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20 April 2016
ASSOCIATE VICE PRESIDENTGROWTH ACCELERATOR / RENEWABLE ENERGYRYAN PLETKA, P.E.
DISRUPTIVE TECHNOLOGIES AND THE FUTURE OF THE UTILITY BUSINESS MODEL
AGENDA1. Introduction2. Disruptive Technologies3. Future Utility Business Models
2
WewillmakeelectricitysocheapthatonlytherichwillburncandlesThomasEdison
Image source: Shine‐Co Antique LED 6 W bulb ‐ $20 on Amazon, Accessed April 16 from:http://www.amazon.com/Shine‐Co‐Antique‐Filament‐Squirrel‐110‐220V/dp/B01AT2HCEU/ref=sr_1_32?s=hi&ie=UTF8&qid=1461005021&sr=1‐32&keywords=led+edison
LED Bulb
TheB&VGrowthAcceleratoriscommittedtoidentifyingthenextsetofchallengesforB&Vandourclients
• Current & Future – B&V Growth Accelerator• Drones
• Autonomous vehicles
• Augmented reality
• High‐density urban agriculture
• Space elevators
• Recent Past – Western Director Renewables• Utility Planning
• Distributed Generation
• Renewable Energy Transmission Initiative (RETI)
SPEAKER BACKGROUNDRYAN PLETKA
3
WHY DO WE HAVE ELECTRIC UTILITIES?
4
• Obligation to serve
• Natural monopoly
• Economies‐of‐scale
• Public good
• Network system
• Safety
• Reliability
• Sophisticated Technology
ELECTRIC UTILITY FEATURES
22 April 2016
5
Black & Veatch
• Obligation to serve
• Natural monopoly
• Economies‐of‐scale
• Public good
• Network system
• Safety
• Reliability
• Sophisticated Technology
ELECTRIC UTILITY FEATURES
22 April 2016
6
Black & Veatch
Source: Design concept from Kyuho Song and Boa A. Available at: https://www.behance.net/gallery/9803275/Window‐socket. Accessed April 20, 2016
HOW FAR OUT IS 10 YEARS?
7
Data Source, CDC, National Health Interview Survey, http://www.cdc.gov/nchs/nhis/releases.htm, accessed April 17, 2016Other source: http://www.digitaltrends.com/home/you‐can‐still‐call‐about‐40‐percent‐of‐u‐s‐households‐on‐a‐landline/accessed April 17, 2016
PERCENT OF U.S. HOMES WITH LANDLINE TELEPHONES
8
0
10
20
30
40
50
60
70
80
90
100
2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025
Data Source, CDC, National Health Interview Survey, http://www.cdc.gov/nchs/nhis/releases.htm, accessed April 17, 2016Other source: http://www.digitaltrends.com/home/you‐can‐still‐call‐about‐40‐percent‐of‐u‐s‐households‐on‐a‐landline/accessed April 17, 2016
PERCENT OF U.S. HOMES WITH LANDLINE TELEPHONES
9
0
10
20
30
40
50
60
70
80
90
100
2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025
“There will be so few people on the network that it won’t be economical to maintain it,” Jon Banks, United States Telecom Association
FCC now requires telcos provide 3 months notice before abandoning copper network
KAUAI ISLAND UTILITY COOPERATIVE
Black & Veatch
10
22 April 2016
• 2007: over 94% of Kauai’s electricity was generated from imported fossil fuels
• 2016: Renewables hit 90% on four days in January (hydro, biomass, solar) – 38% annually on an energy basis
Data Source, KIUC: 2008 Integrated Resource Plan; KIUC Press Release: http://website.kiuc.coop/sites/kiuc/files/PDF/pr/pr2016‐0203‐90percent.pdf
DISRUPTIVE TECHNOLOGIESRenewable EnergyDistributed Energy Resources
Distributed generation (solar)Electric Vehicles and Energy StorageEnergy Efficiency and Demand ResponsePlanning for DERs
11
Thepresentistheirs;thefuture,forwhichIreallyworked,ismine.NikolaTesla
Data Source: EIA
CAPACITY ADDITIONS/SUBTRACTIONS1940‐2014 (GW)
12
Bytheendof2015,renewablesaccountedfor19%oftotalinstalledcapacityintheU.S.,and13%ofannualgeneration
California RPS Laws:
• 2002: 20% by 2017
• 2011: 33% by 2020
• 2015: 50% by 2030
• 100% RPS?
