The New York Public Utility Commission is moving the New York state utility industry toward a radical refinition of utilities as we have known them over the past hundred years since Tesla and Edison created the electric power industry. In the future in New York state the utility industry may be comprised of distributed system platform (DSP) providers, basically providing the grid but not directly selling energy, and and energy market with many energy providers including bulk power generators and many distributed energy generators, you and me with rooftop solar panels.
Currently the grid is comprised of large, central power plants interconnected via transmission lines and distribution networks that feed power to customers. But this is beginning to change with the rise of distributed energy resources (DER) such as small natural gas-fueled generators, combined heat and power plants, electricity storage, and especially solar photovoltaics (PV) on rooftops and in larger arrays connected to the distribution system. DER already has had a significant impact on the operation of the electric power grid and its role will undoubtedly become even more important in the future.
Solar power is growing rapidly. 4.2 GW of solar power was added in 2013 in the U.S. It is not unreasonable to expect reaching 20GW of solar and a million installations in the near future. This proliferation of solar is driven primarily by customers wanting choice and by solar PV becoming very economical. For the first time in 100 years companies like SolarCity are providing consumers with a competitive alternative to the local power company. This is disruptive for the traditional utility business model. Many utilities are aleady trying to adapt to this new world, for example by utility-provided solar power at Wright-Hennepin Cooperative Electric Assn.
In the traditional utility model, if you compare variable and fixed costs with fixed and variable revenue, there is a mismatch. This translates into a revenue shortfall or unrecovered cost when you compare a non-solar customer's with a solar customer's annual bill. The problem is not technology, it is the current utility business model and in the utility industry in the U.S. there is an increasing recognition that it has to change.
In Maryland earlier this year in response to a recommendation from the Governor’s Task Force on Grid Resiliency to “scope out a Utility 2.0 pilot proposal", the Energy Future Coalition (EFC) prepared recommendations for a smart grid pilot project that would address key business objectives including a regulatory framework for the smart grid and a new utility business model that would keep utilities financially viable even as they delivered less electric power. EFC's key recommendation is a new utility business model that would decouple utility revenue from selling electric power.
Reforming the Energy Vision in New York State
New York has gone a step further. A Straw Proposal submitted by New York Department of Public Services (DPS) staff in its capacity as adviser to the Public Service Commission (PSC) proposes increasing the use and coordination of distributed energy resources(DER) via markets operated through a distributed system platform (DSP). Fundamentally this means that DSPs are not in the business of directly selling power themselves (unlike today's utilities), but create and maintain the market and infrastructure for the sale and distribution of electricity produced by the wholesale market (bulk generation) and thousands of DER generators. In the Straw Proposal DER is used to describe a wide variety of distributed energy resources, including end-use energy efficiency, demand response, distributed storage, and distributed generation.
Earlier this year New York’s Governor Andrew Cuomo asked the New York Public Service Commission to fundamentally shift utility regulation to meet the needs of a more distributed, consumer-focused energy system. In April 2014, the Commission issued an Order Instituting Proceeding for Reforming the Energy Vision (REV) which proposed a platform to transform New York’s electric industry, for both regulated and non-regulated entities, with the objective of creating market-based products and services that would drive an increasingly efficient, clean, reliable, and customer-oriented industry. Regulatory reform would enable coordination of a wide range of distributed energy resources to manage load, optimize system operations, and enable clean distributed power generation. New and existing markets and tariffs would be developed to empower customers to optimize their energy usage and reduce electric bills, while stimulating innovation and new products.
