Member-Owned Power Companies

Part
01
of three
Part
01

Member-Owned power Companies

Member-owned power companies are highly competitive in the United States' rural energy sector with most of their members pledging to remain loyal to them despite the competitive energy markets. The members feel the companies are cheaper than their competitors and are more transparent in their dealings with their customers. These companies own about 42% of the national line distribution network and have operations in about 48 states. The number of member-owned power companies in the United States has been increasing from one in the 1940s to over 900 today and the companies have outlined their growth projections for 2020 to 2026. The regulations affecting the companies include the 'Rural Act', the 'Secure Act', the 'Parking Lot' tax and the 'Cadillac' tax. Some major concerns facing the industry include the aging grid line, the global environment quality concerns and their employees' motivation.

Impact of Competitive Energy Markets on Member Owned Power Companies

The Growth Of Member-Owned Power Companies in the United States

Regulations Likely to Impact Member-Owned Power Companies

Major Concerns Facing Member-Owned Power Companies

  • One of the major concerns facing these companies is the aging and deteriorating line distribution network which has served for close to a century. The companies are strongly considering modernizing the grid line to improve services to their members but this has a heavy cost implication.
  • Environment quality concerns is the other issue these companies are faced with since the global trend now is for companies to move towards renewable energy sources and away from traditional sources such as coal. This shift has heavy cost implications given that coal has been the major source of power for these companies. Employee motivation is also an issue these companies are struggling with as most of their staff reside far away from their work places and have to commute long distances to and from work causing many of them to suffer burn-out.
Part
02
of three
Part
02

Member-Owned Power Company Trends

The two recent and major trends that were observed in the member-owned power companies are as follows: 1) The growing inclination towards power stations based on natural gas and renewable energy sources, which affects overall fuel mix. 2) Investments in battery storage and electric vehicle (EV) charging stations, which are caused by the rise of Li-ion battery technology and electric vehicles, respectively.

Diversification of Power/Fuel Mix:

Trend: Power plants fueled by natural gas and renewable sources are growing and are projected to keep doing so, whereas power plants powered by coal and nuclear energy are declining, and this trend too, is expected to continue.
  • Among the new installations being planned by Co-operative power companies, as per the National Rural Electric Cooperative Association (NRECA), wind and natural gas power stations dominate with 46% and 34% of the total planned capacity, whereas planned solar powered plant installations currently have an 18% share in these stations. Moreover, among the installations that are currently facing planned retirements, 43%, 33%, and 21% are powered by coal, natural gas, and nuclear energy, respectively.
  • The official website of NRECA states that most of the cooperative power utilities tend to phase out the use of conventional energy sources, and switch entirely to the renewable energy sources. Due to the decreased natural gas prices the coal’s share in generation is projected to fall from 28% to 21% whereas that of natural gas is expected to rise from 32% to over 37%.
  • Renewable energy generation is projected to grow steadily, from 18% to over 37%, and is expected to exceed coal based energy generation in 2031 to become the second largest source of generation.

Use/Impact of New Technology:

Trend: The co-ops power companies are always inclined to adapt to newer technologies in their power supply services to ensure their survival in a competitive market. The most recent of these trends include investments in EV charging stations and battery storage.

Battery Storage:
  • The data provided on the official website of NRECA shows that new technologies are continuously being integrated into the electric grid system to ensure improved resiliency, efficiency, and other factors
  • A microgrid consisting of two 150 KW generators fueled by propane and a 1 MWh / 500 kW Tesla PowerPack battery system is planned in North Carolina to ensure an undisturbed power supply for a 31-home subdivision during extreme situations.
  • A battery storage unit is also being planned for providing resilient power supply system in California, which is frequently disturbed due to the wildfires.
  • According to an article published on official site of NRECA in August 2019, four co-ops were among the top 10 lists of electric utilities that invested in battery storage during 2018. Kauai Island Utility Cooperative ranked first with storage of 3000 Wh per customer. Other top co-ops mentioned are Connexus Energy, United Power Inc., and Chickasaw Electric Cooperative.
EV Charging Stations:
  • The Senate environment committee has approved $1 billion in federal grants for creating EV charging stations. Inverstor-owned as well as member-owned power companies are qualified to apply for these grants.
  • Oklahoma Co-ops are planning numerous public vehicle charging points every 25-50 miles throughout the state.
  • North Carolina based electric cooperatives has announced a $1 million investment for twenty-one EV charging stations in September 2019, ten of which are DC Fast Chargers and the remaining eleven are Level 2 chargers. The fast chargers can bring a depleted battery of an EV to 80% in 30 minutes, whereas the Level 2 stations take a few hours to do the same, and are hence planned for installation in locations where people won't mind spending some time, such as cafes, restaurants, etc.

Part
03
of three
Part
03

Investor-Owned Power Company Trends

According to industry outlook analyses, investor-owned power companies are adapting to regulatory trends and developments in technology. With a focus on an aging infrastructure, utility industry trends will continue to expand into the new decade with new opportunities for growth. Notable trends at the forefront of the industry revolve around the transition into clean energy, value from distributed energy resource (DER) strategies, and growth through new business models.

Commitments to renewable energy

  • Natural gas continues to be a primary energy source in the US power generation mix. In 2019, natural gas remained at more than 44% of generation capacity. However, wind and solar capacity has continued to increase to approximately 12% of capacity due to increased support for renewables, declining prices, and regulatory policies such as renewable portfolio standards (RPS).
  • While many local and state governments have supported clean energy with increased renewable portfolio standards, the federal government has rolled back environmental rules and regulations put in place by the Clean Power Plan.
  • In the next decade, renewable energy, which includes wind and solar, is expected to increase from 18% of total U.S. energy generation in 2018 to approximately 31% by 2050. This increase is expected to contrast the decline in nuclear and coal shares, according to the Energy Information Agency (EIA).

