Reworking the traditional electric utility.

• Author: Rahim, Shahid
• Position: Report

Byline: Dr. Shahid Rahim

Some new and disruptive business forces are rendering the traditional electricity business model obsolete and it may not serve well to accomplish the government's strategic goals in the power sector. It is imperative that this business in the country be reorganized along a more dynamic, flexible, and innovative lines to embrace the emerging realities and new developments. The risks of not acting timely could be serious as well as expensive, and also difficult to correct later.

Four major developments in the world's electricity marketplace have altered the fundamentals of the electricity business, and are raising serious questions about the continued viability of the traditional way of doing this business.

First, the recent technological strides and cost reductions in the renewable electricity generating technologies, particularly photovoltaic panels, have brought generation costs from these to a competitive level with those from conventional generation technologies.

Second, similar developments in the electricity storage technologies have made it possible for residential and other small consumers to opt for photovoltaic systems for meeting their electricity demands, either bypassing the local electric utility's system entirely or using it only as a backup to cover times when power from their own facilities is unavailable or uneconomic.

Third, the rapid inroads made by electric vehicles (EVs), and in particular plug-in hybrid electric vehicles (PHEVs), in the transport sector, especially in developed countries, are significantly impacting electricity demand. It is only a matter of time when these electrically-driven vehicles start penetrating the developing countries' markets, including Pakistan.

Fourth, the advent and deployment of intelligent and smart-grid technologies are making it possible for customers to manage their own demand to minimize their electricity bills as well as offering some this demand response capability back to their electric utility to cut their own electricity bills, and in some cases, even to earn extra money.

Collectively, the above trends are being termed "disruptive" by industry analysts because these are challenging the fundamental principles of the traditional electric utility business; some have been quick to even predict that these forces may be drifting the traditional electric utilities into a "death spiral".

The traditional electric utility business operating model in which power...