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
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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
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New York State Energy Research
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& Development Authority
Nat’l Assn. of State Energy Offices
U.S. Dept. of Energy
U.S. Environmental Protection Agency
 Customer Representatives
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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
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Conservation Law Foundation
Conservation Services Group
 DG Vendors/Developers
Cummins Power Generation
EnerNOC
Northern Power Systems
RealEnergy
Solar Turbines
TurboSteam
UTC Power
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 EPRI Team
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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
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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
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 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?
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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
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utility ownership of DG was highly contentious
 some DG providers adamantly opposed it
 2003-04: EPRI / SoCal Edison Collaborative
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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 –
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“open a docket to investigate if utilities can install and own DG
as a distribution resource”
 2006: MADRI – major barriers to DG still include:
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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:
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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
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CCHP
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PV, with energy efficiency
 Utility-owned, on customer premises
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CCHP, on either side of the meter
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PV, with energy efficiency
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Biogas, from dairy or other customer operations
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Quantifying stakeholder impacts
 ‘Single installation’ calculator model shows –
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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 –
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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
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Customer-owned DG, especially baseload, presents
different questions (‘lost revenue’ recovery, etc.)
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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
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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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