should utilities own distributed generation?

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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]

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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]. - PowerPoint PPT Presentation

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Page 1: Should utilities own  distributed   generation?

Should utilities own distributed generation?

Restructuring RoundtableDecember 8, 2006

Presented by:John Nimmons, J.D.

Lead Consultant, DER Incentives ProjectEPRI DER Public/Private Partnership

415.381.7310 [email protected]

Page 2: Should utilities own  distributed   generation?

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‘Creating & Demonstrating Utility DER Incentives’ Collaborative Sponsors & Participants

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

Utilities Edison Electric Institute National Grid Northeast Utilities NStar Pacific Gas & Electric San Diego Gas & Electric Southern California Edison Tennessee Valley Authority

DG Vendors/Developers Cummins Power Generation EnerNOC Northern Power Systems RealEnergy Solar Turbines TurboSteam UTC Power

Customer Representatives Democracy and Regulation Energy Consortium Los Angeles County Sanitation Dist. General Services Administration

Public Interest & Other Conservation Law Foundation Conservation Services Group

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

Page 7: Should utilities own  distributed   generation?

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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

Also see: http://masstech.org/dg/winwin.htm, http://masstech.org/dg/EPRI-STAC.htm,

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?

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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 installationUtility-owned, customer-sited CCHP

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Stakeholder impacts: single installationUtility-owned, customer-sited PV with EE

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Stakeholder impacts: single installationUtility-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, theCollaborative'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