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/ ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED 1
EEI STRATEGIC ISSUES ROUNDTABLE
MADISON, WI
THE iDER PLAYBOOK FOR
UTILITIES –
ARE WE READY?
DO WE NEED TO BE?
SEPTEMBER 28, 2016
/ ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED 2 / ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED 2
AGENDA
1. Introductions and Objectives
2. Mega Trends and Tipping Points
3. The iDER Playbook
4. Facilitated Discussion – State of Readiness
/ ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED 3 / ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED 3
THE IDER PLAYBOOK FOR UTILITIES –
ARE WE READY? DO WE NEED TO BE?
• This interactive discussion will explore what the utilities feel is needed to be “ready”
for increased adoption of DERs in their service areas across 5 dimensions:
- Customers/Programs
- Regulation/Policy
- Business Models
- Technology
- Operations
• After a brief introduction of DER trends, Navigant will guide an interactive
discussion/debate (using quick survey tools) on the level of readiness/maturity the
utility audience members feel is:
- A) currently in place in their organization;
- B) needed to be fully ready for the future.
/ ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED 4 / ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED 4
AGENDA
1. Introductions and Objectives
2. Mega Trends and Tipping Points
3. The iDER Playbook
4. Facilitated Discussion – State of Readiness
/ ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED 5 / ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED 5
MEGA TRENDS DRIVING POWER INDUSTRY TRANSFORMATION
The following megatrends1 underpin the industry transformation:
1. The power of customer choice and changing demands
2. Rising number of carbon emissions reduction policies and regulations
3. Shifting power-generating sources
4. Delivering shareholder value through mergers and acquisitions (M&A)
5. Regionalizing of energy resources
6. Merging industries, new entrants, and colliding giants
7. The emerging Energy Cloud: Replacement of old infrastructure and transition
toward an increasingly decentralized and smarter power grid architecture
The transformation includes a wide range of strategic, operational, technological,
commercial, environmental, and regulatory changes that are transforming the
traditional strategies and business models.
1 Take Control of Your Future: Megatrends in the Utilities Industry
/ ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED 6 / ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED 6
TIPPING POINTS INDICATORS THAT THE TRANSFORMATION HAS STARTED
Power Forward: 215 Fortune 500 companies investing in GHG reductions,
sustainability, and renewable energy initiatives
DER growing 3 times faster than central station generation between 2015-2019
in the US (168 vs 57 GW)
In 2016, natural gas, solar, and wind expected to make up 93% of U.S.
generation additions
Paris Climate Agreement signed by 175 countries limiting global warming to
<2o C by 2100
AEP decommissions 11 coal plants (6,500 MW) and builds renewables (4,000 MW)
Value of utility M&A deals quadrupled in 2014-15 (compared to 2012)
CAISO saving $18.9M in first quarter of 2016 by using 113 GWH of surplus
renewable energy across participants
2018 - Tesla producing 500,000 cars per year (range > 200 miles, 30-40K)
/ ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED 7 / ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED 7
OUR VIEW ON THE INDUSTRY TRANSFORMATION THE ENERGY CLOUD1
EMERGING: THE ENERGY CLOUD
Distributed, Two-Way Power Flows
TODAY: TRADITIONAL POWER GRID
Central, One-Way Power System
1 Navigating the Energy Transformation: Building a Competitive Advantage for Energy Cloud 2.0 (white paper)
©2016 Navigant Consulting, Inc. All rights reserved. (Source: Navigant Consulting)
/ ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED 8 / ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED 8
DER IN THE UNITED STATES WE FORECAST STRONG DER PENETRATION GROWTH OVER THE NEXT DECADE
Observations
• DER deployments
will reach ~30 GW
this year in the US,
versus new central
station generation
(19.7GW)
• On a 5-year basis
(2015-2019), DER in
the US is growing
almost 3 times faster
than central
generation (168 GW
vs. 57 GW).
(Source: Navigant Research)
Annual Installed DER Power Capacity Additions
by DER Technology, United States: 2015-2024
-
10,000
20,000
30,000
40,000
50,000
60,000
70,000
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
(MW
)
Distributed Generation Distributed Energy Storage Microgrids Electric Vehicle Charging Load Demand Response Energy Efficiency
/ ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED 9 / ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED 9
STATE & FUTURE OF THE POWER INDUSTRY SURVEY BALANCED VIEWPOINTS ON DER
Which distributed energy resource
will be the most useful to utility
operations by 2025?
Which will be the most prevalent
distributed energy resource in terms
of capacity by 2025?
Source: Navigant Consulting/Public Utilities Fortnightly
/ ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED 10 / ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED 10
STATE & FUTURE OF THE POWER INDUSTRY SURVEY BALANCED VIEWPOINTS ON DER
When will the growth of DER force a
major shift in the utility business models?
What is the most important tipping
point for utilities to aggressively pursue
owning and operating DER?
Source: Navigant Consulting/Public Utilities Fortnightly
/ ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED 11 / ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED 11
AGENDA
1. Introductions and Objectives
2. Mega Trends and Tipping Points
3. The iDER Playbook
4. Facilitated Discussion – State of Readiness
/ ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED 12 / ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED 12
UNDERSTANDING THE IMPACTS
INTELLIGENT The increasing connectivity, controllability, and automation of energy-consuming devices through the use of sensor technology, communications infrastructure, and software applications available to users (e.g., smart cities, smart homes, and IoT) as well as integration of data analytics capabilities.
