Current state of the electricity power market

by Dennis Quinn, President, JouleSmart


As a small business owner or manager, you may not think much about your energy supplies except when it’s time to pay the monthly bill. For much of the last century, “out of sight, out of mind’ may have worked great for SMBs, given how predictable (by which I mean “boring”) the utility industry historically has been. But as Sonal Patel over at Power Magazine puts it, “The power sector’s transformation over the last 10 years has been profound and unmistakable.” The confluence of regulatory, economic, and technology disruptions portend big changes that could affect your bottom line. Here are two trends to keep an eye on.

The rise of renewable energy

There was a time when wind and solar energy were considered expensive premium options only for price-insensitive enviro-geeks. No more.

According to Lawrence Berkeley National Laboratory, the national average wholesale price of wind Power Purchase Agreements (PPAs) dropped to around 2¢/kWh in 2017, down from a high of 7¢/kWh back in 2009. These prices compare favorably to the projected future fuel costs of gas-fired generation. Not surprisingly, wind has made up 30% of new electricity generation capacity nationwide over the last decade.

Solar PV power has followed a similar declining cost curve, both for utility-scale and rooftop generation. National Renewable Energy Laboratory (NREL) benchmarked U.S. PV installed costs as of Q1 2017 at $1.85/Watt (DC) for commercial rooftop systems and $1.03/Watt (DC) for fixed-tilt utility-scale systems. These benchmark prices represent a 65 percent decline since 2010.

The 2017 benchmark translates to an unsubsidized Levelized Cost of Energy (LCOE) of $0.09–0.12/kWh or $0.06–0.08/kWh when including the federal Investment Tax Credit.

Declining renewable energy prices impact SMBs in at least two ways. First, competitive prices for rooftop solar offer new options for customers to manage their utility bills. Once limited to sunny, high energy-cost states (and yes, I’m looking at you, California and Hawaii), rooftop PV is now widely affordable across the map.

Second, wind and solar power are intermittent—they only produce when the wind blows and the sun shines. Their increasing penetration on the grid pose new challenges to utilities to balance power supply and demand. One way they are doing so is by adopting more variable pricing structures to reward customers who consume when power is plentiful and cheap and punish those who consume when power supplies are tight. As a business owner, this means you’ll need to pay more attention to when you use energy relative to price peaks.

Proliferation of AMI meters (aka smart meters)

According to the Federal Energy Regulatory Commission (FERC), “Advanced meters are the most prevalent type of metering deployed throughout the country, accounting for nearly half of all meters installed and operational in the United States.”

Smart meters record energy consumption in 15-minute and hourly intervals rather than monthly. This rich new information source opens the door to multiple innovations in pricing, grid management, and facility management. On the pricing front, regulators in several states, including Maryland, Minnesota, Ohio, and Pennsylvania, have approved, or are considering, time-based rate pilots. In other states, including California and Pennsylvania, regulators are considering next steps for demand response and time-based rate programs. The latest generation of demand response programs offer new flexibility and rewards to customers who are able to manage their loads to minimize grid impacts. New energy efficiency pilots in California, Oregon, and New York will pay for savings calculated from Normalized Metered Energy Consumption. Finally, AMI meter data offers customers an enhanced feedback mechanism to manage and optimize their internal systems.

Implications for your business

The bad news is that the increasing complexity of the energy markets can feel overwhelming. The good news is that energy services companies like JouleSmart are stepping up to help you manage that complexity so you can focus on your core business.

JouleSmart helps companies transform their underperforming buildings into intelligent, productive, efficient, and comfortable facilities. JouleSmart upgrades your building with intelligent and connected equipment, which can include some or all of the following: occupancy and temperature sensors, real-time power meters, smart thermostats, intelligent HVAC (heating, ventilation and air conditioning) controls and monitoring, intelligent lighting systems, cellular gateways, wireless networks, and a building management system with Integrated Intelligence Gateway. JouleSmart’s ActiveOversight ™ provides 24/7 monitoring to maintain a high-performance building.

The benefits of the intelligent building include improvements to the bottom line, employee productivity, customer comfort and a reduced carbon footprint. Along the way, JouleSmart squeezes your utility bills and positions you to fully participate in utility demand response programs. Best of all, JouleSmart covers the upfront costs and recovers those costs through the shared savings. There are no capital expenditures and no risk on your part. Now is a great time to explore how your business can benefit from transformations in the power market.