Everything old is new again. Or so goes the song — and the utility industry, according to Dean Oskvig, the President and CEO of Black & Veatch's energy practice.

“In a way, what we're evolving to is where we started out, 100 or 110 years ago,” Oskvig said. “The U.S. electric system then was a collection of individual generators, and they weren't connected very well. It was chaos.”

That chaos led to centralized plants and distribution in vertically integrated areas, the essential regulated format the utility industry worked with for the better part of a century. But as distributed resources are becoming a driving force behind the grid's evolution today, it appears the past is now present. According to Oskvig, recent and rapid technology advances mean that what didn't work well in 1915 could be transformative in 2015. The technology side, however — including rapid advances that have enabled two-way power flows and battery storage to help integrate intermittent resources — is only a part of the transition.

“Now we have the technology that can overcome what was chaos 100 years ago,” Oskvig said. “Today, we have technology that is out ahead of business models and regulations. And those need to catch up.”

Black & Veatch recently released its ninth annual Strategic Directions: U.S. Electric Industry report, based on a survey of more than 400 electric industry stakeholders. While some of the takeaways feel obvious (utilities expect more renewable investment and are focused on distributed resources), the pace of change is striking.

Today, distributed generation (DG) assets of less than 20 MW capacity make up about 5% of the U.S. generation mix, B&V said. But more than half of respondents (53%) expect that the share of DG assets could double by 2020. That's a significant step up from what the survey showed in 2013 and 2014, when 43% believed distributed resources would reach that level.

“Given this acknowledgment, how ready is the industry for increased adoption of DG by their customers?” B&V asked in the report. Some 80% think distributed generation, and in particular solar PV, “represents a threat to their business.”

“In reality, many utilities are still in the review stage when it comes to assessing how they will manage DG,” the report said. “While some utilities might view DG as a threat, they are, perhaps surprisingly, open to considering investments in it and related technologies.”

New technology changing utility-customer relationship

New technology — from battery storage to smart thermostats to smart phones — has driven the industry's change as consumers look to take more control of their energy consumption. But utilities are facing declining customer growth and low or negative consumption growth, while at the same time they need to upgrade infrastructure to allow new applications and meet growing calls to reduce energy sales. What can utilities do about all this?

Successfully upgrading and integrating infrastructure and energy will mean utilities need to harness all resources available to them — including the customer.

“A renewed focus on customer interaction is also altering the way energy efficiency and distributed energy resources are deployed,” B&V said in the report. “In turn, this is changing the relationship among customers, utilities, technology and the markets to which we all connect. As a result, electric utilities are viewing the customer as a partner in their operational, financial and efficiency goals.”

That customer focus means changing the way utilities engage with their customers: B&V found 54% of the overall survey respondents expected to increase their social media investments, including 78% of bundled distribution and transmission service companies, and 69% of vertically integrated utilities.

Critical to getting customers to engage with the utility is the use of modern technology. Bill inserts long ago became fodder for the recycling bin, B&V notes. "The way to a customer’s heart is through their tablet or smartphone, meaning it must be mobile."

The caveat is that messages must be useful to the consumer — "concise, customized and actionable." Investments in advanced metering and data analytics have given both utilities and consumers a wealth of data, and utilities now have the opportunity to offer multiple, targeted choices in terms of billing and conservation.

"The soft things are, a lot of times, the hardest to figure out," Oskvig said. When utilities give customers options, the overwhelming result is that they simply default by making no choice, meaning power providers must find better ways to interact with customers. 

"Business plans usually overstate the amount of customer interaction that is going to happen," he said. "We can make a lot of plans about providing customer choice for this, or ability to do that. Often we put that all in place and it doesn't change anything."

A J.D. Power customer survey released last month largelt echoed those ideas. According to that report, customers want more communications from their utilities — up to twice as much as they receive now — and they want to feel they have degrees of choice and control.

For utilities, meeting demand response and efficiency goals "hinges on the utility's ability to engage its customers," B&V said. "Too many programs have failed because of customer confusion and cost barriers (both real and perceived). By placing a singular focus on the unique value of digital control and developing simplified messages, utilities can begin the change process."

Industry transformation educating consumers, challenging utilities

Despite the massive changes in how the industry produces and delivers power, Oskvig remains convinced that, at the end of the day, centralized distribution isn't really going anywhere. "The backbone grid is always going to be there," he said.

The need for that basic grid, however, is at the heart of much debate between ratepayer advocates, clean energy stakeholders, and utilities needing to recover costs. It is a familiar narrative playing out in many states, where utilities say residential solar panels are often subsidized by the wider grid, while customers argue they provide benefits that are not being properly accounted for.

Customers accustomed to receiving a monthly power bill for their consumption are only now seeing the costs of maintaining the grid that go beyond generation. That's creating a hectic learning curve, but ultimately it will all be for the better, Oskvig believes.

"We are surfacing a lot of these dynamics and coming to grips with them in a more tangible way than before," he said. The process of revamping the utility industry is "revealing all of the costs it takes to have a grid, to operate it, to maintain it, to upgrade it, to add capacity, to modernize it. ... One of the benefits of what we're doing here, is that the customer will understand more of that."

Ultimately, Black & Veatch concluded that the next generation utility will be the companies that "provide the logistics, transportation, security and billing services for millions of potential electric suppliers and buyers across the bulk power systems, distribution grids and microgrids."

All the while figuring out how to remain profitable, of course — and at a time when independent power producers are playing a more prominent role in the electricity grid. Utilities today are responding to this challenge by shifting their business models to put a greater focus on transmission, retire older plants sooner, and investing in the promise of self-generation and unregulated assets.