DISTRIBUTED
The increased proliferation of DER (including energy efficiency, DR, distributed storage, distributed generation, and EVs) brought about by technology advancements and increased customer desire for control over energy usage.
CLEAN
The global movement to reduce GHG/carbon emissions through federal or state legislative, regulatory, or other policy efforts as well as increased social pressures and/or customer demands.
The Energy Cloud
Beyond safe, reliable and affordable
Customers
Regulation and Policy
Technology
Business Models
Operations
Impact Dimensions
/ ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED 13 / ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED 13
ENERGY CLOUD PLAYBOOK DIMENSIONS
Dimension CLEAN DISTRIBUTED INTELLIGENT
Customers
• Rise of Community
Choice Aggregation
• Carbon free energy
• Sustainability
• Self-generation/storage
• Security/reliability
• Cost savings
• Accessibility/control
• Transactive energy
• Digital communication
Regulation and
Policy
• Clean Power Plan
(U.S.)
• 20-20-20 (EU)
• Paris Accord
• Self-generation
incentives
• Net energy metering
• Feed-in tariffs
• Grid modernization
• Standardization
• Smart meter targets
Business
Models
• Utility-scale renewables
• Green pricing
• Community
aggregation
• DER build, own, and
operate
• Energy services
• Microgrid as a service
• Network Orchestrator
• Variable rate design
• Smart grid as a service
Technology • Utility-scale renewables
• Distributed renewables
• Intelligent devices
• DER
• Volt/VAR
• Microgrids
• IT/data analytics
• Advanced metering
infrastructure
• Blockchain
Operations • Renewables integration
• Transmission upgrades
• Load balancing
• Aggregation
• Two-way power flow
• Asset management
• IT/OT convergence
• Customer engagement
• Cybersecurity
/ ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED 14 / ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED 14
UTILITIES ECOSYSTEM IS CHANGING
/ ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED 15 / ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED 15
STRATEGY FOR DER INTEGRATED DER MATURITY MODEL
A maturity model can help you understand your readiness for DER integration and
value capture.
Have you started benchmarking your DER efforts?
/ ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED 16 / ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED 16
AGENDA
1. Introductions and Objectives
2. Mega Trends and Tipping Points
3. The iDER Playbook
4. Facilitated Discussion – State of Readiness
/ ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED 17 / ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED 17
iDER PLAYBOOK – CUSTOMER PROGRAMS
Characteristics of Fully Mature iDER Business:
• Full fleet of DER programs, high customer engagement, high customer satisfaction
with program
• DERs make significant % (25) of retail energy and capacity
• Mutually beneficial partnerships with 3rd party programs
• Programs are visible and easy to access
• Rapid interconnection time and easy process.
1. Not Important 5. Very Important
--- Importance ---
1. Not Ready
at All
5. Very Ready
--- Readiness ---
/ ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED 18 / ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED 18
iDER PLAYBOOK – REGULATION AND POLICY
Characteristics of Fully Mature iDER Business:
• Strong state policies and regulations driving DER (e.g., NEM, RPS, incentives);
• Regulatory mandates govern DER –inclusion within IRP or long-term planning efforts
• Regulators providing feedback concerning value of DER and IRP / long-term
valuation process
• Company’s policy positions on DER actively communicated to stakeholders
(investors, customers, employees)
1. Not Important 5. Very Important
--- Importance ---
1. Not Ready
at All
5. Very Ready
--- Readiness ---
/ ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED 19 / ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED 19
iDER PLAYBOOK – TECHNOLOGY
Characteristics of Fully Mature iDER Business:
• IT/OT fully integrated for situational awareness of DER status
• Cyber-secure communications and system, communications without latency issues-
-near real-time awareness, appropriate control to maintain reliability
• Availability of right information to capture value from DER and forecast (analytics)
1. Not Important 5. Very Important
--- Importance ---
1. Not Ready
at All
5. Very Ready
--- Readiness ---
/ ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED 20 / ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED 20
iDER PLAYBOOK – BUSINESS MODELS
Characteristics of Fully Mature iDER Business:
• ISO/RTO/BA is currently integrating DER and allows participation
• Utility plays aggregator role in wholesale markets
• Transactive energy wholesale interface
• DER ownership and operation is allowed and encouraged and being fully
implemented
• Profitable retail business models deployed and are being adopted
• (if applicable) unregulated subsidiary is market leader in retail DER;
1. Not Important 5. Very Important
--- Importance ---
1. Not Ready
at All
5. Very Ready
--- Readiness ---
/ ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED 21 / ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED 21
iDER PLAYBOOK – OPERATIONS
Characteristics of Fully Mature iDER Business:
• Departments organized to effectively handle DER integration;
• DER buy-in and acceptance across entire organization;
• A DER-focused cross-functional team leads coordination
• Mature change management process is in place that is fast and flexible
• Proven ability to integrate new ideas and processes;
• Wide spread and defined process in place to develop and foster new ideas and
innovation
1. Not Important 5. Very Important
--- Importance ---
1. Not Ready
at All
5. Very Ready
--- Readiness ---
/ ©2016 NAVIGANT CONSULTING, INC. ALL RIGHTS RESERVED 22 navigant.com
CONTACT
MIKE RUTKOWSKI
Managing Director
312.583.6880
ROB WILHITE
Managing Director
704. 347.7735