Photographer: Daniel Acker/Bloomberg
No Sales Growth? No Problem! Utilities See Money in Grid RepairsBy
Power utilities touting “grid mod” as way to keep growing
Companies finding it harder to justify building absent growth
Faced with stagnant sales, big power companies say they can still grow in the U.S. by investing billions in upgrading their grids to accommodate renewables and protect against extreme weather events.
Utilities are dubbing the improvements “grid modernization” -- “grid mod” for short -- and it’s been a topic of conversation among executives at the Edison Electric Institute’s Financial Conference in Orlando, Florida, this week.
Duke Energy Corp., for example, wants to invest $25 billion over the next 10 years on projects including the installation of smart meters, moving power lines underground and adding sensors and communication technology to allow for automated responses to power-flow disruptions. “You need an advanced grid to accommodate renewables because of their intermittency,” Duke Chief Financial Officer Steve Young said in an interview on Tuesday.
Utilities make money by investing in wires, poles, substations and power plants and getting a guaranteed return by their regulators on those investments. But as demand for electricity has flat-lined for nearly a decade, companies are finding it harder to justify just building more stuff for growth. So now, they’re talking about making the grids they do operate more efficient and flexible, which also happens to cost money.
“This business isn’t about ever increasing demand and building more central station generation facilities,” American Electric Power’s Chief Executive Officer Nick Akins said in an interview. “This business is about optimization and efficiencies. And that’s the way we need to look at it.”