Governing Green Power II:
How should utilities of the future make money?

University of Hawai‘i at Mānoa
Innovation Laboratory -- iLab (directions and map)

Growth of renewable energy, reduced economies of scale, rapidly falling storage costs, network communication technologies, plus customer self-generation, load shifting and efficiency options, all have the potential to dramatically change the nature of electricity systems. Underlying this is the eroding viability of incumbent regulatory models that govern utility revenue and profit.

Key issues that this conference will address:

• Profit of investor-owned utilities is typically tied to rate of return on capital investments, which sets the wrong incentive for utilities to promote less capital-intensive ways of integrating renewables, such as demand response.
• Current volumetric (i.e., per kWh) rates and demand charges do not reflect underlying marginal costs, creating inefficiencies that will become more severe as renewable penetration grows.
• As renewables and storage grow, fixed costs will increasingly replace fuel costs, making marginal costs more variable and more difficult to determine.
• A potentially large shortfall in revenue from efficient volumetric pricing in covering all fixed costs.
• Alternative ways of covering fixed costs not covered by efficient volumetric pricing.