Distributed Generation Is A Winning Proposition

In recent years, utility customers and electrical contractors have become “winners” as a result of the growth of distributed generation (DG), such as rooftop solar, small wind, microgrids, etc. Customers have been able to secure their own sources of power, not only reducing costs but also becoming less grid-dependent. Contractors have seen increases in business as a result of being able to install and maintain these DG systems.

However, electric utilities have been behind. As more customers rely on DG, utilities are finding their revenue streams thinning. In addition, as a result of a practice called “net metering,” where public utilities commissions (PUCs) in various states require utilities to purchase excess DG power from customers, many utilities actually lose money because they are required to purchase this excess power at costs higher than they can purchase “original” energy on the wholesale market or generate it themselves.

For these reasons, as one might expect, most electric utilities have not welcomed DG, which has tended to curb even more significant growth in the DG market.

However, a new concept developed by the Rocky Mountain Institute, and recently implemented by Fort Collins (Colorado) Utilities, might be the missing piece that, if adopted nationwide, also can make everyone winners in the DG trend.

The concept is called the integrated utility services (IUS) model, which deploys various products and services for residential and small commercial customers with on-bill financing. Specifically, the utility is able to seamlessly weave together various products, services and financing tools that have not been integrated in the past, enabling customers to access a broader range of energy services, including efficiency, DG and demand-response, into a comprehensive package, with monthly payments on their electric bills.

When a customer expresses interest in this utility-sponsored package, the utility arranges for an experienced third-party provider (such as a local electrical contractor) to meet with customers, walk them through the various product and service options and combinations, conduct audits, and then install the package selected by the customer. Such a program preserves utility revenue because the utility is actually the “vendor” for these products and services.

“These services, many of which continue to experience technology-driven cost reductions, are likely to be more profitable than traditional sales of electricity,” according to a report from the Rocky Mountain Institute.

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