Utility of the Future: or What to Think When Everyone Says Your World is Turning Upside Down

[Originally published in Energy Biz]

As the red-eye jet made its way toward the airport with dawn breaking, street lights still on and house lights coming on, I watched first the farms with long roads, then the small clusters of towns, then the vast suburban outreach of Washington, DC. I had been thinking a lot about the evolution of the electric grid. From above, one could see how electricity, whether urban or rural, connected all of these people and businesses into one enormous system, sometimes dense and sometimes sparse, but always on. Now the next generation of innovation is poised to change the way we think about and use this system.

Many of these innovations are more than just information flow—they are real energy resources like solar and energy storage, demand response, and energy efficiency—that affect both the operations and business of utilities. At a recent conference in Hawaii—a state that has been undergoing such tremendous and real-time alterations to their grid that I have likened it to changing the tires while the car is moving—state regulatory Commissioner Lorraine Akiba said, “The integrated grid of the future is one that requires strategic actions to realize the full value of central power and distributed energy resources.” [1]

Akiba touches the key here to the future of our utility model: integration. The term came up again at a recent energy storage conference in California when a utility representative said, “Our job is not to simply connect, but to integrate.” The integration will need to be both physical—which has always been the operating premise—but also digital. Moreover, this integration does not need to rely on a centralized system of power generation plants connected by long transmission lines, but rather can allow for disaggregation of flexible and distributed resources.

One case to watch is the New York REV proceeding[2] where utilities—already decoupled from generation—are being asked to become consumer-service platform providers. As the commission Chair Audrey Zibelman has said, “By fundamentally restructuring the way utilities and energy companies sell electricity, New York can maximize the utilization of resources, and reduce the need for new infrastructure through expanded demand management, energy efficiency, renewable energy, distributed generation, and energy storage programs.”[3] The key here will be whether the utilities will be able to perform all these services, operate their system, and remain cost-competitive at the same time.

Utilities that see this integration with disrupters as a business opportunity stand to benefit. As in the case of New York, utilities could start thinking of themselves as service providers or, at least, integrators. What the Federal Energy Regulatory Commission has done on the bulk-power side by allowing compensation for characteristics and services provided to the transmission side of the system, state regulators could do on the distribution grid by allowing compensation for a wider range of values.

Another potential construct–proposed in the REV proceeding with Jon Wellinghoff, former Chairman of the FERC and Jeff Cramer, one of my business partners—would be for distribution utilities to adopt what FERC put into place when it issued Orders 888 and 2000[4], enabling the creation of competitive wholesale markets and Independent System Operators. This would be a comparable system on the distribution side, or Independent Distribution System Operator (IDSO).[5] The IDSO would enable distributed energy resource integration, greater consumer choice and participation, and allow for a more efficient and transactive energy framework.

Yet another option might be that utilities and others could be compensated for increased efficiency, for decreased energy intensity, and for lower-carbon resources (especially as the EPA Clean Power Plan is finalized and states begin implementation). State RPSs already give utilities credit for renewables, and in decoupled constructs, utilities are given credit for efficiency programs. What could be new is a more holistic set of metrics—going beyond but not totally dissimilar from the Value of Solar model.[6] That new set of metrics could: take into consideration what we want out of our system; put rules in place to compensate for those services; incentivize entities to provide those services; and then allow all participants to compete to provide services. Utilities could be winners in that model, but so could consumers and innovators.

It would be helpful to have a national policy that sets goals and objectives for our electric grid that could be the basis for a new compensation model. But states can set their own policies, as California has, that drive innovation in resources that can help meet state goals. The impetus does not need to be limited to state leadership, either. Vision can come from utilities and innovators collaborating to offer a set of services that are presented to commissions and allow them to see (and compensate) myriad benefits of that integration.

To keep those lights on that dot the landscape, whether in clusters or singly, utilities can join forces with “disrupters” to ensure that everyone benefits from a cleaner and more efficient system. They key is to move beyond simple connection to integration.

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Rebuild For the Next Sandy

Check out this blog on AOL Energy, too!

After hurricane Sandy ravaged the Atlantic shoreline, my 88-year-old mother-in-law sat in her New Jersey home, unwilling to leave her things, for over a week with no electricity. Another friend of mine spent that same week waiting in gas lines to refill a generator and keep his brother’s small business going. These two examples don’t even include the truly unfortunate folks who completely lost their homes and businesses; they just lost their electric power.

There has been quite a bit of buzz about whether the “smart grid” and associated technologies and applications actually helped in the Sandy recovery efforts. They may have but I think we can do better. Read more of this post

In the Middle of the Debt Ceiling Negotiations: Can Energy Information for Consumers Help our Economy?

As I rode the metro into work the other day, I read a piece by George Packer in the New Yorker describing a family unable to make ends meet because they are underemployed, not qualifying for federal or state assistance yet unable to make a living wage with high skills required. Packer claimed that the 9.2 % unemployment rate is really something like 16.2% if one takes into consideration those who do not appear unemployed on paper but are certainly not making it financially. Washington, D.C., is a bit of a bubble in that regard; we have not seen as dramatically the economic toll that the rest of the country has suffered. As I thought about the millions of parents with college degrees who would go to part-time jobs that do not use their skills and then stay up online all night juggling bills and school supply costs, I stepped into a briefing in the cool, sparkling new Capitol Visitor’s Center. Read more of this post

Five Lies Your Mother Never Told You About Smart Grid

Check out AOL Energy for part of this blog!

Lie #1: Smart grid is a project for the utilities and its success rests in their hands. Utilities really have just three public goals: operate a safe, reliable, cost-effective electric grid. Our grid does need modernizing; it is congested and overloaded in some places and we need more real time information about what electrons are going where so we can balance variable renewable sources like wind and solar with electric vehicles and other consumer loads. On the metering side, having remote access to real time information will allow faster response to outages and a more accurate ability to plan for energy sources. The Recovery Act did a lot to subsidize that initial cost – and we still have a long way to go. Read more of this post

What can you get for a few billion dollars? A futile attempt to find results of smart grid stimulus funding.

I visited the federal government’s SmartGrid Web site today for the hundredth time to see if I could figure out what we’ve done with the $4.5 billion in stimulus funds the Department of Energy (DOE) has been giving out for the last two years. Nothing but a message saying results would be posted starting late 2011. Digging pretty deep into the Web site you can find some charts about which technologies have been installed to date, but nothing about what the stimulus was really supposed to do—create jobs. Read more of this post

FERC Order 745 and clean tech: really, this is not boring!

When the words “FERC Order” are uttered, most people’s eyes either glaze over or worried frowns appear as they wonder if they need to understand the conversation. Let’s try to figure out what this order means for the clean tech world in words we can all understand. Read more of this post

STATE OF THE SMART GRID:…

I’ve been avoiding writing about the potential fate of smart grid in this new Congress because, honestly, I haven’t been able to get a good read on these new folks yet. The President’s State of the Union address did provide us with some markers about what might be possible in the smart grid world over the next 18 months or so. Let’s start with what he said:

●A Clean Energy Standard, which seems to be on a track to define everything as “clean” except energy efficiency (arguably the quickest, cheapest, cleanest resource of all), may help smart grid in some way—since just about any power production benefits from an intelligent grid–although not as significantly as a renewable portfolio standard would.

●Emphasis on “infrastructure” could certainly incentivize improvements to the electric grid and create much-needed jobs.

STEM (Science Technology Engineering and Math) education programs, especially assisting girls, will help groom our smart grid employee of the future. More