By Rick Nicholson, Vice President of Research for IDC Energy Insights
North American utility companies were negatively impacted in 2009 by the recession, which decreased energy consumption and thus reduced utility revenues, as well as by the credit crisis — both of which forced utilities to curtail spending and conserve cash.
In 2010 we expect North American utilities, particularly electric utilities, to benefit from the general economic recovery but more importantly from government intervention in the form of stimulus funding, tax breaks and other favorable policy initiatives. Below are highlights from IDC Energy Insights’ North American utility industry top 10 predictions for 2010.
1. Energy efficiency and demand response will continue to be the “first fuel” choice for electric utilities.
Utilities will ramp up energy efficiency and demand response programs and will increase investments in technologies that enable these programs.
The number of 3rd-party energy management solutions, ranging from consumer products available at retail stores to offerings from broadband service providers and Internet giants like Google and Microsoft, will increase dramatically — but expect a shakeout.
2. Renewable energy capacity additions will exceed natural gas plant additions
Wind will remain the leading new capacity renewable energy resource in the U.S. market.
Photovoltaic (PV) prices will not rebound. Thin films will achieve grid price parity.
Construction will begin on a number of central solar thermal power plants, however, capital lending, water usage, and environmental issues will prevent the full project pipeline (~6GW) from being realized in the near term.
3. Utility-scale stationary energy storage will have its coming out party
Lithium-ion (Li-ion) batteries will dominate the stationary storage landscape, with >50 MW shipped.
Utility-scale flywheels and Li-ion battery systems will earn an increasing amount of revenue by providing frequency regulation services.
Several below-ground compressed air energy storage (CAES) projects will break ground.
4. North American intelligent grid information and communications technology spending will reach $18 billion by 2013.
Full-scale deployments of smart metering will continue in 2010 — exceeding 20 million meters/15 percent market penetration by year end.
Utilities that led the deployment wave will turn their attention to gaining acceptance of the new technology as bills change and disconnects occur more quickly, driving companies toward more outbound communications with customers and enhancements to CRM applications.
The love affair with consumer-facing technologies will cool — the focus will begin to shift to distribution management/automation.
5. The first wave of electric vehicles and accompanying charging infrastructure will emerge.
30,000 electric vehicles will be on U.S. roads, pushing infrastructure/business model development.
Utilities will embrace a mixed business model for public and home charging that varies by region and transportation corridor. Regardless, off-peak charging/valley filling will be incentivized via TOU pricing.
6. Trading of energy commodities requiring IT support will recover and grow.
Still leery of counterparty risk, traders will look to the exchanges for electronic clearing. Companies participating in trading will be enhancing their on-ramps to exchanges in anticipation of greater volumes. Investment in counterparty risk applications will continue to grow.
7. Traditional generators will focus on managing their portfolio for sustainability
Generators will look to IT to provide analytics, such as complex simulations with cost of carbon, as one of the parameters to test changes to their portfolio of generation plants, whether it is cap and dividend or cap and trade.
8. Scarcity of clean water and availability of new technology will awaken the sleeping water market
Increasing water rates will begin to provide a price signal that drives conservation initiatives and associated technology investments during the next 2-3 years.
9. Smart cities will emerge as proving grounds for the intelligent economy.
Smart city initiatives like Amsterdam Smart City and the Pecan Street Project in Austin will emerge as the leaders in deploying, integrating and testing the broadest range of information, communication and energy technologies.
Within the context of smart cities, energy infrastructure (the smart grid) will be the initial focus of investments and will be used to support other infrastructure components such as water, transportation and buildings.
10. U.S. utility industry IT spending growth will accelerate dramatically.
Author:With more than twenty years of experience in information technology in the energy industry, Rick Nicholson is responsible for IDC Energy Insights’ research-based advisory and consulting offerings, which provide full coverage of the energy industry value chain including both utilities and oil & gas segments. Mr. Nicholson’s experience has given him a thorough understanding of market dynamics, business strategies and processes, and technology solutions. He is a recognized and highly respected expert in the alignment of business and technology strategies and the successful deployment of technology to enable business process improvement.