The Straw Proposal supports the central vision of REV, that increasing distributed energy resources(DER) via markets operated through a distributed system platform (DSP) is achievable and offers substantial customer benefits. The proposal found there is large potential for the integration of Distributed Energy Resources (DERs) into the New York electricity market, via a Distributed System Platform (DSP) framework. The integration of DER offers customers the opportunity to manage their usage and reduce their bills while at the same time creating important system and societal benefits such as increased system efficiency and reduction of carbon emissions. (The DPS Staff was assisted in preparing this proposal by Rocky Mountain Institute, the Regulatory Assistance Project, and the New York State Energy Research and Development Authority. )
Distributed System Platform
The foundation for Utility 2.0 in New York is the distributed system platform. The definition of DSP used by the DPS staff is an "intelligent network platform that will provide safe, reliable and efficient electric services by integrating diverse resources to meet customers’ and society’s evolving needs. The DSP fosters broad market activity that monetizes system and social values, by enabling active customer and third party engagement that is aligned with the wholesale market and bulk power system."
The DSP provides basic functions including market operations, grid operations, and integrated system planning.
- The DSP will enable participation by DER service providers in a transparent, open market. It will also create an open platform for new energy products and service delivery by third parties and energy suppliers to consumers.
- The DSP will need to integrate new market operation functions with both utilities’ existing grid operations and advanced “smart grid” capabilities. The distributed grid will facilitate deployment of DERs, two-way power flows, advanced communications, distribution system monitoring and management systems, and automated balancing of energy sources and loads. This is intended to lower peak demand on the bulk power system, increase reliability and manage investment needs of the distribution system.
- The DSP will the require modernization of power distribution systems. In the future distribution systems will need to operate under conditions very different from those of today. Modernization of distribution systems must meet and balance important policy objectives such as system reliability and resiliency, customer empowerment, consumer protection, system efficiencies, cost-effectiveness, competitive markets, energy efficiency, power quality, fuel diversity, and responsible environmental stewardship.
Implementing the DSP
Currently, power distribution utilities deliver electricity services directly to end-use residential, commercial and industrial customers. The New York Independent System Operator (NYISO) operates the transmission network and manages wholesale electricity markets. Distribution utilities construct, maintain and operate distribution system infrastructure and assets. A growing number of customers are engaged in distributed generation, for example, rooftop solar. There are demand response and energy efficiency programs sometimes run by the utilities themselves, sometime by other agencies.
The Straw Proposal recommends that New York's existing distribution utilities, such as Consolidated Edison, National Grid, and New York State Electric and Gas, serve as the DSPs. This would entail New York's utilities focusing on energy distribution (the grid), market-creation and other electric services but getting out of the business of direct energy sales.
Under the REV vision, the DSPs will responsible for creating a retail energy market which includes both the wholesale energy market and the growing DER markets - you and me with our rooftop panels.
Utility grid operations divisions will continue to be responsible for distribution system planning across the electric network, including the distribution network and connections to the bulk power system.
The NYISO will continue planning for bulk system upgrades, bulk generation forecasts, and other service needs.
Customers will become participants in the management and optimization of the electric system through wide-scale adoption of DER products. For larger customers this could involve actively managing energy usage and generation. For smaller customers automatic technologies and controls could optimize their usage patterns. DER service providers could become aggregators between customers and the DSP.
The Public Services Commission's role will be to maintain a critical oversight of the market. This will include guidance and processes for market rule making, approving investment plans and rate designs by regulated utilities, and reviewing the activities of ESCOs (energy suppliers), third-party service providers, and utilities for compliance with market rules.
One of the important features of the Straw Man proposal is an information exchange. Since customer electric power usage data can reveal opportunities for DER investment and development of innovative products and services such as consumer apps, the Straw Man proposes a bi-directional electricity data information exchange involving customer usage data from smart meters and data from energy generating installations on both sides of the meter. The data exchange is intended to help with monitoring the distribution system, identifying opportunities for DER products and services tied directly to customer data, and to support the development of innovative DER products and services. Customers would have the option to opt out of the data exchange program.
Customers would also be able to access to their own energy usage data in a standard format. In addition, customers would be able to authorize that their energy usage data be provided to third-parties such as DER providers, to enable providers to develop and offer products and services that are tailored to the customer’s specific energy patterns and needs. New tools, often apps running on hand-held devices, are being developed to help energy consumers understand the alternatives in purchasing electricity from a third party provider, installing solar PV on their roof, and other energy-related services.