The Future of Utilities: Extinction or Re-Invention?

The Future of Utilities: Extinction or Re-Invention?

The Future of Utilities: Extinction or Re-Invention?
May 18, 2015 by Susanne Fratzscher
Date of Publication: May 2015
Number of Pages: 24

Utilities are experiencing an unprecedented change in their operating environment, which requires a broad reinvention of business models. Historically, a centralized and grid-connected power generation structure positioned utilities in the center of the power system, with a culture focused on regulators and mandates rather than innovation and customer service expectations. This utility business model is now profoundly questioned by the accelerated deployment of distributed energy resources and smart grid technologies, as well as profound changes in market economics and regulatory frameworks. This is a global trend, to which utilities and regulators around the world seek to find adequate solutions.


This is an exceptionally well

This is an exceptionally well-worded and - as far as I can tell - accurate and balanced appraisal of the utility industries in both the United States and Germany, but it stops short of a perceptibly impending development - the need for rapidly restructuring Germany's lignite mining regions, which should not be abandoned for reason of the electrical power transmission and expertise that is already in place. Unfortunately, the state governments in charge have always reflexively insisted that they have no Plan B in place for such a radical transition, and naturally their own current energy policy would be put into question by any such alternative contingency planning. In addition to the situation at RWE, however, Vattenfall's eastern German power plants are no longer profitable. The company has now applied for refunds of the commercial taxes it paid to local Lusatian and Southern Leipzig communities in 2014. Gemany's four lignite state governments are thus clearly being overruled by the majority rule of the market. To date, no viable proposals have been submitted on what to do next. Someone must come up with a plan that keeps as many power plants running as still required, which produces enough revenues to pay for mining reclamation, and which reverses population declines that have been induced by ever-more-rationalized surface mining operations. That's a tall order, and it is not apparent whether Germany has the tall men and women capable of filling it. We're talking about one fourth of Germany's electrical power generation here, meaning that these powerful means must be quickly transformed into equally powerful ends of a notably different complexion.

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