ORLANDO — Distributed energy resources (DER) including rooftop solar, battery storage and electric vehicles offer improved economic alternatives to a centralized grid design, enhanced consumer choice, more flexibility in grid planning and operations, and a smaller carbon footprint made by the electric industry.
So is there a downside?
Generally, the challenge for electric companies and regulators partly relates to the harnessing of DER to offer a variety of value-added electricity services to retail electricity customers, such as DER services for energy efficiency, demand response, distributed generation and energy storage options and services for electric vehicles (EVs), such as charging stations.
Offering these new value-added services from a modernized grid is impacting the role of utilities, third-party providers and regulators, who all must figure out how to make it work to best benefit consumers.
For instance, according to the Electricity Markets and Policy Group of the Lawrence Berkeley National Lab, a U.S. Department of Energy Office of Science lab managed by the University of California, regulators must decide what a basic electricity service is compared to a value-added service; which entity provides the value-added services (utilities, third-party providers or both); under what conditions; and how will the utility company get paid for enabling services.
Traveling this new-age electricity road is loaded with lots of considerations, according to regulators who spoke during sessions held here this week at the Edison Electric Institute’s (EEI) 2017 Financial Conference.
“I’m realistic and I know there are many challenges, but customers are driving this; it’s a work in progress,” said Lorraine Akiba, a commissioner for the Hawaii Public Utilities Commission (PUC).
“I’m positive overall” that solutions will be determined on such issues, she said, adding, “I’m not a Polly Anna to say it’s all hunky dory.”
Nevertheless, Akiba and two other regulators offered suggestions on how electric companies might better maneuver some of these considerations when they come before their state PUCs.
Rates, for instance, are a very thorny issue, said Michael Peter Florio, former commissioner with the California PUC through 2016, who is now an energy consultant and senior fellow at More Than Smart, an Oakland-based nonprofit working on distributed energy issues.
“When you’re talking about rate design, everybody has an opinion and much of that is leave it alone,” Florio said during an EEI session.
In California, Florio said, demand response and energy efficiency have existed for 30 years, while volumetric pricing also has been a central focus for many years and one that he supported.
“It’s the networks and figuring out a way to charge for [services] that is acceptable to customers; that’s what’s challenging,” Florio said. “It’s considered radical to handle it like the telecom industry did with cell phone plans, for instance … and hard to make it happen.”
But fixing the rate issue needs to happen or the growth of DER could be inhibited, which wouldn’t be good over the long term, he said.
Florio also noted that there has been “a contentious environment between utilities and third parties regarding new products and services. I hope to see more partnerships and solutions.”
For instance, electric companies could contract with a third party to handle a service and then defer an investment, he said.
Akiba agreed that utilities should consider partnering together to support the grid of the future. They could adopt new products and services to provide customers the best options, or partner to invest in accelerators, she said.
Utilities must harness big data analytics or invest or contract with a partner on innovation around them, she said, acknowledging that it takes time, energy and a partnership with regulators, as well.
Utilities need to have the ability to change and respond, too, so we must help utilities become energy services consultant managers … and incentivize utilities to save money but remain reliable and affordable while planning for the future with reinvestments in infrastructure, for instance,” Akiba said.
But be clear about your core business, said Asim Haque, chairman of the Public Utilities Commission of Ohio (PUCO). Regulators don’t want to have to draw a market line in the sand regarding which services should be regulated and unregulated, he said.
Haque also noted that companies should “ensure you’re future-proofing these investments for customers and for all projects we’re trying to push forward.”
He cited a utility in Ohio that has to replace all of its smart meters only seven years after PUCO approved their installation because “seven years ago, we didn’t know what constituted a smart meter,” Haque said.
The grid, Akiba said, is the highway of the future and electric companies could be the orchestrators of all the components.
“The grid will enable all the different sectors to operate,” she said. “Generation will be more risky, but running and supporting the grid is the sweet spot for utilities.”
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