The reality of the smart grid is that oftentimes the more power utilities sell, the more money they make, so utilities risk losing money by deploying smart grid technologies that help consumers conserve energy (GridPoint’s Jeffrey Ross pointed out as much in his testimonial before the House’s Committee on Science and Technology yesterday morning). Well, an illustration of the mess created by this business model emerged recently from a spat between a disgruntled utility that was losing revenues through an energy efficiency program and a smart grid tech startup that was helping utility customers save energy.
Earlier this month the French Energy Regulatory Commission declared that the startup Voltalis, which sells energy management devices that curb energy consumption, would have to pay utilities for the power saved by its devices. Voltalis’ devices, through which utilities can remotely turn on and off appliances during peak energy-use hours, can save customers 10 percent of their energy bill, and can help utilities manage the power grid better and avoid building more expensive power generation plants as more people consume more energy.
Voltalis installed the device for free, charged utilities for the service, and worked with the utility to help them implement demand response programs. France’s main utility, EDF, seemed to be working with Voltalis well enough — until the revenue loss from the drop in energy consumption went before the regulatory commission.
France’s power regulator basically said that Voltalis was causing EDF to lose revenue and declared that Voltalis “can’t be a free rider.” The decision, which is utterly ridiculous and goes against the country’s efficiency goals, has caused a big hullabaloo in France — the New York Times quotes, an antinuclear group called Sortir du Nucléaire saying, “At this rate, it will soon be obligatory in France to consume large quantities of electricity, or face taxes and fines, and maybe imprisonment, too.”
It’s also got people talking about “a good old boys club” in France’s energy industry, says Echelon’s Senior VP of Sales and Marketing, Anders Axelsson, (whose company provides the power line technology for Voltalis’ home energy gear). EDF was government-owned until a few years ago but is now a limited-liability corporation.
To be sure, the French energy market has unique challenges. But the larger problem is the business model of having a company’s core product be something that much of the world is working to reduce consumption of: energy. As Axelsson tells us: “It is a must to change the way utilities do businesses. There has to be new business models worked out.” There’s a variety of ways to do this — like energy efficiency mandates — but one of the biggest is decoupling, in which utilities’ power sales are disconnected from their profits. There’s some movement on this (like encouraging language in the stimulus package) but until the problem get’s fixed, we’ll be seeing more cases like the one between Voltalis and EDF.