Distributed energy resource (DER) strategies

  • Energy infrastructure is moving towards decentralized electrical grid that are dynamic in nature and made up of DERs. The efficiency and cost-effectiveness of DERs is appealing to ratepayers while utility companies are strategizing ways to penetrate the marketplace.
  • According to a survey of over 900 US electric industry stakeholders, the majority of respondents see utility investment in DERs as a long-term play, with 55% in agreement that DERs will dictate service offerings over the next 10 years. In another survey, over 60% of utilities expressed interest in being able to own and rate-base DERs.
  • DER strategies may face regulatory challenges as regulations seek to main competition. Some states such as New York and Arizona have DER marketplaces that may restrict DER ownership by utilities. DER penetration into the marketplace will be a hot topic in the coming years.

Evolving business models and technology

  • Power companies are delving into transactive energy models that use new technologies such as blockchain. Blockchain technology could play a vital role in enabling customers to create value through energy storage, solar, vehicle-to-grid, and EV charging transactions.
  • There is still some uncertainty around new business models which will require further advancements in regulatory and market structures. However, this new technology is expected to help promote grid flexibility and customer participation. For utilities, it can help add an extra level of security to prevent cyber attacks.
  • Currently, power company ComEd in Illinois is exploring the use of blockchain to monitor simulated energy exchanges between resources, such as solar and storage, on two microgrids. Industry members will continue following the potential of the technology for other capabilities such as tracking renewable energy certificates.

Sources
Sources

From Part 02
Quotes
  • "Generation from renewables is projected to steadily increase, reaching 26% in 2040 and surpassing coal by 2031."
  • "Out of the total 90 GW of new capacity planned for the 2019-2027 period, 46% is from natural gas units, primarily at natural gas combined cycle (NGCC) plants. Together, wind and solar make up an additional 48%."
  • "A total of 42.8 GW of capacity is scheduled to retire before 2030 with coal, gas, and nuclear units accounting for approximately 43%, 33%, and 21%, respectively."
  • " These retirements are expected to be replaced by 24 GW of new wind, solar PV, and natural gas capacity. As shown in Figure 11, nearly two-thirds of the planned additions are utility-scale renewables, mostly scheduled to come online in December."
  • "The AEO2019 projected electricity generation mix from EIA’s Reference Case is shown in Figure 22, with significant shifts expected from 2019 to 2040. Because of low natural gas prices and the fact that no new coal units are being built, the gap between generation from coal and natural gas is projected to increase, with coal’s share of generation falling from 28% to 21% while natural gas rises from 32% to over 37%. Renewable generation (including hydro) is also projected to grow steadily, from 18% to over 37%, surpassing coal generation in 2031 to become the second largest source of generation. "
Quotes
  • "Wake Electric Membership Corp. is working with a home builder and North Carolina Electric Membership Corp., the statewide generation and transmission cooperative, to provide a microgrid to serve the 31-home subdivision during extreme situations. “As a residential homeowner in the neighborhood, most of the benefit will be that the resilience of their electric service will be very high,” said Don Bowman, vice president of engineering and operations at the Wake Forest-based distribution co-op. The microgrid will consist of two 150-kilowatt generators fueled by propane and a 1 megawatt-hour/500 kW Tesla PowerPack battery system. "
  • "The neighborhood will be able to run for up to 36 hours in times of outages due to hurricanes, other weather events, accidents, equipment failure or even proactive maintenance work on the system, said Bowman. The microgrid will also be connected to the main grid, adding new power resources that support greater reliability."
Quotes
  • "We’ll also hear from Kevin Short, general manager of Anza Electric Cooperative, whose co-op is getting ready to deploy its first utility-scale battery storage unit to help battle resiliency challenges due to California’s frequent wildfires. And Barry Brown, executive director of engineering and transmission maintenance at AEPCO, talks about their unique relationship with Anza and how they’ve worked together to get this project off the ground."
Quotes
  • "The Anadarko-based generation and transmission cooperative co-hosted an event detailing plans that officials described as a “game changer for electric vehicles,” establishing the most comprehensive public charging network in the nation. Public vehicle charging points will be deployed within 25 to 50 miles of every roadway in the state. The chargers should ease concerns for motorists traveling long distances, even in sparsely populated areas."
Quotes
  • "The 21 new charging stations will be made up of 10 DC Fast Chargers and 11 Level 2 chargers. The fast chargers can bring a depleted EV battery to 80% capacity in about 30 minutes. The Level 2 chargers take several hours to do the same, which is why they are located near places where drivers tend to stay awhile—such as restaurants and state parks, Huis said."
Quotes
  • "The Senate environment committee has approved a $287 billion, five-year transportation bill that authorizes $1 billion in federal grants to create electric vehicle charging stations along major U.S. highways."
Quotes
  • "Kaua’i Island Utility Cooperative in Lihue, Hawaii, ranked No. 1 among utilities that added the most watt-hours of energy storage per customer in 2018. KIUC posted more than 3,000 watt-hours per customer, nearly six times more than the second-ranked utility, Sterling Municipal Light Department in Massachusetts. This is the second year that KIUC topped the list of storage watts per customer."
  • "Three other co-ops also made that list: Connexus Energy in Ramsey, Minnesota, which ranked fifth; and United Power Inc. in Brighton, Colorado, which ranked sixth."
  • " Chickasaw Electric Cooperative of Somerville, Tennessee, in partnership with the Tennessee Valley Authority, ranked seventh."