February 1, 2018 Navigating the Transformation · Navigating the Transformation: The Future of the Electric Power Industry Author: Ken Colburn Keywords: Business Models, Integrated

Ken Colburn

Principal and US Program Director

The Regulatory Assistance Project (RAP)®

Bar Harbor, Maine

United States

+1 617 784 6975

[email protected]

raponline.org

February 1, 2018

Navigating the Transformation:The Future of the Electric Power Industry

East River Electric 2018 Energize ForumSioux Falls, SD

Regulatory Assistance Project (RAP)®2

The Regulatory Assistance Project is a global, non-profit team of veteran regulators advising current regulators

on energy sector issues. (www.raponline.org)

• Foundation-funded; some contracts

• Non-advocacy; no interventions

Introduction

Ken Colburn directs RAP’s U.S. Programs. His experience as a regulator came in New Hampshire.

Ken is also a lifelong cooperative member, and serves on

the board of NH Electric Cooperative and NRECA.

http://www.raponline.org/

Regulatory Assistance Project (RAP)®

1 Power Sector Transformation:The Big Picture

Regulatory Assistance Project (RAP)® 4

2015:<0.8%

Electricity Demand Growth Has Been Declining for 50+ Years


Source: Energy in Context,

15 March 2015

And Economic Growth Has Decoupled from Energy


Which Trend to Bet the Farm On?


Electric Power is Getting Much Cleaner…


Power Sector Jobs Have Shifted

Source: https://energy.gov/downloads/2017-us-energy-and-employment-report

~3x

https://energy.gov/downloads/2017-us-energy-and-employment-report


Disruptive Forces Transforming ElectricityA

DO

PTIO

N

TIME2020

$150/kW h

2010

W ind grid

parit y

Solar grid parit y

Smart met erroll-out

PM Us

Source: Chandu Visweswariah, Utopus Insights Inc.

Compounding Network Effects

Artificial Intelligence,Deep Machine Learning

Aggregation, Digitization,Ability to Shape Load

We are here


10Source: Chandu Visw eswariah, Utopus Insights

Courtesy Dr. Asa Hopkins from the Vermont Comprehensive Energy Plan, Planning and Energy Resources Division, Public Service Department

Internal combustion EV

Power Sector Transformation (PST): Sankey Diagram – Vermont 20152050


Load-Shaping Example: Nest’s “Rush Hour Rewards” Program

11Chandu Visw eswariah , Utopus Insights

Swing MW of load automatically: win-win-win for Nest, customers, and the utility

https://nest.com/support/article/What-is-Rush-Hour-Rewards


• Uses sound waves to “shake” moisture out

• 80% reduction in electricity consumption compared to

electric resistance dryer

12

Even Newer Technologies Are Coming:Ultrasonic Clothes Dryer


Transactive Energy Capability is Already Here

“The project is but one example of how rapidly spreading technologies like rooftop solar and blockchain are upending the traditional relationships between electric companies and consumers, putting ever more control in the hands of customers.”


Not Encouraging Trends for Traditional Electric Utilities


2 Utility Responses, Directions• Good News and Bad News


• Fixed Charges

• Demand Charges

• Smart Rate Design

16

Bad News: Rate Design


Fixed Cost Classification Methods

Cost Category

Straight

Fixed /

Variable

Minimum

System

Method

Basic

Customer

Method

Poles $10 $5 -$

Wires $20 $10 -$

Transformers $10 $5 -$

Services $1 $1 $1

Meters $1 $1 $1

Billing $2 $2 $1

Customer Service $2 $2 $1

Total $46 $26 $4

$/month/customer


How Did High Fixed Charges Work Out for Landline Phone Companies?

ILEC

Acc

ess

Lin

es (

FCC

Fo

rm 4

77)

Down 55-60%in <15 years


Non-Coincident Peak (NCP) Demand Charges Are Also Suspect


• More equitable cost recovery

• Reduce peak demand

• Encourage EV charging during off-peak hours

• Encourage electric water heater controls or timers

• Provide benefit to low-use customers

• Better aligns the customer with the market

20

Time-Varying (TVR), Time-of-Use (TOU), Dynamic Rates Offer Promise


• Bad: Throughput

Incentive (current)

• Better: Decoupling

• Best: Performance-

Based Regulation

(PBR)

How ShouldUtility Ratemaking Be Done?


• Electric Vehicles (EVs)

• Water Heating

• Space Heating

• (Industrial Applications; Indoor Agriculture)

22

Good News: Electrification


Electrification is Already Happening

Photo credits: Nest and Dennis Schroder, NREL

54%


But, Not All Electrification is Created Equal

• It’s all about

load growth,

right?

• Brattle: “Utility

sales could nearly

double by 2050”!


What is Beneficial Electrification?

1. Saves Members Money

Long-Term; New Services2. Reduces Environmental

Impacts3. Enables Better Grid

Management

…an original NRECA and RAP concept


The “Duck Curve” and Workplace EV Charging

Home Charging without TOU

Workplace Charging

Source: Jim Lazar, RAP


Ongoing Environmental Benefits Because Devices “Get Cleaner” with the Grid


3 How Can We Be Most Effective?


• Get closer to members

• Segmentation, new services

• Focus on RE, EE, DERs, EVs

• Attend to equity, low-income

• Decouple revenue from kWh sales

• Rethink rate design

• Not cavalier fixed or demand charges!

• Get going on EVs & heat pumps,

distribution system planning, transactive

energy, analytics, management of

demand, etc.29

Electrification Load Will Buy Time –But Not a Reprieve


• Identify what your members want and need

• Identify the challenges and opportunitiesthey will face- Henry Ford: ”If I’d asked my customers what they wanted,

they would have said ‘a faster horse.’”

- Wayne Gretsky: “Skate to where the puck will be.”

• Address both proactively- i.e., Serve them

- Note: Probably won’t happen with the kWh-throughput

business model

30

The Best Path Forward?


Time is of the Essence…


Global Best Utility Scale: 2015

From Michael Liebriech presentation to CAISO October 18, 2017

32



33




34



Disruptive Forces Transforming ElectricityA

DO

PTIO

N

TIME

We are here

2020

$150/kW h

2010

W ind grid

parit y

Solar grid parit y

Smart met erroll-out

PM Us

Source: Chandu Visweswariah, Utopus Insights Inc.

Information & Network Effects

Artificial Intelligence,Deep Machine Learning

Aggregation, Digitization,Ability to Shape Load

Ken Colburn

Principal and US Program Director

The Regulatory Assistance Project (RAP)®

+1 617 784 6975

[email protected]

raponline.org

Bar Harbor, Maine

United States

About RAP

The Regulatory Assistance Project (RAP)® is an independent, non-partisan,

non-governmental organization dedicated to accelerating the transition to

a clean, reliable, and efficient energy future.

Learn more about our work at raponline.org

http://www.raponline.org/

Documents

February 1, 2018 Navigating the Transformation · Navigating the Transformation: The Future of the Electric Power Industry Author: Ken Colburn Keywords: Business Models, Integrated