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NASEO Energy Policy Outlook
Bringing Stakeholders into the Utility Evolution Conversation
Tanuj Deora
February 8, 2017
About SEPA
SEPA’s mission is to facilitate the utility industry’s smart transition to a clean energy future through education,
research, and collaboration.
www.sepapower.org
www.sepapower.org
Policymaker & Regulator Goals
4
• Political Dynamics
Cost, Choice, Environment, Jobs
• Base Expectations
Safety, Reliability, Affordability
• Existing Statute & Regulations
State & Federal Compliance
• Economic Development
Rates, X-subsidies, Jobs
• Definitions of “Fairness”
Inherent Conflicts
• The “Regulatory Compact”
How to and to Whom to Apply It?
www.sepapower.org
Utilities’ PracticalConsiderations
5
Policy & Regulatory Uncertainty
(Environmental, Markets, Rates)
Demand Growth
(Organic Growth, DER, EE,
New Sources of Load)
Customer Expectations
(Control, Options, Cost)
Cost Dynamics
(Fuel, Capital)
Reliability & Resiliency
(Threats, Resource Adequacy,
System Coordination)
Technology Advances
(Generation, DER, Hardware,
Software, Data Analytics)
www.sepapower.org
…if those aren’t enough…
6
Policy & Regulatory Uncertainty
(Environmental, Markets, Rates)
Demand Growth
(Organic Growth, DER, EE,
New Sources of Load)
Customer Expectations
(Control, Options, Cost)
Cost Dynamics
(Fuel, Capital)
Reliability & Resiliency
(Threats, Resource Adequacy,
System Coordination)
Technology Advances
(Generation, DER, Hardware,
Software, Data Analytics)
Threats from New
Entrants
Workforce
Capabilities
www.sepapower.org
Grid-Centric Solutions
7
Rate ReformNew Customer
Offerings
Grid
Modernization
DER
Integration
• Volumetric vs
Fixed/Demand
• Time-Varying
• Market-Based /
Transactive
• Community
Solar
• Rooftop Solar &
Storage
• Holistic DER
Solutions
• Communications
Networks
• Advanced
Metering
• Data & Analytics
• Grid Services
• Resource
Planning
• Program Design
www.sepapower.org
Putting it Together
8
www.sepapower.org
The Wrong Way to Simplify
9
Grid (i.e. Utility)
Perspective:
System = Value
DGPV = Cost
Measured Expectation of
Change
Consumer (or 3rd Party)
Perspective:
System = Cost
DGPV = Value
Rapid Expectation for
Change
www.sepapower.org
The 51st State
10
What?Unlocking the transition to a clean energy
future
Who?51st State
Community
How? Phased based
activities and content
www.sepapower.org
SEPA’s Alternative Approach
11
THE BUILD
(Phase III)
Toolkit & community to start down the
path
THE BLUEPRINTS
(Phase II)
Scoping holistic pathways from
our current systems to future
structures
THE VISION
(Phase I)
Visions of a hypothetical,
optimized electricity
marketplace
51st State Community
•“SEPA has really taken the reigns on an evolving conversation about evolving the power grid.”
- 51st State Summit Participant 2016
•“51st State is my favorite industry initiative”
•- Regulatory Support Executive
www.sepapower.org
Bruce
Nordma
n
www.sepapower.org13
Utility Evolution Roadmapping
Expert Stakeholder Consensus
SEPA condensed contributions into 4 “doctrines” that represent common ground for discussing utility and market transformation:
1. A primary goal of the market should be to promote efficiencies in the production, consumption, and investment in energy and related technologies
2. The role of the utility, as a public service entity, should be clearly defined so that all market participants can understand their roles in enabling customer options in a fair, transparent, and non-discriminatory manner
3. Rate structures should provide transparent cost allocation that supports a sustainable revenue model for utility services providing a public good.
4. Customers should be presented with a variety of rate and program options that expand their choice of and access to energy-related products and services, and that are simple, transparent, and create stable value propositions
Blueprints for Electricity Market Reform
Report available athttp://51st.report
www.sepapower.org
Potential Distribution Utility Business Models
Distribution System
Platform Optimizer
Wires-Only
Planner/Owner/Operator
Provider/Owner of
Behind-the-Meter DER
Interconnector &
Integrator of DER
Opera
tional C
ontr
ol
Low High
High
Deployment Control
www.sepapower.org
Potential Model for Utilities’ Future:The Distribution System Operator
16
www.sepapower.org
Key Questions
17
Policy & Regulatory Uncertainty
How do we most efficiently ensure alignment?
