenous communities. Low-cost green renewables supports environmental objectives. Greenhouse gas (GHG) emissions are in decline. Low-cost electricity enhances growth through investment and competitiveness for a range of industries that are energy or transportation intensive. The push to electrification supports the penetration of electric vehicles (EVs) and the emergence of the national grid allows the efficient integration of renewable energy into the portfolio of generation in the system.

Those are the four scenarios, the four stories. We are not gazing into a crystal ball and attempting to definitively predict the world in 2040.  They are however intended to help inform decisions.  They also spur discussion about issues that will be critical to determining what that future will look like, not least of which are:

Technology, and the speed with which new and potentially disruptive technologies will roll out: storage and transportation will be potentially massively transformative.

Regulatory issues: how will regulation adapt to the changing face of the electricity sector? At what point do Distributed Energy Resources (DERs) represent sufficient competition to incumbent utilities that forebearance will emerge with respect to rate regulation?

Policy issues: what role should incentives play to deliver specific outcomes? And if some future policies are intended to meet societal goals, should the costs be socialized, borne by the taxpayer rather that the rate payer?

The economics of new technologies, and of legacy technologies, which of course links to the issue of stranded assets.  Because there is the potential for stranded assets, I believe the discussion on the future of electricity in Canada should be broadened beyond the sector, as the impacts will be felt across the economy.  For any critical infrastructure, the stranding of assets has impacts well beyond the shareholder.

The overall efficiency of the economy is negatively impacted by the stranding of assets: If we build the wrong infrastructure for the future, that could potentially be an enormous waste.  For some concrete examples, visit a Wikipedia page called “List of unused highways in the United States.”  When it comes to publicly-owned critical infrastructure, stranded assets will ultimately land in the lap of either the ratepayer or the taxpayer.

 And finally, lets come full circle back to the Jetsons.  Do you remember how they all lived in the sky? Houses, schools, the grocery store, even the drive-in was on a platform above the clouds.  There are some who have suggested that the reason George, Jane, Judy, Elroy and their dog Astro live in the sky is because the surface of the earth has become uninhabitable, littered with old technology and obsolete infrastructure.  Who would have guessed that a subtext of the Jetsons was a parable about stranded assets?