Navigating the Transformation:

Transcription

1 February 1, 2018 Navigating the Transformation: The Future of the Electric Power Industry East River Electric 2018 Energize Forum Sioux Falls, SD Ken Colburn Principal and US Program Director The Regulatory Assistance Project (RAP) Bar Harbor, Maine United States raponline.org

2 Introduction The Regulatory Assistance Project is a global, non-profit team of veteran regulators advising current regulators on energy sector issues. ( Foundation-funded; some contracts Non-advocacy; no interventions Ken Colburn directs RAP s U.S. Programs. His experience as a regulator came in New Hampshire. Ken is also a lifelong cooperative member, and serves on the board of NH Electric Cooperative and NRECA. Regulatory Assistance Project (RAP) 2

3 1 Power Sector Transformation: The Big Picture Regulatory Assistance Project (RAP)

4 Electricity Demand Growth Has Been Declining for 50+ Years 2015: <0.8% Regulatory Assistance Project (RAP) 4

5 And Economic Growth Has Decoupled from Energy Source: Energy in Context, 15 March 2015 Regulatory Assistance Project (RAP) 5

6 Which Trend to Bet the Farm On? Regulatory Assistance Project (RAP) 6

7 Electric Power is Getting Much Cleaner Regulatory Assistance Project (RAP) 7

8 Power Sector Jobs Have Shifted ~3x Source: Regulatory Assistance Project (RAP) 8

9 ADOPTION Disruptive Forces Transforming Electricity Aggregation, Digitization, Ability to Shape Load Artificial Intelligence, Deep Machine Learning Compounding Network Effects $150/kW h PM Us Solar grid parit y W ind grid parit y Smart meter roll-out TIME We are here Source: Chandu Visweswariah, Utopus Insights Inc. Regulatory Assistance Project (RAP) 9

10 Power Sector Transformation (PST): Sankey Diagram Vermont Internal combustion EV Courtesy Dr. Asa Hopkins from the Vermont Comprehensive Energy Plan, Planning and Energy Resources Division, Public Service Department Regulatory Assistance Project (RAP) 10 Source: Chandu Visw eswariah, Utopus Insights

11 Load-Shaping Example: Nest s Rush Hour Rewards Program Swing MW of load automatically: win-win-win for Nest, customers, and the utility Regulatory Assistance Project (RAP) Chandu Visw eswariah, Utopus Insights 11

12 Even Newer Technologies Are Coming: Ultrasonic Clothes Dryer Uses sound waves to shake moisture out 80% reduction in electricity consumption compared to electric resistance dryer Regulatory Assistance Project (RAP) 12

13 Transactive Energy Capability is Already Here The project is but one example of how rapidly spreading technologies like rooftop solar and blockchain are upending the traditional relationships between electric companies and consumers, putting ever more control in the hands of customers. Regulatory Assistance Project (RAP) 13

14 Not Encouraging Trends for Traditional Electric Utilities Regulatory Assistance Project (RAP) 14

15 2 Utility Responses, Directions Good News and Bad News Regulatory Assistance Project (RAP)

16 Bad News: Rate Design Fixed Charges Demand Charges Smart Rate Design Regulatory Assistance Project (RAP) 16

17 Fixed Cost Classification Methods Cost Category Straight Fixed / Variable Minimum System Method Basic Customer Method $/month/customer Poles $10 $5 $ - Wires $20 $10 $ - Transformers $10 $5 $ - Services $1 $1 $1 Meters $1 $1 $1 Billing $2 $2 $1 Customer Service $2 $2 $1 Total $46 $26 $4 Regulatory Assistance Project (RAP) 17

18 ILEC Access Lines (FCC Form 477) How Did High Fixed Charges Work Out for Landline Phone Companies? Down 55-60% in <15 years Regulatory Assistance Project (RAP) 18

19 Non-Coincident Peak (NCP) Demand Charges Are Also Suspect Regulatory Assistance Project (RAP) 19

20 Time-Varying (TVR), Time-of-Use (TOU), Dynamic Rates Offer Promise More equitable cost recovery Reduce peak demand Encourage EV charging during off-peak hours Encourage electric water heater controls or timers Provide benefit to low-use customers Better aligns the customer with the market Regulatory Assistance Project (RAP) 20

21 How Should Utility Ratemaking Be Done? Bad: Throughput Incentive (current) Better: Decoupling Best: Performance- Based Regulation (PBR) Regulatory Assistance Project (RAP) 21

22 Good News: Electrification Electric Vehicles (EVs) Water Heating Space Heating (Industrial Applications; Indoor Agriculture) Regulatory Assistance Project (RAP) 22

23 Electrification is Already Happening 54% Photo credits: Nest and Dennis Schroder, NREL Regulatory Assistance Project (RAP) 23

24 But, Not All Electrification is Created Equal It s all about load growth, right? Brattle: Utility sales could nearly double by 2050! Regulatory Assistance Project (RAP) 24

25 What is Beneficial Electrification? an original NRECA and RAP concept 1. Saves Members Money Long-Term; New Services 2. Reduces Environmental Impacts 3. Enables Better Grid Management Regulatory Assistance Project (RAP) 25

26 The Duck Curve and Workplace EV Charging Home Charging without TOU Workplace Charging Source: Jim Lazar, RAP Regulatory Assistance Project (RAP) 26

27 Ongoing Environmental Benefits Because Devices Get Cleaner with the Grid Regulatory Assistance Project (RAP) 27

28 3 How Can We Be Most Effective? Regulatory Assistance Project (RAP)

29 Electrification Load Will Buy Time But Not a Reprieve Get closer to members Segmentation, new services Focus on RE, EE, DERs, EVs Attend to equity, low-income Decouple revenue from kwh sales Rethink rate design Not cavalier fixed or demand charges! Get going on EVs & heat pumps, distribution system planning, transactive energy, analytics, management of demand, etc. Regulatory Assistance Project (RAP) 29

30 The Best Path Forward? Identify what your members want and need Identify the challenges and opportunities they will face - Henry Ford: If I d asked my customers what they wanted, they would have said a faster horse. - Wayne Gretsky: Skate to where the puck will be. Address both proactively - i.e., Serve them - Note: Probably won t happen with the kwh-throughput business model Regulatory Assistance Project (RAP) 30

31 Time is of the Essence Regulatory Assistance Project (RAP) 31

32 Global Best Utility Scale: 2015 From Michael Liebriech presentation to CAISO October 18, 2017 Regulatory Assistance Project (RAP) 32

33 Global Best Utility Scale: 2016 From Michael Liebriech presentation to CAISO October 18, 2017 Regulatory Assistance Project (RAP) 33

34 Global Best Utility Scale: 2017 From Michael Liebriech presentation to CAISO October 18, 2017 Regulatory Assistance Project (RAP) 34

35 ADOPTION Disruptive Forces Transforming Electricity Aggregation, Digitization, Ability to Shape Load Artificial Intelligence, Deep Machine Learning Information & Network Effects $150/kW h PM Us Solar grid parit y W ind grid parit y Smart meter roll-out TIME We are here Source: Chandu Visweswariah, Utopus Insights Inc. Regulatory Assistance Project (RAP) 35

36 About RAP The Regulatory Assistance Project (RAP) is an independent, non-partisan, non-governmental organization dedicated to accelerating the transition to a clean, reliable, and efficient energy future. Learn more about our work at raponline.org Ken Colburn Principal and US Program Director The Regulatory Assistance Project (RAP) Bar Harbor, Maine United States kcolburn@raponline.org raponline.org