Demand Growth
Can we build models robust
for wide-ranging scenarios?
Customer Expectations
How should the utilities’ role
evolve to ensure choice?
Cost Dynamics
Which risks should be
held by the utility, which
by customers?
Reliability & Resiliency
How do we address new risks
while realizing new opportunity?
Technology Advances
How can we best support
innovation and deployment of
new resources?
Continue the Conversation…
Resources
Events
Tanuj Deora
Chief Strategy Officer
202-552-4411
1220 19th St NW, Suite 800
Washington, DC 20036
www.sepapower.org
@sepapower
For more information:
Thank You!
www.sepapower.org
Additional Material
20
www.sepapower.org
All-in turn-key costs for solar PV in the US, 2015
Sources: SEPA “2015 Utility Solar Marketplace Snapshot,” Data from EnergySage & Mercatus
US prcing varies significantly by state, and is generally higher than many countries by as much as 50% in the
residential market
• Residential
pricing has
been quoted
as low as
$2.50/W
• FirstSolar
expects $1/W
for large
scale by
2017
www.sepapower.org
Solar has grown, and utilities respond
Mainstream Utility
Solar Strategies:
• Large Scale
Solar PV in IRPs
• Exploring
Community
Solar
• Redesigning
Rate Structures
22
www.sepapower.org
Looking forward, new strategies may be needed
Emerging Utility
DER Strategies:
• Next-Level
Customer Insight
& Engagement
• Evaluating DER
as Grid Assets
• Rewiring Utility
Operating
Practices
Source: GTM Research/SEIA U.S. Solar Market Insight
69 91 138 258 329 715 1,596
2,753 3,857
5,043 5,901
12,720
8,487
9,638
12,341
14,637
18,023
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
2005 2007 2009 2011 2013 2015 2017E 2019E 2021E
Sola
r P
V In
stal
lati
on
s (M
wac
)
Residential Non-Residential Utility
Centralized Solar Boom in 2016,
Even With ITC Extension
Utility-Scale Remains >50% of Installations,
But Distributed Solar Now >8 GWac
23
www.sepapower.org
Primary utility response to NEM is fixed charges
24
www.sepapower.org
Competiveness of distributed rooftop PV
25
FL
0%-10% Savings
0%-5% Loss
>10% Savings
>5% Loss
A
Z
CA
HI
NV
NJ
NH
NM
P
A
SC
VT
CO
CT
GA
ME
MD
MA
MIRI
TX
UT
WY
AL
AR
DE
FL
LA
MN
MS
MO
NE
NY
NC
OH
SD
VA
WI
Source: GTM Research
www.sepapower.org
Distributed rooftop price vs. retail price today
26
.¢
2.¢
4.¢
6.¢
8.¢
10.¢
12.¢
14.¢
Standard Rate Increased Fixed Charge Demand Charge Full Fixed Cost Recovery
Impact of Rate DesignHow different rate structures impact cost efficacy
Assumes EIA U.S. average data and $3/watt
$5 Fixed, 10.9¢ variable $20 Fixed, 9.2¢/kWh variable $5 Fixed, $10/kW demand, $55 Fixed,
7.4¢/kWh variable 5.9¢/kWh variable
Solar LCOE Range varies by orientation and location
www.sepapower.org
Distributed rooftop price vs. retail price in 2020
27
.¢
2.¢
4.¢
6.¢
8.¢
10.¢
12.¢
14.¢
Standard Rate Increased Fixed Charge Demand Charge Full Fixed Cost Recovery
Solar Efficacy in 2020 - 30% ITCAssumes $1.5/watt rooftop install cost & rate inflation at utility retail rate average from 1990-2013
Solar LCOE Range varies by orientation and location
$5 Fixed, 12.3¢ variable $20 Fixed, 10.4¢/kWh variable $5 Fixed, $10/kW demand, $55 Fixed, 5.9¢/kWh variable
8.3¢/kWh variable
www.sepapower.org
Distributed solar value proposition
28
California Net Energy Metering Rate payer Impacts Evaluation
Prepared by California Public Utilities Commission Energy Division October 28, 2013 (E3)
?
