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2019 Power and Utilities Industry Outlook

Power and utilities industry trends

As forces of change in the power and utilities sector accelerate, utilities are tapping new technologies to serve increasingly sophisticated customers and improve operational efficiencies. But regulatory structures may need to catch up for the industry to meet evolving customer expectations. Read about how far and fast the industry is changing and what we should look out for in the new year in Deloitte’s 2019 Power and Utilities Outlook, a take from Scott Smith, US Power & Utilities leader, Deloitte LLP.

My take: Chris Tattersall

Power sector transformation continues as regulatory initiatives strive to keep pace

In my 2018 Outlook, I highlighted that the power business was well into a period of transformation and profound change driven by technological and competitive forces, as well as changing customer expectations. As these forces accelerate, electric power companies are tapping new technologies to serve increasingly sophisticated customers conditioned by other industries to expect a high-tech digital experience. New technologies are also expanding opportunities to improve operational efficiencies and prompting experiments with new business models. But regulatory structures are taking time to catch up. Change has begun, but it will need to spread faster for regulated utilities to meet evolving customer expectations. If they aren’t positioned to capture value from the shift toward distributed energy resources such as rooftop solar, battery storage, electric vehicles, and smart thermostats and appliances, they risk losing revenue. As we move into 2019, I want to take stock of how far and fast the industry is changing and what we should be looking out for in the new year.

But first, let’s take a brief look at the fundamentals. Continuing the post-recession trend, US electricity consumption is still characterized by relatively slow growth, although data through the third quarter of 2018 saw an acceleration over the previous year, largely due to an unusually hot summer.1 If confirmed by market data through year-end, this would be welcome news for an industry that has grown accustomed to low load growth and therefore a need to focus primarily on asset utilization and reliability to sustain margins. On the generation side, the three dominant trends also seem to be a continuation of recent years—that is, displacement of coal-fired generation, steady growth in natural gas, and rapid growth in wind and solar generation. The drivers for this trend are a powerful combination of economics, customer preference, and an increasingly central role for carbon footprint reduction along the electricity value chain.

Other significant events in 2018 remain partially unresolved, such as whether additional mechanisms at the federal or state level might be established to support generation assets under economic stress—for example, some of the coal-fired and nuclear fleet. And severe weather events continue to drive utilities to improve their response and recovery capabilities and regulators to accommodate mitigation options. For example, in response to the California wildfires, regulators have worked with utilities on a new operating and regulatory model that enables utilities to curtail power when winds exceed specified speeds in order to reduce the risk of equipment potentially contributing to wildfires.2

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2019 Power & Utilities Outlook
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