Fall 2016 - 60500 - PA680PA - Policy Research Project

New Electric Utility Business Models & the Cost of Electricity

The electric utility industry is undergoing the greatest changes since its inception over a hundred years ago.  The transition from fossil fuels to renewable energy and the advent of distributed energy resources such as distributed generation, energy storage, efficiency and smart grid technologies are rapidly changing the industry. New electric utility business models are being proposed, debated and piloted in the U.S. and other parts of the world.

This PRP will compare new business models, investigate current and future incentives and subsidies for electrical generation, and investigate the impact of different levels of distributed energy resources on the business models.

The PRP report will include: data on current subsidies for gas, coal, nuclear, wind and solar generation; listing of expected incentives and subsidies under the new business models; comparison of new business models showing similarities and distinctions; and impact of low and high penetration levels of DER on the business model formulas.

New electric utility business models reviewed will include New York’s Reforming the Energy Vision, California PUC proceedings, UK RIIO project, and others. There will be discussion of new utility financial mechanisms such as performance-based ratemaking, market-based earnings, and distribution system provider models. Current debates over net metering, value and solar tariffs, fixed charges and other issues will be examined.