Stakeholders often want to discuss the value proposition delivered by distributed solar
as part of any discussion regarding cost shifting
www.sepapower.org
Recent actions solar related policies
29
Policy Type Actions% by
TypeJurisdictions
Residential fixed charge
increase
42 35% 25 + DC
Net metering 37 31% 24
Solar valuation or net
metering study
16 13% 15 + DC
Community solar 12 10% 11
Residential solar charge 8 7% 6
Third-party ownership of
solar
3 2% 3
Utility-led rooftop PV
programs
3 2% 3
Total 121 100% 42 + DC
Source: “The 50 States Of Solar. A Quarterly Look At America’s Fast-evolving Distributed Solar
Policy Conversation. Q2 2016.” NC Clean Energy Center & Meister Consultants Group.
http://www.dsireusa.org/resources/presentations-and-publications/
www.sepapower.org
Position statement on net energy meteringAugust 2013
• Customer-sited solar generation will play an increasingly important role in the energy mix for utilities and consumers.
• Net energy metering (NEM) policies promote the deployment of customer-sited distributed solar generation in many markets.
• However, NEM and rate design, inherently linked, need to evolve to transparently allocate costs and benefits, compensating all parties for their value contribution.
• This transition will only be effective when utilities, the solar industry and customers collaborate to create a sustainable solar distributed generation marketplace.
www.sepapower.org
Where is this going? HI self supply economics
31
A bundled package
– aka “nanogrid” –
replacement for grid
supplied power may
be closer than we
think
• Allows customers
to avoid both
energy & demand
charges
• Flips the paradigm
– DER as primary,
grid as the back-up
• HI program does
not leverage DER
for any system
benefits
• Implications more
interesting for
microgrids
www.sepapower.org
Consumers adoption drivers for community solar
32
Customer Protection Implications
Transparent production
and financial performance
REC marketing & clarity of
ownership
Education on what the
customer gets34%
38%
65%
Gain more independence from my utility
Help the environment
Lower monthly energy costs
Customer Preference
Lower monthly
energy costs
Help the
environment
Independence
from my utility
2,001 Residential utility customers
95% CI, ± 2.2% MoE
252 Commercial business utility customers
95% CI, ± 6.2% MoE
www.sepapower.org
Community solar market potential
www.sepapower.org
Designing a Successful Community Solar Program
Utility
Customer
Regulator
• Alignment with
investment strategy
• Coordination between
functional groups
Key Considerations
• Value proposition
economics & structure
• Education and outreach
• Brand expectations
• Cross subsidization
• Cost-effectiveness
• Consumer protection
Potential Design Features:
• Structure (rate vs. capacity)
• Terms (pricing, contract lengths, penalties)
• Ownership – utility vs. third party vs.
customer
• Amortization of administrative costs (billing
system, etc.)
• Siting for distribution system benefit
• Inverter functionality
• Cross-program marketing (key accounts,
DSM, etc.)
• Cost allocations (subscriber vs. rate base)
• Risk allocation (subscription, O&M,
production)
www.sepapower.org
Utility administered vs. 3rd-party
www.sepapower.org
Key accounts
36
MGM agrees to pay
$86.9mm exit fee to
leave NV Energy
• Company claims
motivation stems from
their customers’
desires for green
vacation destinations
• MGM represents 5% of
NV Energy’s load
• At least two additional
other casino
companies looking to
follow suit
www.sepapower.org
Advanced grid tech deployments underway
Source: 2015 Solar Market Snapshot, SEPA
Common Utility Strategies Promoting EVs
• Maximal potential
control but limited
scale
• ex: PG&E, SCE
Utility
Fleets
Consumer
Education
Deploying
Charging
Stations
Provide EV
Incentives &
Rates
• Low cost, but mixed
history on results
• ex: ComEd, Alabama
Power
• System benefits vs
consumer transport
needs
• ex: KCPL, SDGE,
PSEG, Austin Energy
• Stimulate demand
growth vs cost shift
concern
• ex: IEC, Dominion,
SDGE, PSE, JEA
www.sepapower.org
Designing a Successful Electric Vehicle Program
Utility
Customer
Regulator
• Strategic alignment
• Demand response
capability
• Managed demand
promotion
Key Considerations
• Access to charging
infrastructure
• Value proposition
• Impact on availability &
range
• Deployment
acceleration
• Affordability / equity
• Rate impacts
Potential Design Features:
• Third party v utility
deployed/owned/branded/managed
• Demand response capability
• Cross-program marketing
• Cost and risk allocations
• Incentive and/or innovative rates
• Siting criteria (grid benefit, maximal use,
cost optimization, consumer convenience()
Potential Models:
• Rate-based charging infrastructure
• Fleet and charging advisory, incentives,
and/or financing
• Community charging
www.sepapower.org
Utility offerings for combined DER
40
Source: Accenture, Utility Dive
Customers Crave
More Options…
…And Utilities Want to
Provide Them.
