Customer-Side Energy Management: What Role Should Utilities Play?
Involving utilities in customer-side electricity management could reduce competition in managing customer energy use, but the idea may offer benefits as well.
Abstract
Decarbonization of the electricity grid implies more variable and intermittent solar and wind generation. Intermittency response is the strongest motivation for customer-side energy management (CSEM)—that is, technology that allows a third party to monitor electricity availability and adjusts use to balance supply and demand. The question is the role of utilities in providing CSEM. Antitrust and regulatory policy have reflected a principle that regulated businesses’ participation in unregulated markets creates opportunities to exploit market power. Tactics include excessive transfer pricing of unregulated inputs, cross-subsidization of unregulated services, and discrimination against unaffiliated rivals in obtaining the regulated service. Risks of utilities’ involvement in CSEM can probably be mitigated through vigilance and safeguards. Moreover, a utility may be well placed to undertake CSEM because of its supply and consumer use. In addition, adverse selection may inhibit a direct-to consumer CSEM market from developing. A likely outcome is that the utility procures CSEM technology from a competitive market and provides CSEM directly.
