Cost Reduction Strategies for Utilities Part 1: Multi-purpose Use Assets

Guest Author: Ahsan Upal

Utilities are trusted with a responsibility to provide a standard service at a regulator approved rate, without a right to refuse anyone, with expectations for the highest levels of public safety and reliability of service. That makes us conservative by nature, I get it. But that’s no excuse to be complacent, hiding behind the shadow of greater responsibility and walls of regulation, thinking that we have too many constraints to innovate. Hoping that our business model will continue to deliver value for our customers, the shareholders and the stakeholders.

I don’t believe that our current business environment will continue in a world where users are no longer willing to pay for affording utilities the luxury of owning and inefficiently operating single purpose infrastructure. In a world where you can turn your personal commute car into a dual-purpose Uber taxi and the unused rooms in your house into Airbnb hotel rooms our current model looks awfully inefficient and it is going to be challenged.

However, before that happens, and we’re forced to make quick changes, there is a window of opportunity to evaluate if our customers are getting true value from our assets and for their rates, are we operating our utilities efficiently, are we making an effective use of our resources and deploying best practices, latest technology and approach to making the best and informed decisions for not just our shareholders, utility boards but also for the ratepayers.

Utilities are at a crossroad today and they need to decide whether they are going to evolve to become more innovative on their own initiative or are they going to be forced by customer pressure through political will and regulators or be taken-over by the non-utility competition.

This paper will explore some approaches utilities can take to deliver better value to their ratepayers.

Multipurpose Use Assets

There was a point in time when the telephone companies used to transmit through their copper wires only telephone voice communication and the cable companies only TV video signal, however, today the same copper wires are being used to transmit voice, internet traffic and video signals, taking their one revenue stream to multiple while dramatically lowering the individual cost of each service. What makes us think we can continue to deliver a single product of only electricity down our wires without being challenged and our current business model called-out as archaic?

Utilities need to reevaluate the assets that they own and think what additional value could be derived from them? This will not only make them more efficient and lead to lower rates for our consumers, but it will also increase their market capitalization by increasing value of the existing assets and revenue per km of line or per transformer or megawatts of generation per acre. Utilities have some very valuable assets in terms of their generation plants, lines and substations, land and right-of-way, maintenance and spare equipment, construction vehicles and consumer data. Can more value be derived from them, some ideas to consider are presented here:

  • Adding solar and wind resources on the existing traditional generating plant lands will add capacity to the same facility making greater use of the existing land, increasing energy density of megawatts generated per acre, while utilizing the existing grid connection.
  • Adding powerline carrier communications (PLC) on the powerlines that allows telecommunication such as internet and voice traffic to be carried over the powerlines. This will add another revenue stream and make multipurpose use of the powerlines subsidizing the electricity delivery cost.
  • Many utilities will setup their own area wide fiber network for protection requirements. These requirements use only a small bandwidth of the fiber leaving much of the bandwidth to remain unused. Most utilities do not utilize the spare fiber capacity or get a benefit from commercializing it for additional revenue.
  • Along the same lines of thought, could fiber be buried in the powerlines right-of-way or alongside pipelines or railway tracks making multipurpose use of the same right of way land reducing the environmental impact but equally importantly reducing the costs of construction by laying down multiple assets at the same time. Getting a bit more creative could the powerlines be buried below or alongside the train tracks? The same crew could inspect and maintain both assets, reducing operational costs.
  • Utilities especially the distribution utilities own some prime land for substations in urban centers. Perhaps, some of these spaces can be commercialized, for example, could a drive-thru fast food restaurant or a coffee shop be opened at the substation property or even a public library, mall or a condo building built atop a substation? Certainly, additional public safety precautions will need to be considered to make such ventures viable. However, if the additional cost to build appropriate structures to restrict public access while allowing operational access, and to make it architecturally appealing, is outweighed by the additional revenue and utilization potential then perhaps there is a sound business case that needs to be investigated to gain the extra value.
  • Encouraging smaller utilities to merge to create operational efficiencies while reducing the management overhead. Where that is not possible could the utility spare equipment and maintenance vehicles such as bucket trucks be pooled between the neighboring utilities to make efficient use of those assets for the participating utilities.
  • There would be operational and corporate overhead efficiencies if utilities deliver multiple services, for example, if an electric utility also runs water and natural gas utility or vice versa allowing same accounting, supply chain and field crews to be able to support multiple assets. Instead of having multiple revenue meters and area networks to get the meter data perhaps one super-meter could work for electricity, gas and water transmitting the data over one area network instead of three.
  • Now for some truly out-of-the-box thinking consider the transmission lines that crisscross our lands thousands of kilometers between cities and communities scattered throughout most countries of the world. Could goods such as from Amazon, Walmart or postal service deliveries be transported along the transmission lines especially to remote communities and between major urban centers? For example, Hydro Quebec has developed a transmission line inspection robot called Expliner that crawls the conductor checking for anomalies. Similar robots or tethered drones could have dollies to carry delivery packages autonomously. This will not only create another revenue stream for the T&D utilities, but it would reduce much goods transportation traffic from our roads reducing the carbon emission, roads wear and tear, and the cost of deliveries while lowering the electric utility rates.

Could PODs or tethered drones similar to line inspection dollies be used to deliver goods. Photo credit – EPTCON

  • Could the right of way the utilities own be used for other purposes such as for farming? Could underground storage, data warehouses or automated factories that require minimum manpower such as bottling be constructed there? Could the base of transmission towers be converted into storage space for utilities or municipalities?
  • Utilities sit on a treasure-trove of consumer data that can be anonymized and utilized to offer new services to our customers or shared as open-source with technology companies to develop new smart home technologies and services – layering services on top of our utility network.

There are already some successful examples of such multipurpose use where street lights for examples are attached to the distribution poles and 3rd party fiber is hung on the powerlines as well. The next generation small cellular 5G network will require a high concentration of antennas to have sufficient signal strength and utility poles will provide a great mounting post. Similarly, as the move towards the interconnected and smarter cities of the future takes place could the sensors and cameras monitoring traffic flows, weather, crime be installed on the power poles. These instruments could double duty and also detect and report on pole and conductor condition and outages?

Read next of Ahsan Upal’s series : “Cost Reduction Strategies for Utilities Part 2: Technology Adoption