www.sepapower.org
Utility offerings for combined DER
41
What’s the Value of a Tesla Powerwall? $50
per Month, Bets Green Mountain Power
Greentech Media
National Grid demand response pilot nets
participants 20% energy savings
Utility dive
Minnesota co-op bundles community solar,
demand response programs
Utility dive
www.sepapower.org
Utility rooftop solar programs
42
• Leasing roof from customers ($30/month for 20 years)
• 10 MW = 3,000 customers
• Fixed monthly rate for 25 years
• 3.5 MW = 600 customers
• Leasing roof from customer ($.03/kwh for 20 years)
• 10 MW cap - 4,000 applications in first month
• Third party owns systems & sells power to CPS
• Marketing solar to customers• Screening and advising customers• Offering list of qualified installers,
including Southern Company subsidiary
www.sepapower.org
Possible utility participation in DGPV
43
Direct Sales and
Marketing
Customer
Contracts/Agreements
On-property Siting
Tailored Programs
Partnership with
Developer
Investment in
Developer
Investment in
Development Fund
Market Support Service:
O&M
Customer Service
Procurement
Design, Specs, Permitting
Industry Partnerships
Customer Enablers
Loans
Incentives
Equipment
Billing
www.sepapower.org
Utilities considerations for DER strategy
44
Supply Planning
• IRP inclusion
• Resource mix long-term
• VOS calculation
Customer Service
• Customer communication
• Market potential
• Satisfaction
Legal • Deal structuring
Rates/Reg• Rate design
• NEM impacts
Government Affairs • Stakeholder views
IT/Billing• Translating programs onto the bill
• Integration of new technologiesDistribution
Engineering/Planning
• Grid impacts
Finance/Tax• Tax appetite
• Available CapEx / O&M
www.sepapower.org
DER capabilities
Source: Distributed Energy Resources Capabilities Guide, SEPA
www.sepapower.org
Valuation of DER of Distribution Assets
Source: Addressing the Locational Valuation Challenge for Distributed Energy Resources,
SEPA and Nexant
www.sepapower.org
The Utility’s role in DER deployment & integration
•Optimal deployment of DER will require proactive engagement and cooperation.
•Whether in front of or behind the meter, allocation of costs and benefits should be transparent.
•Utilities possess unique technical & operational knowledge of the grid, critical for optimizing the benefits for customers both individually and as a system.
•Utilities bring additional benefits for deployment based on utilities’ access to and cost of capital, rate stability, customer relationships, and holistic experience with DER.
•Customer and third party ownership can provide additional including expanded choice, cost stability, additional streams of capital, expanded consumer education, innovative customer acquisition models, and provision of complementary goods and services.
•Safeguards are needed to ensure a competitive DER market evolves ensuring open access to the interconnection processes, clear direction from grid operators on deployment, and transparency.
July 2016
www.sepapower.org
Incentive Mechanisms
48
Source: NGA, SEPA
Traditionalist
Approaches
Adjustment
Mechanisms
Incremental /
Supplemental
Transformative
Models
• Expansion of investment opportunities
• Rate restructuring to ensure cost recovery
• Stand-by fees
• Return on “TotEx”
• Performance-based regulation (PBR)
• Transaction fees, market access
• Revenue from data sales
• Selling services, not commodity
• Capitalizing key expenses (“regulatory assets”)
• Performance trackers
• Stand-by Fees
• Decoupling
• Shared savings
• Return on capital avoided
• Revenue from DER sales
• Premium offerings
