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engage directly with the technical and economic aspects of smart grid innovation. Many of
these actors, including the utilities and long-standing suppliers of generation, transmission,
anddistribution equipment, areenergysystem incumbents withdeepties andlong-standing
relationships with the existing electric system processes and institutions. Incumbents have
been directly involved in the co-creation of rules and norms of the current energy system
and tend to benefit from the status quo. Newer entrants, including firms in the information
and communication technology (ICT) sector and start-up companies, have different
priorities as they are developing and taking advantage of novel business opportunities.
They include companies selling rooftop solar PV or those combining groups of consumers
to provide third-party demand response services; these actors are more likely to benefit
from new rules and changes to the existing order. New and incumbent actors have different
priorities and therefore have different capacities to adapt to change. Different risk
tolerances are shaped by individual circumstances that in turn influence interactions with
other societal actors. These differences also result in different kinds of interest in the
opportunities presented by smart grid innovation.
4.2.1 Utilities
Electric power utilities generate electric power, operate the high-voltage transmission
system to bring power to central substations, and run the low-voltage distribution grid to
bring electric power to customers. They are responsible for planning and operating the
electric power system and ensuring electricity is reliable and affordable for customers.
Depending on the jurisdiction, electric utilities can be private or public companies. A
utility may be “vertically integrated,” serve a defined service territory, and singly fulfill
all of those functions, or in restructured jurisdictions each of those services (generation,
transmission, and distribution) will be provided by a separate entity. In some parts of the
world utilities are owned by the public sector, while in other places they are privatized. All
of these factors influence a utility's orientation toward developing smart grid.
The utility ownership models in the United States are diverse and span many of those
found elsewhere in the world. In the United States, there are four main types of utilities:
(1) investor-owned utilities (IOUs); (2) municipally owned utilities; (3) cooperatively
owned utilities; and (4) federal power agencies. These different ownership structures shape
the utility's motivations, their relationship with federal and state regulators, and their
relationship with their customers.
In the United States, 193 IOUs serve 99 million customers (68 percent) and sell roughly
2,000 giga-watt hours (GWh). Traditionally, IOUs owned generation, transmission, and the
distribution networks which served customers. As regulated utilities, they were granted
exclusive service territories and handled customer service and billing. Infrastructure
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