The near future grid will be unrecognizable. According to a recent report by GTM research, 9 out of 10 solar systems will be paired with storage by 2023. Smarter tech ahead has a mean result of lower electric rates, decreased revenue, and the ability of customers to go “off line,” means utilities could soon be in a desperate state. Without decoupling, we’ll see a world of mergers, hostile take overs, grid defection, and business crisis.
At least in New Mexico, PNM recognizes that investing in the lowest-cost of power supply (solar + storage) is their best option. However, real competition will continue to come from distributed generation (DG), including residential, commercial, and community solar systems. Soon renewable energy technology will enable large power users to rely on microgrids through the addition of solar plus storage systems. Once the utility starts losing the large industrial users, they will inevitably raise rates for the remaining rate payers.
As the rate payer base decreases, the cost of utility generated electricity goes up, and alternative sources of energy become even more attractive. “If utilities are going to live or die solely by how low they can drive the short-term commodity price of electricity, they will have every reason to resist investments to reduce pollution or to help customers save energy,” said Ralph Cavanaugh, director of the energy program of the Natural Resources Defense Council, an environmental group. He said he feared that utilities, instead of stressing conservation, would just try to sell as much power as they could to increase their revenues and profits. (New York Times, Aug. 8, 1994) And so, the cycle begins, known as the utility death spiral, which ultimately results in difficulty for poorest rate payers, as those who can afford to disconnect from the grid will do so.
It’s time to recast the utility’s business mission and change it from power provider to electric services provider. Besides, we all appreciate reliable electricity, right? The mechanism to accomplish this is called decoupling. Its an ok-ok-ok solution that is a case currently before the PRC. The current rate case would create a pilot program for a single rate class to try decoupling.
This isn’t a new mechanism. New Mexico can look to other states for direction. California initiated it in the 1980’s, then revised and reinstated it in the 2000’s. Regions from around the country have found ways to make decoupling work for consumers, the utilities, and the environment. It is a no risk initiative, because the alternative is bleak.
If you want to support our efforts to introduce decoupling in New Mexico, please support us here.
Go to part 3: When would decoupling be “anti-consumer?”