“When the world is predictable, you need smart people. When the world is unpredictable, you need adaptable people,” had commented Henry Mintzberg, a distinguished professor at Canada’s McGill University, who has studied the formal and informal roles of managers in business success more than anyone else among his peers. His seminal book, “The Rise and Fall of Strategic Planning” and a paper on the same theme in Harvard Business Review, both published in 1994, had sent jitters through the spines of business school faculties and corporate executives across the world. “Strategic planning”, met its coup de grace in the 90s, after enjoying zenith in the 70s and 80s, as industry after industry went through turmoil, upheavals, and reshuffling to survive the ruthless market forces.
The days of strategic planning in the power sector are also long over. As the sector undergoes an unprecedented transformation, unleashed by technology-driven disruptive forces during the past decade, almost all aspects of this 140-year old and one of the most stable businesses have come under critical re-evaluation—the physical infrastructure, institutional setup, business model, regulatory framework, pricing approaches, performance control, and you name it. A new approach seems to be sinking in the boardrooms of electric utilities that, in sharp contrast to this industry’s history, their focus must now shift to the extreme end of its value chain, the consumers, if the industry is to remain profitable.
Infrastructure industries which were thought to be the exclusive domain of the state for their natural monopoly and public-service character also couldn’t remain immune to the disruptive forces. First to fall was public transport, then the airline industry, and later the telephone industry. Due to their humongous size and complexity, electric utilities tried to act as the last bastion of this special category of businesses. And they did resist major changes until the last decade, except for a guided competition here and some choice allowed there. But, with the advent of smaller generators with cost and performance features beating those of their large-sized competitors, these utilities also couldn’t survive the market’s onslaught. The final death blow to this behemoth was, however, dealt by the recent availability of small, modular, and competitive renewable power generation technologies.
The industry is arguably at a crossroads. Some other developments including the growing popularity of electric vehicles (EVs), EV-driven battery storage, and smart grid technologies, are poised to shakeup the very foundation of this industry. The question isn’t whether to change or not, as there are no two opinions among utility executives that they must change. The real issue is how to manage the change and to what degree, as some of them, due to comfort of old habits and routines, are still reluctant to make any radical change even though the world around their industry has gone topsy-turvy.
But change they must because it’s unavoidable, and the sooner they did, the better it would be. Planning and planners hold a key and pivotal role to easing out the requisite transition. From its traditional role of providing business solutions to executive management that are robust against a set of predictable future scenarios, planners are now increasingly being called upon to aid top leaderships in thinking strategically and devising strategies to redefine and realign their position in a market that continues to be ruled by unpredictable surprises. In this new world, “strategic planning” has become an oxymoron. Agility and flexibility for adapting to changing market are the new rules of the game in this sector.
The traditional approaches to electricity resource planning, including “least-cost planning”, “integrated resource planning”, “portfolio planning”, and more recently, “value-based planning” are all remnants from an era when electric utilities were considered among the most stable and least risky of industries for investment since economies of scale existed in generation and transmission, competition was non-existent, consumers had no choice in suppliers, and a handsome return on investment was guaranteed by regulators.
Traditional planning in its various forms essentially consisted of aggregating consumers’ forecast demand within the utility’s control area and meeting it through a least-cost sequence of generation and transmission and distribution (T&D) capacity additions. These approaches have lost their rationale as well as usefulness. A continued reliance on this approach essentially is tantamount to locking the country into capital-intensive, long-lived, import-dependent, and environmentally-hostile power sector infrastructure which, once in place, will be difficult to change, let alone rollback.
In the above backdrop, issuing of “Indicative Generation Capacity Expansion Plan (IGCEP) 2047″ by the National Transmission and Despatch Company (NTDC) for the country, as a regulatory requirement from NEPRA is, therefore, baffling. It clearly shows that our government and power sector entities are still stuck with the traditional approach to managing this sector via large central-station generation facilities. In this writer’s view, a major part of the future investment should instead go to augmenting and strengthening the T&D systems and building institutional capabilities instead of expanding central-station generation and allied transmission systems.
The government and NEPRA will have to seriously re-think their present approach to power sector management. The central focus of the government in the next 5 to 10 years should be the distribution systems because it will be the front where most of the action will take place. Enabling regulations, visionary leadership, dynamic and savvy management, intelligent and smart networks, and imaginative, creative, and innovative service packages will all be required to offer electricity customers (yes, you read it right, no more captive and helpless “consumers”) to win them back and keep them tied with the grid. System planners have a special role in the future, as further discussed below.
Planning will need to start at the consumer’s end, by identifying his energy service needs, like space conditioning, lighting, cooking, food preservation, mobility, etc. After identifying these at the individual as well as community levels, planners should consider the scope of electricity in serving these requirements, at source, via a nearby distributed plant, or from the utility’s main grid whichever proves to be the most feasible solution.
Reaping the huge potential that shifting the planning and development focus at the distribution level, however, will not be easy. It will require strong political will and commitment by the government and some systemic overhaul in the existing institutional structure. Most planning tools, institutional capacity, and financing arrangements have evolved around large and central-station supply-oriented schemes based on conventional technologies. As such, these deeply-entrenched practices will be difficult to unravel and replace with a new thinking and approach.
A major part of the system planning function will also need to move from its current central location—under the NTDC—to Distribution Companies (DISCOs) as these entities are much closer to customers, and thus can better plan for the demand and required supplies within their jurisdictions. In a sense, DISCOs will be planning for mini-grids that will be designed to function as autonomous systems largely but will be tied with the NTDC’s national grid to mutually assist each other to enhance operation of the country-wide interconnected system.
The existing planning capacity within DISCOs will require considerable strengthening and re-equipping to enable them to perform their new and enhanced roles. The planning function at NTDC will still be required but its aim and role will have to change. Instead of being the sole planner for the power sector, it will need to act as a coordinator and facilitator in linking together mini-grids under DISCOs.
The suggested changes will be difficult as well as time- and resource-consuming, but their payoffs to the nation would be huge in terms of avoiding unnecessary, capital-intensive, and largely import-dependent generation, transmission, and distribution assets.
[box type=”note” align=”” class=”” width=””]The writer is a freelance consultant, specializing in sustainable energy and power system planning and development. He can be reached via email at email@example.com.[/box]