Study: North American Utilities Most Concerned about Regulation, Infrastructure, Workforce, Pricing

According to a survey of more than 100 senior executives in the U.S. and Canadian electric and natural gas industries, the five most critical challenges facing the North American energy industry, in order of importance, are: environmental regulation, aging infrastructure, non-environmental regulation, an aging industry workforce, and the need for new pricing mechanisms. The annual survey, now in its fifth year, was conducted by Capgemini and Platts.

Maintaining high levels of reliable power delivery was cited as a key industry focus by more than half (55 percent giving it a rating of nine or ten on a scale of  one to 10 from “not important at all” to “very important”) of the respondents to the survey, which was completed April 2011. Executives indicated challenges to achieving this goal related to key infrastructure, specifically transmission. Additionally, 51 percent identified cybersecurity technology as highly important, especially in terms of customer data and control systems, while 44 percent cited the importance of infrastructure security, including pipelines, plants, and transmission.
“While executives identified environmental regulations as the most important issue facing the power industry, and they expect wind, solar, and natural gas to increase in their fuel mix, they continued to give the nod to nuclear and unconventional gas,” said Tia Hensler Heath, director of market research and operations at Platts.

Nearly half of the survey respondents (40 percent) agreed that increasing shale gas is very important; 37 percent gave high importance to expanding coal in more environmentally acceptable ways; and 31 percent emphasized the need for expanding the nuclear fleet. This said, fuel mix issues were in the bottom third of the power industry’s 13 issues tested.

When asked about pricing and rates, which ranked as the fifth-leading concern, close to one-third of the survey respondents rated decoupling and critical peak pricing as very important. The study also shows that there is some debate as to whose responsibility it is to educate consumers on green energy costs. While 42 percent of executives believe it is very important to educate consumers, only 27 percent strongly agree that it is the responsibility of the utility companies to educate the end user.

In the area of smart meters, the survey showed that the majority (72 percent) of utility industry executives are or have been involved with smart meter rollouts to their customers. However, few respondents know if the technology has reduced peak electricity demand or usage. An additional 67 percent do not know or question if consumer use of smart meter data to manage their energy consumption will become mainstream. Of those who do believe it will become mainstream, more than a third (34 percent) expect it will take between five and ten years.

As the industry’s growing investment in renewable energy provides consumers with more options than ever before, it has become imperative for utilities to more effectively communicate with the end user. The study revealed most respondents (60 percent) strongly agree that they need to embrace the concept of the consumer, and move away from viewing their customers as “merely rate payers.” In addition, 46 percent strongly agree that utilities need to be more media savvy and become more involved in public relations aspects of their business as a way to engage more closely with consumers.

“Among lessons learned from the initial large-scale rollouts of smart meters in North America has been the importance of utilities being in close communications with and educating their customers and stakeholders on the costs, benefits and details of these programs,” said John Christens, vice president of smart energy services at Capgemini. “Understanding consumer attitudes and effective education will be critical to the success of future rollouts as well as for new initiatives such as electric vehicles, smart home appliances, time-of-use pricing, energy conservation and efficiency programs, and the potential price impacts of decoupling structures and increased renewable-energy generation.”

In addition to surveying utility executives on current industry issues, the Platts/Capgemini study also asked the industry leaders to offer their opinions about the future of the energy industry. Among the key findings, the survey revealed that over the next five to ten years:

  • Utility executives plan to increase their focus on environmental regulation and pricing/rates (both 67 percent), end users (62 percent) and consumer technologies (60 percent) such as electric vehicles and energy-efficient appliances, and infrastructure (60 percent);
  • Most utilities anticipate their companies will increase the use of wind, solar, and natural gas in their overall fuel mix while the majority of executives at utilities with coal generation expect to decrease their use of coal;
  • More than half of utility executives (55 percent) strongly agree the industry needs to focus more on system and cybersecurity; and
  • Eighty percent of the respondents believe the industry should create business models that support decoupling, but only a small proportion strongly agrees the industry will actually move in this direction (12 percent).

The Platts/Capgemini survey involved both in-depth telephone interviews and an online questionnaire; it measured issues on a scale of 1 to 10 from “not important at all” to “very important” or “strongly disagree” to “strongly agree.”