Yes, they follow a century-old generation-and-distribution model. But they also juggle a complex, contradictory set of variables – and pray for good weather.
Back in ancient Egypt, they had it made. Every year the Nile flooded, bringing with it enough water and fertile silt to make Egypt the breadbasket of the world for thousands of years.
In the rare years when the Nile failed to flood, the Pharaoh had some explaining to do. When there were seven bad years in a row, it was written up in a story we still know today.
The ancient Egyptians valued predictability and reliability – always good for business. Naturally they set up their culture to keep things the same. Why would anyone mess with a system that provides the people with food, wealth and comfort?
The culture was so conservative that even the art stayed the same through the centuries. No changes, thank you – they might make the Nile decide not to flood. If that happened – as the communications folks in Ramses’ court might have said – you can write Pharaoh’s talking points.
This is a simplistic way of introducing the mindset of a typical electric utility executive.
If you’re a Shelton Insights subscriber – say, an energy efficiency program manager, customer service director or sustainability officer at a utility – you may wonder why you’re having trouble selling your colleagues on a software package or a program that could save customers money on their bills and even strengthen the reliability of the system.
If you run a solar power startup, you might be confused about your power company’s pushback on the idea of installing PV panels on rooftops.
If you’re one of the corner office utility executives we’re talking about, you might want to invite everyone to walk a mile in your shoes, because the choices are never as simple as they sound.
And you’re right.
So what can we do to help our readers understand you better?
In our Shelton consumer segments, it’s safe to say that by and large, utility executives are Cautious Conservatives, falling among the 22 percent of Americans who are predominantly male, white, well educated, over 55 and married.
On energy matters around the home, Cautious Conservatives are generally knowledgeable about energy and make energy improvements primarily to save money and to get more control over personal energy consumption and costs.
When directly asked how they feel about the environment, they’re more likely to say, “It shouldn’t stand in the way of business development.”
In some ways, electric utilities do have a good deal, along the lines of the Egyptian Pharaohs. They make and distribute a product everybody wants and needs. At local utilities, they send out bills and the folks in town pay them.
The basic technology – large generating plants putting alternating current onto a grid – has stayed pretty much the same for more than a century. The basic business model – despite all the excited talk about competition and deregulation in the pre-Enron era – hasn’t really changed much either. Most power companies still operate as monopolies, at least with residential customers, and they are still regulated by public utility commissions.
And even the quaint old chestnut about the public good still applies, too: Private utility shareholders may not like it, but in exchange for the privilege of providing a necessary service, utilities really are supposed to do the best they can for the people they serve.
For starters, they’ve got to keep electricity prices as low as they feasibly can. If they don’t, the utility commission will squawk, and big industrial customers might switch providers or – worse – leave the service area and take their jobs with them. Then – to paraphrase what might be said inside the headquarters – you can write Pharaoh’s talking points.
The public good also includes the environment. Even before conservation groups started suing them, most utilities were installing as much emissions-control equipment on their coal plants as they could afford. Many are also making long-term plans for more nuclear and natural gas (along with a smattering of renewables).
Like those ancient Egyptians, we Americans expect 100 percent reliability. We not only want our lights on 24/7, but high-tech industries even require that their power never fluctuate. Even a tiny flutter can ruin millions of dollars worth of microchips.
To keep that kind of quality and reliability, the good old electric system looks pretty good, with the utility running a few big plants and controlling exactly how much power goes onto the grid.
To utility execs, all those rooftop solar units look like an unpredictable wild card. How can we predict power production? How can the balancing engineer in the Control Room compensate when rogue watts come onto the grid? From the standpoint of reliability and predictability, renewable energy is not a solution. It’s a problem.
Then there’s the pesky weather. It’s like Goldilocks: If it’s too hot, you have peak power demands and need to use costly power sources. If it’s too mild, you don’t get enough revenue.
You want it just right, and without too many tornadoes, hurricanes and snowstorms. Like those ancient Egyptians, you want the annual flood – without the 12 plagues.
As extreme weather events have grown more common and more severe, it has become a bigger and costlier challenge for utilities to bounce back.
Our Shelton research tells us that, after a weather event, residential customers are patient, for a little while. Participants in our Utility Pulse 13 survey told us they expect the power back on within twenty-four hours. This is not reasonable or practical, but it’s what utility customers expect.
Want another headache? Try to build a nuclear plant. Just ask the Duke folks who recently pulled the plug on their $27 billion plant near Orlando, Fla.
We can learn a lot about utility execs from the discussions of nuclear. “It’ll take some money to build,” I’ve heard more than one CEO say, “but doggone it, once it’s done, it’s clean, safe and cheap to run.” For a utility executive, a nuclear plant feels like an answer to a bunch of problems.
It is an engineering answer, which feels comfortable to an engineer. It’s a safe and reasonable answer to a person who values the safe and reasonable course. And it’s an answer you can stand up at a meeting and sell to your board, the PUC, and even some conservationists, once you explain to them that nuclear puts out no emissions at all.
Unfortunately, “safe” choices often turn out to be not so safe at all. In the late 90s, when natural gas was cheap, many utilities built natural gas plants. Then prices spiked, and lots of plants were mothballed or sold at a loss.
Other ideas and solutions sound newfangled, a little too tree-hugger. If it’s something new, a Cautious Conservative exec will want to see low-risk trials, pilot projects and case studies. That’s how the successful, innovative programs around the country have been sold internally, and that’s what will sell.
Every day, the utility executive is pushed and pulled to cut costs and find efficiencies, yet also spend money on facilities, transmission lines and improvements that can enhance reliability and clean up emissions.
If you’re marketing to a utility executive, keep in mind that your pitch should show exactly how it will cut costs and increase reliability, and it should sound safe, tested and reasonable.