Should utilities own distributed generation?

1
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
• jna_at_speakeasy.org

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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
• Natl 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

3
Whats 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-scalegeneration (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)

4
TD 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_
id000000000001011026
targetnid267828value04T101.0marketnid267715o
itype1searchdate8/19/2004
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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

6
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
  providersto 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,
8
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

9
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-o
wned, customer-sited CCHP
11
Stakeholder impacts single installationUtility-o
wned, customer-sited PV with EE
12
Stakeholder impacts single installationUtility-o
wned, 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

See E3s 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.
14
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
  arearegulators 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