RENEWABLE PORTFOLIO STANDARDS
22 April 2016
13
Black & Veatch
50% RPS: ONE POTENTIAL PORTFOLIO
4/22/2016
Out of State(WY, NM)
• Source: WECC‐wide Portfolio from CPUC RPS Calculator v6.2
• Key Issues• Cost• Transmission• Out‐of‐state issues• Integration• Curtailment• Environmental Impact
Legend (500 MW Blocks)
Each icon represents about 500 MWLocations are approximateNew and contracted renewables for IOUsUtility‐scale onlyBiomass and hydro not shown
Wind
Solar
Geothermal
50% RPS: ONE POTENTIAL PORTFOLIO
4/22/2016
Out of State(WY, NM)
• Source: WECC‐wide Portfolio from CPUC RPS Calculator v6.2
• Key Issues• Cost• Transmission• Out‐of‐state issues• Integration• Curtailment• Environmental Impact
Legend (500 MW Blocks)
Each icon represents about 500 MWLocations are approximateNew and contracted renewables for IOUsUtility‐scale onlyBiomass and hydro not shown
Wind
Solar
Geothermal
Tehachapi CREZ
Tehachapi CREZ
Tehachapi CREZ – Existing Renewable Development
LA CountyKern County
Wind
Solar
Pine Tree Wind 135 MW
Solar Star579 MW
Tehachapi CREZ – Existing Renewable Development
2016 SOLAR AND WIND COST OF ENERGY
19© Black & Veatch Holding Company 2016. All Rights Reserved. Not to be reproduced or re‐distributed without consent. Includes current federal tax incentives. Cost is include transmission interconnection, but not delivery.
Solar
Wind
<$20 >$200
Levelized Cost of Energy ($/MWh)
• Black & Veatch’s latest survey of utility executives reported that • Almost two‐thirds believe energy storage will be the most important factor facilitating integration of wind and solar
• The second and third most important factors are “transmission upgrades” and “new flexible conventional power plants”
• Lower cost flexibility options may be available (market rules, demand response, etc.)
• At the distributed level, understanding and shaping customer behavior will be essential
RENEWABLE INTEGRATION ‐ VARIETY OF OPTIONS AVAILABLE TO PROVIDE FLEXIBILITY
20
Thecomplexityandcostofintegrationwillincreaseasrenewableenergyincreases
• Seasonal to multi‐year storage
• Hydrogen
• Mega interconnections
• Bi‐directional EV
• Flexible renewables
• Power “natural” gas
• Water‐energy integration (e.g., desalination)
• 4th Generation DER ‐ optimization
RENEWABLE ENERGY INTEGRATION –NEXT‐GEN INTEGRATION OPTIONS
22 April 2016
21
Black & Veatch
Source: NBC News, accessed April 17, 2016
DISTRIBUTED ENERGY RESOURCES (DER)
22
23
DERS THAT WILL IMPACT ELECTRIC UTILITIES MOSTB&V’s 2015‐16 Survey of 206 Electric Utilities
Source: 2015‐16 Strategic Directions: Smart Utilities/Smart Cities Survey Results, Black & Veatch Global Insights, published Feb. 2016. 23
Sources:SMUD: Personal communication with Jim Barnett, solar program manager LADWP: SIP Dashboard posted on the SIP website, https://www.ladwp.com/cs/idcplg?IdcService=GET_FILE&dDocName=OPLADWPCCB395923&RevisionSelectionMethod=LatestReleasedPG&E: NEM Program Tracking webpage, http://www.pge.com/en/mybusiness/save/solar/nemtracking/index.pageSCE: NEM Cap Data, https://www.sce.com/wps/portal/home/residential/generating‐your‐own‐power/net‐energy‐metering/!ut/p/b1/hc_NCoJAFAXgZ2nhMufoQFm7Ec3GQimjbDahYZNgTpglvX0WbaK_uzuX78C9RJCYiDK55DKpc1UmxT2L3sawPDbmEbhlUxfcRhiwOcPEMVuwbgG‐DMO__oqIV‐KNDAfcXxrRFA6igL6Bed‐8A3ca2oYJy3yCgQd37IctWMwoOJ0hiBijQO8JfhzpEyELlT4eXrMypZYkosp2WZVV‐rlq1_u6Pp6GGjQ0TaNLpWSR6Vt10PCpslenmsSvkhwPMXLeFem16dwACqNhQQ!!/dl4/d5/L2dBISEvZ0FBIS9nQSEh/#accordionGrp1‐6‐hashSDG&E: NEM Dashboard, http://www.sdge.com/clean‐energy/net‐energy‐metering/overview‐nem‐capHI: http://www.utilitydive.com/news/17‐of‐hawaiian‐electric‐customers‐now‐have‐rooftop‐solar/413014/Australia: http://www.cleanenergyregulator.gov.au/RET/Forms‐and‐resources/Postcode‐data‐for‐small‐scale‐installations#Summary‐of‐postcode‐data
