Should utilities own distributed generation?
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Transcript Should utilities own distributed generation?
Should utilities own
distributed generation?
Restructuring Roundtable
December 8, 2006
Presented by:
John Nimmons, J.D.
Lead Consultant, DER Incentives Project
EPRI DER Public/Private Partnership
415.381.7310
[email protected]
‘Creating & Demonstrating Utility DER Incentives’
Collaborative Sponsors & Participants
Utilities
Government & Research
Mass. Div. of Energy Resources
Mass. Technology Collaborative
Mass. Dept. of Telecomm & Energy
California Energy Commission
Electric Power Research Institute
New Jersey Board of Public Utilities
New York State Energy Research
& Development Authority
Nat’l Assn. of State Energy Offices
U.S. Dept. of Energy
U.S. Environmental Protection Agency
Customer Representatives
Democracy and Regulation
Energy Consortium
Los Angeles County Sanitation Dist.
General Services Administration
Edison Electric Institute
National Grid
Northeast Utilities
NStar
Pacific Gas & Electric
San Diego Gas & Electric
Southern California Edison
Tennessee Valley Authority
Public Interest & Other
Conservation Law Foundation
Conservation Services Group
DG Vendors/Developers
Cummins Power Generation
EnerNOC
Northern Power Systems
RealEnergy
Solar Turbines
TurboSteam
UTC Power
EPRI Team
Ellen Petrill, Director
David Thimsen, Proj. Mgr.
John Nimmons & Assoc.
Madison Energy Consultants
Energy & Environmental Econs.
Regulatory Assistance Project
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What’s ‘distributed’ generation?
Distinct from ‘central’ or ‘merchant’ generation
produces electrons, but similarity ends there
very different scale, markets, technologies, functions, etc.
Typical State definitions:
‘small-scale’generation (e.g., 3kW – 10MW; Connecticut: 65 MW)
near the load that it serves
‘within’, or connected to, the distribution system
using preferred technologies or resources
PV, CHP, fuel cells, small wind turbines, etc
solar, biogas, biomass, wave or tidal energy, etc.
Mass. restructuring statute defines DG narrowly
“a generation facility or renewable energy facility connected directly
to distribution facilities or to retail customer facilities which alleviate
or avoid transmission or distribution constraints or the installation
of new transmission facilities or distribution facilities.”
(G.L.Chap.164, §1, 1997)
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T&D impacts are one value among many,
as New England stakeholders and others now recognize
Also see: http://masstech.org/dg/benefits.htm, http://www.epri.com/OrderableitemDesc.asp?product_id=000000000001011026&
targetnid=267828&value=04T101.0&marketnid=267715&oitype=1&searchdate=8/19/2004
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Recasting the question
Ask not whether utilities should own DG –
ask whether a diverse & sustainable
energy portfolio should include DG
If so, how can we structure the energy business
to best achieve that?
Not by ruling out options at the outset, but by –
Exploring models that offer some promise
Deciding where utilities can add value, and
what roles they're best situated to play
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Rethinking the answer
1998-2000: California PUC DG Proceedings
utility ownership of DG was highly contentious
some DG providers adamantly opposed it
2003-04: EPRI / SoCal Edison Collaborative
DG providers wanted utilities to play a more central role –
provide system & customer information, facilitate siting,
offer integration services – maybe even own DG !
2006: Mass. DG Collaborative recommended that DTE –
“open a docket to investigate if utilities can install and own DG
as a distribution resource”
2006: MADRI – major barriers to DG still include:
uncertainty about viable business models
regulatory disincentives to electricity providers
to promote or implement distributed solutions
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Mass. DOER / MTC / EPRI Project:
‘Creating & Demonstrating Utility DER Incentives’
Are there viable business models for IOU participation
in DG markets? – i.e., approaches that benefit:
participating customers
non-participating customers
utility shareholders
society at large
Can we quantify their stakeholder impacts –
who benefits, who pays, and what drives this?
What regulatory changes might be needed
to support promising business models?
Can we test these business & regulatory approaches
in pilot projects?
Also see: http://masstech.org/dg/winwin.htm, http://masstech.org/dg/EPRI-STAC.htm,
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Business cases under consideration
Customer-owned, utility-facilitated
CCHP
PV, with energy efficiency
Utility-owned, on customer premises
CCHP, on either side of the meter
PV, with energy efficiency
Biogas, from dairy or other customer operations
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Quantifying stakeholder impacts
‘Single installation’ calculator model shows –
who benefits and who pays for various types of DG
which costs and benefits drive the outcome
‘Aggregate impact’ calculator model shows
impacts of DG penetration levels on –
utility revenues or customer bills
utility rates
utility net income
utility return on equity
net societal savings
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Stakeholder impacts: single installation
Utility-owned, customer-sited CCHP
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Stakeholder impacts: single installation
Utility-owned, customer-sited PV with EE
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Stakeholder impacts: single installation
Utility-owned, customer-sited biogas generation
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Stakeholder impacts: in the aggregate
Output from ‘single installation’ calculator
feeds into ‘aggregate impacts’ calculator
Aggregate impacts will be shown this way:
Utility revenues
or customer bills
Utility rates
Utility net income
Utility ROE
Net societal
savings
See E3’s Energy Efficiency Benefits Calculator at http://www.epa.gov/cleanenergy/actionplan/outreach.htm,
now being adapted for distributed generation through the Mass. DOER / MTC / EPRI Project.
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What regulatory changes are needed?
Depends on which business cases appear most likely
to yield win/wins
Customer-owned DG, especially baseload, presents
different questions (‘lost revenue’ recovery, etc.)
Utility-owned DG may require rethinking 21st-century
utility roles, reinventing U.S. utilities as –
energy (not ‘electricity’ or ‘gas’) suppliers and stewards
facilitators and integrators of more diverse resource choices
venture partners with other energy industry players, leveraging
each others’ strengths to benefit ‘shared’ customers
Anticompetitive issues are important in this area;
regulators need to ensure a level playing field
Once promising business cases are identified, the
Collaborative's efforts will focus on regulatory needs
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Conclusions
Where multiple stakeholders can benefit from DG and
none are harmed, regulation should encourage it
Where investor-owned utilities can add value and
increase societally beneficial DG deployment,
regulation should accommodate that
Non-utility stakeholders increasingly value this approach
Massachusetts stakeholders, led by DOER, MTC, DTE, and
EPRI, aim to identify viable business models and regulatory
approaches, and build tools that others can use to test them
The collaboration continues, and everyone can play
Pilot projects are to follow, and everyone can learn
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