Being a utility manager is getting harder. Tesla is to blame.

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Forget about building a big coal-fired power plant and making a regulated profit while stopping to play golf in the afternoon. Running a utility business is getting harder and harder.

And change is happening at an accelerating pace. This creates more work for utility executives and opportunities for investors.

It’s getting harder and harder to be a utility CEO “mainly because of electric vehicles,” says Ruben Llanes, CEO of AutoGrid. “Also this push for the electrification of everything to reduce [carbon dioxide] emissions.

It is

You’re here

(ticker: TSLA) fault, in a way, in that the company has been a leader in the transition to electric vehicles and renewable energy. The company pioneered consumer electric vehicles, which will require a lot of electricity to charge when they make up a significant share of cars on US roads. And CEO Elon Musk calls electric vehicles, renewable energy generation and battery storage three pillars of a sustainable, carbon-free economy.

The fact is that power generation is no longer solely in the hands of traditional utilities. A

walmart

(symbol: WMT) with a solar roof, a Tesla owner with a backup battery or an owner with a

Generac

(GRNC) standby generator are all potential producers.

Organizing the flow of all this electricity is a monumental task. “It’s not about installing poles and wires,” says Llanes. “Optimization and efficiency are very important.”

This is where his company, which was taken over by an electrical hardware and software giant

Schneider-Electric

(tickers: SU. France, SGBSY) in 2022, excels. The 13-year-old startup provides software to utilities and others that manage the growing complexity of the network.

AutoGrid sells software for DROMS, DERMS and VPP, three products whose acronyms underscore the complexity of the energy industry.

DROMS is short for Demand Response Optimization and Management Systems. Some of these systems can change thermostats in homes to manage electricity demand when the grid is on. The more sophisticated systems include demand forecasting and logic to pre-cool homes so that there is no spike in demand following a weather event.

DERMS is the abbreviation for Distributed Energy Resource Management Systems. This software orchestrates assets into the market that might not be part of the traditional utility network.

And VPP is short for Virtual Power Plant. A VPP replaces traditional power generation with distributed generation assets. Schneider’s AutoGrid, for example, will aggregate megawatts of generation assets – the power of solar panels on top of a

walmart
,

for example – and sell those megawatts to a utility.

One thing a utility can do with a large enough VPP is replace peak generating capacity, often a fossil fuel power plant that is expensive to operate.

Schneider is a player in this field because thousands of their building management systems are in use. Schneider equipment is found in four out of 10 homes in the United States, although owners may not realize it. Think of the circuit breaker boxes in your basement.

The company is also involved because the opportunity is great. Bloomberg BNEF estimates that by 2040 there will be 1 terawatt of flexible capacity. That translates to a global business with around $100 billion in annual sales, coming from DROMS, DERMS and VPP, Llanes says.

A terawatt is a lot. Today there is approximately 7 to 8 terawatts of global power generation capacity. More than half is still based on fossil fuels. Solar represents about 5%.

Some of the growing opportunity has already manifested itself in Schneider stocks. Shares have risen more than 100%, cumulatively, over the past five years. THE

S&P500
is up around 55% over the same period.

Write to Al Root at allen.root@dowjones.com