DISTRIBUTED SOLAR PENETRATION (CAPACITY BASIS) IN VARIOUS LOCATIONS
22 April 2016
24
0% 5% 10% 15% 20% 25% 30% 35%
LADWP
SMUD
SCE
PG&E
SDGE
Australia
HI (HECO, HELCO, MECO)
PV Capacity as a % of Peak Load
Source: Australia PV Institute, available at: http://pv‐map.apvi.org.au/historical#7/‐27.391/152.897. Accessed April 20, 2016
AUSTRALIA RESIDENTIAL PV PENETRATION(PERCENT OF DWELLINGS)
22 April 2016
25
Black & Veatch
Source data: EV Sales: PEV Collaborative, http://www.pevcollaborative.org/sites/all/themes/pev/files/3_mar_PEV_cumulative.pdf, Accessed April 18, 2016. Original data adapted from www.hybridcars.comTesla Model 3 reservations: Twitter @elonmusk, http://electrek.co/2016/04/14/tesla‐model‐3‐reservations‐2/
California, 196,447
US Total, 428,816
0
100,000
200,000
300,000
400,000
Jan 2011 Jan 2012 Jan 2013 Jan 2014 Jan 2015 Jan 2016
U.S. & CALIFORNIA CUMULATIVE EV SALES
22 April 2016Black & Veatch
26
Source data: Tesla Model 3 reservations: Twitter @elonmusk, http://electrek.co/2016/04/14/tesla‐model‐3‐reservations‐2/. April 14 total is an estimate based on last reported value of “approaching 400,000”
Tesla400,000
0
100,000
200,000
300,000
400,000
4/1/2016 4/8/2016 4/15/2016
TESLA MODEL 3 RESERVATIONSAVG. SALE PRICE: $42K WITH $1,000 DEPOSIT
22 April 2016Black & Veatch
27
Source: Tesla. B&V Estimates. GTM Research, U.S. Energy Storage Monitor ‐ 2015 Year in Review, available at http://www.greentechmedia.com/research/subscription/u.s.‐energy‐storage‐monitor
ELECTRIC VEHICLES VS. ENERGY STORAGEMARKET SIZE (MWH)
22 April 2016
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Black & Veatch
28,000
4,030
161
0 10,000 20,000 30,000
Equivalent Capacity of 400,000 Model 3s
US Stationary Battery Market ‐ 2016‐2020
US Stationary Battery Market ‐ 2015
MWh
• The U.S. coal industry has lost 90% of its market capitalization in the last 5 years
COAL, ENERGY EFFICIENCY AND DEMAND RESPONSE
22 April 2016
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Black & Veatch
0 5 10 15 20
Alpha Natural Resources
Cloud Peak
Arch Coal
Peabody Energy
Fraction of 2014 US Coal Production, %
0 50 100 150
4/16 Market Capitalization, $M
Source: Stock quotes as of the week of April 16. Survey Monkey valuation from CB Insights. Coal production data from EIA, https://www.eia.gov/coal/annual/pdf/table10.pdf.
Withinenergy,investmentisgoingtoinnovative,distributed,data‐intensive,customer‐centricsolutions.Smartgrid,Internet‐of‐Things,etc.
• Opower market capitalization: $450 million
• Survey Monkey private valuation: $2 billion
• Google purchase of Nest: $3.2 billion
COAL, ENERGY EFFICIENCY AND DEMAND RESPONSE
22 April 2016
30
Black & Veatch
Source: Stock quotes as of the week of April 16. Survey Monkey valuation from CB Insights. Coal production data from EIA, https://www.eia.gov/coal/annual/pdf/table10.pdf.
