Investor value creation, utility stock prices and clean energy policy

If regulators want to steer utility investment toward renewable, sustainable resources, and away from carbon-emitting types, they can apply basic investor value creation concepts when implementing policy. The key consideration is the size of the gap between two rates of return. Read Steve Kihm’s blog post on this topic.

A 21st century grid—what do we need to do to get there?

Moving from a century-old electrical system infrastructure to one that is adaptive and more sustainable could require billions if not trillions of dollars. It is unclear whether this massive investment will create value for utility investors.

This leads to a host of key questions. Do investor-owned utility managers want to raise capital for grid modernization? What will it take to get them to invest? Will the current regulatory model work? What levers do regulators need to pull to move the grid forward?

Download the report and hear varying perspectives from utility policy thought leaders in this webinar broadcast May 31, 2017.

Sponsored by Lawrence Berkeley National Laboratory and funded by the U.S. Department of Energy.

Publications + presentations

Download Steve Kihm's detailed profile.

Corporate finance and sustainability

Corporate finance and sustainability: the case of the electric utility industry (pdf)
by Steven Kihm, Seventhwave and University of Wisconsin-Whitewater; Peter Cappers, Lawrence Berkeley National
Laboratory; Andrew Satchwell, Lawrence Berkeley National Laboratory; and Elisabeth Graffy, Arizona State University

ACEEE 2016: Considering risk and investor value in energy efficiency business models

Watch our short summary above and download the full paper.

ISEIF Surge Series: The human side of Smart Grid

Podcast and summary courtesy of the Illinois Science & Energy Innovation Foundation (ISEIF).

The utility business model is an important driver in making the energy system cleaner and more efficient. In what ways is the business model changing as the energy landscape diversifies? Clare and Uzma discuss this high-stakes, complex issue with Steve Kihm of Seventhwave and Andy Satchwell of Lawrence Berkeley National Lab, two authors of a recent paper about the financial and regulatory implications of the shifting utility landscape. Listen to the full episode for a tribute to the tenth anniversary of Snakes on a Plane, and hear Steve and Andy's insights.

Q&A: How regulators can improve clean energy economics for utilities

Steve Kihm, chief economist at Seventhwave, and Andy Satchwell, a Lawrence Berkeley National Laboratory researcher, say regulators have economic levers at their disposal that can guide utilities toward green energy development while improving returns for shareholders. Read more.

photo credit: Creative Commons

Will distributed energy end the utility natural monopoly?

In this article featured in Electricity Policy, Steve Corneli and Steve Kihm discuss how continued improvements in distributed energy resources may erode or even end the natural monopoly characteristics of electric distribution utilities. Download the article.

LBNL paper: A ‘distributed energy resource future’ imagines two paths

A paper by Steve Corneli and Steve Kihm, Electric Industry Structure and Regulatory Responses in a High Distributed Energy Resources Future, is featured in LBNL's Lisa Schwartz's blog post in Greentech Media this week (June 6, 2016).

Source: Electricity Policy

California PUC draft ruling adopts Seventhwave's proposed incentive framework for distributed generation resources

In April 2016, Seventhwave chief economist and principal Steve Kihm's co-authored paper, “You Get What You Pay For: Moving Toward Value in Utility Compensation,” was included in a draft ruling by the California Public Utilities Commission.

Steve co-authored the paper in June 2015 with Ron Lehr, director at Western Grid Group, Sonia Aggarwal, director at America's Power Plan and Edward Burgess, program manager at Arizona State University. The draft ruling adopts the team's proposed incentive framework for distributed generation resources. If adopted, the ruling could serve as a catalyst for distributed generation deployment across California and transform utility regulatory reform in the U.S. View the ruling and papers attached as appendices.

Future Electric Utility Regulation Series

A series of reports from Lawrence Berkeley National Laboratory taps leading thinkers to grapple with complex regulatory issues for electricity. Learn more.

Electric industry structure and regulatory responses in a high distributed energy resources future

A report released by Lawrence Berkeley National Laboratory’s Electricity Markets and Policy Group examines issues related to incremental and fundamental changes to electric industry regulation and utility business models. The report was co-authored by Steve Kihm, Seventhwave, and Steve Corneli, NRG.

Download the report and watch the LBNL webinar on-demand.

Impact of rising interest rates on utility stock prices

Interest rates are a key factor in determining a utility's cost of equity and investors find value when returns exceed the cost of equity. We are pleased to announce the release of a technical brief quantifying the impacts of rising interest rates on utility stock prices and discussing policy approaches state regulators could implement to mitigate negative financial impacts.

Download the paper.

Rethinking regulation to deliver a smarter electricity system

Steve Kihm teamed up with former Colorado PUC Chair Ron Lehr and America's Power Plan's Sonia Aggarwal to set forth a financial framework to promote sustainable resource development.

Download the report: You get what you pay for: Moving toward value in utility compensation (PART ONE: Revenue and profit)

Utility sales growth and shareholder returns

How does distributed generation impact utility sales and shareholder returns? Steve Kihm and Tracy La Haise present an interesting argument that it is not utility sales that drive utility stock returns, but asset growth.

This article was originally published in the June 2015 issue of Strategies, the magazine of the Association of Energy Services Professionals. Download the article.

Utility pricing and new business models: the inside scoop

Can utilities adopt opportunistic strategies under disruptive competition?

Rooftop solar leads a wave of disruptive competition for electric utilities that is grounded in innovations in technology, public policy, social preferences, and business practices. Regulatory protections cannot insulate utilities from these challenges. Leaders in the emerging environment will succeed by focusing on strategies that create new value for customers.

Read our critical analysis of these emerging challenges: Does disruptive competition mean a death spiral for electric utilities? (Energy Law Journal, May 2014). We've also posted a summary of this article.

Distributed generation creates challenges for regulators

Increasing numbers of customers generate some of their own power, causing net revenue losses for utilities.

Regulators are being asked to approve substantially revised utility pricing structures to stem those losses. Setting prices in this manner raises significant issues for policymakers. We analyzed impacts on utility finances and rates and identified the factors driving the market.

Download the white paper.