As PG&E goes bankrupt, Itron wins two expansionist utility deals

The utility market is one that is undergoing quite a lot of transitions, and there are going to be many victims along the way. Some firms are getting into the generation business, others are focusing on the transmission and networks business, and others have decided to zero-in on the customer relationships side. But as the definition of an ‘energy company’ continues to morph, suppliers like Itron are going to find new avenues to pursue.

Commonwealth Edison (ComEd) and Consolidated Edison (ConEd) have signed two separate deals with Itron, which will see ComEd upgrade another 140,000 streetlights using Itron’s Vision Central Management System (CMS), powered by its Wi-SUN offerings, and ConEd is starting a 9,000-unit pilot project for wireless, battery-powered gas leak sensors.

In both deals, it is expected that the Wi-SUN technology Itron specializes in will form a large part of the project. Itron already connects some 4mn smart meters for ComEd, in Illinois, and now it is enabling the utility to expand into new markets like streetlighting, which in turn are a first-step towards many smart city projects.

For ConEd, the leak sensors could be a huge boon for efficiency, and more importantly network safety. In combination with smart meters, which can monitor the usage of its end-customers, the leak sensors enable the utility to more quickly track down and correct leaks in its distribution network. This is a very popular use case in water distribution too, but the risks involved in gas are much more explosive.

For the likes of Itron, these should be easy sales – to energy companies looking to upgrade their grid or better understand how their customers are actually using energy. As more renewable distributed energy resources (DERs) are incorporated into grids, backed up by storage systems to manage their variable outputs, the need for these IoT technologies increase, as these systems require monitoring and remote control. However, the wider energy market is proving quite turbulent, which could hamper investments and rollouts.

The largest utility in the USA, Pacific Gas & Electric (PG&E) has just filed for Chapter 11 bankruptcy, in the wake of two recent fires that have killed upwards of 100 people. PG&E was just cleared of fault in a 2017 wildfire that killed 22 people, but it is thought that it is going to be hunted by the state for its involvement in the 2018 fire that killed at least 86 people in California. It had reported power line problems in the vicinity of the fire’s origin, just before it took hold and broke out.

For California though, PG&E’s bankruptcy could have a significant impact on the state’s plans for renewable energy. There have been rumblings that the loss of the firm, or rather, the new direction that it would go in after the restructuring, will damage its enthusiasm for new projects such as DER and storage. It seems that it is on the hook for tens of billions of dollars in lawsuits related to the two fires, and the company that emerges on the other side of Chapter 11 is going to be much more focused on its core offerings.

Cynically, forcing these lawsuits from local courts into a federal bankruptcy court is likely going to reduce the payouts, as the court can’t also tack on punitive damages. Those suing the company are also going to have to contend with PG&E’s creditors, and it is thought that the costs from these cases are going to raise the rates for PG&E’s 16mn customers too. However, PG&E would argue that filing for Chapter 11 is the only way to allow it to keep running as it tries to get its house in order.

California has a target of 100% carbon-free energy by 2045, and the fate of its largest utility seems likely to impact that date. While smart grid systems are probably going to be a priority in the short term, the loss of demand for solar and storage from one of the biggest customers in the state is going to damage quite a few stakeholders. What’s more, PG&E’s share price is down over 70% over the past year, although it has does seem to have spiked upwards after the Chapter 11 announcement.

The sorts of technologies that can spot failing equipment or cut the power to a failing line before it has the change to cause a fire, are not as likely to be shrugged off by the likes of PG&E. These sorts of products and services would fall under the operational wing, as they would be incorporated into existing processes, or used to replace older systems.

However, the new technologies such as DER and storage are going to be less of a priority in the wake of the filing. As California is such an influential market in the US, this could have significant knock-on effects for any business that is playing in this emerging marketplace. NextEra, a solar provider, has already reached out to the Federal Energy Regulatory Commission (FERC) to intervene if PG&E tries to back out of a recently signed supply contract between the two, for example.

Of course, there’s a chance that the new PG&E decides to pursue renewable energy with vigor, setting up microgrids left, right, and center. If shareholder pressure ramps up, it could push the old-guard out, letting in new blood that fully believe in the renewable future. It’s a slim possibility, but Riot, is, as always, cynically optimistic.