0 5 10 15 20
Alpha Natural Resources
Cloud Peak
Arch Coal
Peabody Energy
Fraction of 2014 US Coal Production, %
0 50 100 150
4/16 Market Capitalization, $M
DER PLANNING
31
PLANNING FOR DISTRIBUTED GRID OPPORTUNITIES22 April 2016
32
Strategy & Operations
DER Potential
T&D Grid Impacts
Bulk Power Impacts
Finance Rates &
Regulation
• SMUD engaged Black & Veatch to assist in assessing integrated Distributed Energy Resources (iDER)
• Major tasks• Review of existing work and processes; tie together approaches
• New, detailed assessments of potential through dispersion modeling
• Distribution system modeling• Bulk system modeling• Economic valuation• Rooftop PV potential modeling
• First of a kind study
PV EE DR CHP ES EV
SMUD INTEGRATED DER ASSESSMENT PROJECT BACKGROUND
33
Projected DER Load Impacts ‐ 2030
NearlyallcustomersexpectedtoimplementsomeEEmeasuresby2030,buttovaryingdegrees
SMUD INTEGRATED DER ASSESSMENT ‐RESIDENTIAL ENERGY EFFICIENCY
34
WidespreadadoptionofEV.Largercirclerepresents2carsperhousehold,smaller‐ 1car
SMUD INTEGRATED DER ASSESSMENT ‐RESIDENTIAL ELECTRIC VEHICLES
35
FewercustomersadoptingsolarPV,butsomeverylarge(30kW)systemspossible
SMUD INTEGRATED DER ASSESSMENT ‐RESIDENTIAL SOLAR PV
36
SomeSolarPVcustomersalsoadoptenergystorage
SMUD INTEGRATED DER ASSESSMENT ‐RESIDENTIAL ENERGY STORAGE
37
Inthisneighborhood,mostcustomershaveatleastonetypeofDER.Severalcustomershavemultiple
ALL RESIDENTIAL DER
38
CommercialDER“fill‐in”
ALL RESIDENTIAL DERALL COMMERCIAL DER
39
40
PERCENT OF TRANSFORMERS STRESSED DUE TO EVS
SMUD IMPACTS: OVER 12,000 TRANSFORMERS MAY NEED TO BE UPGRADED DUE TO EVS, 17% OF TOTAL
POTENTIAL DER IMPACTS – NET LOAD EXAMPLE ONLY
41
‐300
‐200
‐100
0
100
200
300
400
500
600
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
MW
DR ES ‐ Utility ES ‐ Customer EV PV ‐ Customer
EE CHP Utility Load Net Load ‐DER
FUTURE UTILITY BUSINESS MODELS
42
ThefirststeptowardsgettingsomewhereistodecidethatyouarenotgoingtostaywhereyouareJPMorgan
CONTEXT A
ND P
URPOSE
THINKING ABOUT THE “FUTURE” FOR ELECTRIC UTILITIES
43
Distributed, variable, sustainable resources
Secure, self‐healing,
self‐optimizing grid
Consumers/businesses are both users and
creators of energy (bi‐directional power
distribution)
Energy‐efficient, self‐managing
homes driven by consumer choice
Clean transportation, leveraging clean generation and storage of energy
Self‐managing, demand responsive smart buildings
Unidirectional power distribution from
centralized bulk generation
THE REINVENTION OF UTILITY REGULATION . . .
44
Pre 2015
2015+
• Objective is to envision where the electricity system may be in 20 years, possible pathways there, key needs
• Karlynn Cory was a lead investigator ‐‐ now with Black & Veatch
• Potential use: Basis for workshop to initiate conversations, build engagement and discuss strategies
• References:• Informing Electricity Systems of the Future: Key Analysis Needs NREL/JA‐
6A20‐62517• K. Cory; A. Aznar 2014• Electricity Journal Vol. 27 (9) November 2014 pp. 73‐82.
• Flexible Solar Utility: Preparing for Solar's Impacts to Utility Planning and Operations NREL/TP‐6A20‐64586• John Sterling; Ted Davidovich; Karlynn Cory; Alexandra Aznar; Joyce.
McLaren September 2015
NREL FRAMEWORK –ELECTRICITY SYSTEMS OF THE FUTURE
4/22/2016
45
Notnecessarilyexclusive.Futurewilllikelybeamix.Differentforallutilities.
