Revolution of Big Data Means Capacity Markets Should Be Left With Other 19th-Century Thinking
May 08,2015
The buzz that dominated the first day of panels of DNV GL's Retail Energy Executive Forum was "big data" and what it means for the retail energy industry
Constellation CEO Joseph Nigro devoted an opening keynote to big data, comparing the revolution about to happen in retail energy to the introduction of analytics and sabermetrics in baseball. The topic was further broached by numerous industry leaders throughout the day
"The old way of doing business won't work in this new environment," Nigro said. "By embracing and leveraging technology, our industry can effectively improve reliability, transition to clean energy, and lay the groundwork for a truly modern, integrated grid, with a renewed focus on our customers."
"Since restructuring, electric markets have been relatively stagnant with respect to how things work. For years wholesale generators have ultimately supplied power to retail customers," Nigro said
"We now need to accept the reality that major changes are on the horizon," Nigro said
Industry leaders essentially discussed that with big data and distributed generation, suppliers will know, in advance, when and how customers are using energy, and will be able to show the value of various alternative customer behaviors.
Such a revolution makes an outdated concept such as a capacity market, and indeed even a reserve margin, meaningless. When customers have the ability to produce energy behind-the-meter, and have enabling technologies to instantly, without customer action, drop peak load in response to economic signals, the idea of planning out a static forecast of peak demand needs three years out, under centralized planning, seems as antiquated and ultimately just plain stupid as the continued reliance on a central-station, hub-and-spoke model for power supply (the design CEOs like NRG's David Crane constantly rail against).
While neither Nigro nor any other panelists specifically addressed the implications of such revolution on capacity markets, to us, the conclusion is inescapable.
Reserve margins and central planning are relics of Thomas Edison's electric system -- not a "pro-sumer" system focused on customer behavior, decisions, and choice