NREL FRAMEWORK: FIVE VASTLY DIFFERENT FUTURES
22 April 2016
46
Black & Veatch
• Goal: replace aging assets with same, newer assets; meet existing fed/state policies
• Objective = least‐costBusiness as Usual
• Goal: replace aging generation w/low‐carbon, centralized gen• Objectives: lowest risk, lowest carbon
Low‐Carbon, Centralized Generation
• Goal: Growth of distributed energy resources (DER: non‐dispatchable DG, distr. storage)
• Objective: Resiliency
Rapid Growth of DER
• Goal: Fully interactive T&D grid and substantial interactive demand (including DR) in 20 yrs
• Objectives: grid flexibility, consumer desires
Interactivity: Grid and Demand
• Past a tipping point – measureable grid defection in next 20 yearsGrid Defection
47
NREL Framework: Future Directions – Key Takeaways
Emerging Disruptions / DriversLow‐carbon centralized
Rapid Growth of DER
Interactivity: Grid & Demand
Improved electric system flexibility X X X
Financing opportunities X X X
Technology improvements X X X
Carbon policies (e.g. 111(d), tax) X X
Limited NG expansion X X
Transmission planning X X
Transmission cost allocation X X
Bulk power market updates X X
Valuation of new services X X
Ownership opportunities X X
Local concerns about resilience X X
Electrification of transportation X X
Policies supporting DER X
Improved/new control systems X
Future Outlook
48
Considered key barriers and enablers for each future.
Identify what is most important (near term).
Low‐carbon centralized: transmission policies and market rules are key
NREL Framework: Key Barriers and Enablers
49
NREL Framework: When the information is pulled together…
FLIPPING THE DER EQUATION FROM RISK TO OPPORTUNITY – POTENTIAL UTILITY ACTIONS:
50
Smart DER DeploymentSmart DER Deployment
Assess DER potentialAssess DER potential
Analyze customer load/rates to target high
benefit/cost
Analyze customer load/rates to target high
benefit/cost
Identify DER locations to maximize T&D value
Identify DER locations to maximize T&D value
Restructure rates / incentives to encourage DER in the right locations
Restructure rates / incentives to encourage DER in the right locations
Proactively plan T&D for rising DER penetrationProactively plan T&D for rising DER penetration
Establish DER regulatory framework and engage
stakeholders
Establish DER regulatory framework and engage
stakeholders
Customer EngagementCustomer
Engagement
Streamline DER interconnection,
incentives, and permitting
Streamline DER interconnection,
incentives, and permitting
Provide a customer engagement platform for
DER
Provide a customer engagement platform for
DER
Create optimization tools for achieving zero net
energy buildings
Create optimization tools for achieving zero net
energy buildings
Offer options for customers who cannot install DER (e.g., community solar)
Offer options for customers who cannot install DER (e.g., community solar)
Allow on‐bill financing of DER
Allow on‐bill financing of DER
Project ExecutionProject
Execution
Develop, design and deploy utility‐ or customer‐owned
DER
Develop, design and deploy utility‐ or customer‐owned
DER
Invest in and own DER portfolios (inside and
outside service territory)
Invest in and own DER portfolios (inside and
outside service territory)
Develop, design, and deploy microgrids (e.g., PV
plus battery storage)
Develop, design, and deploy microgrids (e.g., PV
plus battery storage)
Design and construct distribution system
upgrades
Design and construct distribution system
upgrades
Implement communication network upgrades
Implement communication network upgrades
Utility Operations
Utility Operations
Monitor, forecast, and control DER to ease grid
integration
Monitor, forecast, and control DER to ease grid
integration
Implement new IT systems (e.g., DMS, DERMS)
Implement new IT systems (e.g., DMS, DERMS)
Deploy and operate utility‐owned smart inverters
Deploy and operate utility‐owned smart inverters
Provide O&M to DER installations in their service
territory (utility‐ or customer‐owned)
Provide O&M to DER installations in their service
territory (utility‐ or customer‐owned)
Procure grid services from utility‐ or customer‐owned
DER
Procure grid services from utility‐ or customer‐owned
DER
• From the outset, the electricity industry has been an enabling and disruptive industry – utility business models evolved very rapidly
• Disruptive technologies are rapidly enabling many new possible pathways to meet customer needs and policy objectives
• Flexibility in options is freeing, but can make planning more challenging and nuanced
• The importance of culture should not be underestimated: agility, flexibility, innovation, forward‐thinking, test and experiment, customer centric, solutions vs. products• If we don’t innovate, others will do that for us…
CONCLUSIONS
THANK YOU!
RYAN PLETKAASSOCIATE VICE PRESIDENTBLACK & VEATCH SAN FRANCISCO913‐458‐[email protected]