Power Market Outlook – Grid Transformation and the Impact of Distributed Energy Resources

As DERs continue to proliferate, utilities are piloting the integration of many different resources and partnering with new entities. These activities have important implications for the manner in which the supply chain procures products and services and the types of contracting relationships that will be needed. Learn more about the changes, impacts to utilities, the continuum of regulatory responses, and what it means for the supply chain in this presentation.

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Power market Outlook Grid Transformation and the Impact of Distributed Energy Resources

    • 14th Annual Platts Utility Supply Chain Management Conference
    • January 1820, 2016

Introduction

    • The influx of Distributed Energy Resources is changing the way utilities operate
      There is tremendous interest in the utility business model and what changes mean for all aspects of the utility
      This talk will focus on:
      What the changes are
      Impacts to utilities
      The continuum of regulatory responses
      What this means for supply chain

The Hype and the Headlines

    • Distributed Energy Resources
  • Utilities Are Facing a Death Spiral, a Mortal Threat!
  • Business Models Are Changing (Forever! Today!)
  • Solar Panels and a Battery in Every Home
  • DSO Coming to a Neighborhood Near You!
  • A Microgrid on Every Campus; In Every Community!
  • Get Paid to Save Energy! See How Much You Can Save!

Distributed Energy Resources

    • Whats Really Out There?
  • 2014 U.S. Decentralized Capacity: 13,018 MWs
    2013 U.S. Electric Generating Capacity (Summer): 1,060,064 MWs
  • Notes: *Distributed and dispersed includes commercial and industrial generators Figures include both actual and estimated and both utility and customer-owned generation. Due to nature of the data, it is possible some systems may be double counted.
    Sources: EIA Form 860 and 861 data; ScottMadden analysis.

    • Notes: *Distributed and dispersed includes commercial and industrial generators Figures include both actual and estimated and both utility and customer-owned generation. Due to nature of the data, it is possible some systems may be double counted.
      Sources: EIA Form 860 and 861 data; ScottMadden analysis.
    • Distributed Energy Resources
    • Whats Really Out There?

Energy Efficiency Programs

    • Whats Really Out There?
  • Annual electric and natural gas energy efficiency program spending. Natural gas spending is not available for the years 19932004.
    Sources: Nadel, Kubo, and Geller 2000; York and Kushler 2002, 2005; Eldridge et al. 2007, 2008, 2009; CEE 2012, 2013, 2014, 2015; Gilleo et al. 2015.

What the Heck Does That Mean??

    • A working definition:
      The changes driven by the emergence of distributed energy resources (DER) in all major functions of electric utilities
    • Utility of the Future
    • The degree of impact to these major functions driven by DER varies significantly by state and region.
    • Regulatory
      Operations
      System Planning
      Customers
      Stakeholder Management
      Revenue Generation
      Pricing
      Supply Chain
    • Energy Efficiency
      Demand Response
      Distributed Generation
      Storage
      Electric Vehicles
      Microgrids
    • All Major Functions of Electric Utilities
    • Distributed Energy Resources (DER)

Complexity and Uncertainty

    • Our Industry Today

    • A Continuum of Responses
    • Distributed Energy Resources Impact
    • Net Metering
    • Pilot Programs
    • Grid Modernization
    • Business Model Redesign
    • Pure Dereg Market

Market is King

  • What this means:

Utility scale renewables (wind and solar) have grown as they have been able to compete effectively in the ERCOT market

Retail energy service providers create products that customers will buy in IOU territories; mainly compete on price with limited DER offerings

Munis and coops have led the state in innovation providing utility scale and DER alternatives; largely because they retain the connection to the customer and can provide holistic offerings to customers

  • Case Study: Texas
  • Key Characteristics:

Complete wholesale deregulation for IOUs: wires companies that earn an ROE on T&D

Munis and Coops: remain fully integrated


Reforming the Energy Vision: Tracks 1 and 2

    • Case Study: New York
    • Demonstration Projects
      Distributed Systems Implementation Plan (DSIP)
      Benefits Cost Analysis (BCA) Framework
      Energy Efficiency Transition Implementation Plan (ETIP)
      Non-Wires Alternatives (NWA)
      Interconnection Processes
      Microgrid Configurations
      Consumer Protections
      Consolidated ESCO Billing
    • Rate Design and DER Compensation
      Determining the value of D (LMP + D), continuing net energy metering, and modifying existing rate designs
    • Earnings Impact Mechanisms (EIMs)
      New performance incentives that are tied to desired outcomes; initially, positive only or symmetric only
    • Scorecard Mechanisms
      Metrics that are to be tracked but not monetized at this time; to be considered as future EIMs
    • Market Based Earnings (MBE)
      Opportunities for utilities to increase revenue by acting as the platform to supplement rate-based revenue
    • Track 1
    • Track 2

AMI

  • Rate Cases

Building Blocks

    • Case Study: California
    • *Now including DERs.
      **1,325 MWs through 2020.
    • General Rate Cases
    • Distribution Resources Plans
      (R.14-08-013)
    • Integrated Demand-Side Management
      (R.14-10-003)*
    • Storage Procurement
      (R.15-03-011)**
    • Net Energy Metering
      (R.14-07-002)
    • Alternative Fueled Vehicles
      (R.13-11-007)
    • Energy Efficiency
      (R.13-11-005)
    • Renewable Portfolio Standard
      (R.15-02-020)
    • Residential Rate Reform (R.12-06-013)

    • A Continuum of Responses
    • Distributed Energy Resources Impact

Grid Transformations Impact on Supply Chain

    • Several forces will conspire to pressure supply chain organizations to adapt and incorporate a more sophisticated approach. Supply chain organizations will face complex sourcing requirements and multi-step RFP solutions, such as Qualifications-Based Selection (QBS).
    • The number of parties supply chain will have to interact with
      will increase
    • Sophisticated contracting needs
      will increase
    • Pace of change
      will increase
    • Specialization of programs
      will increase
    • These are characteristics of complex markets and indicate that alternative sourcing mechanisms should be considered.
    • What Does This All Mean for Supply Chain Organizations?
    • Switching costs
      will increase
    • Unclear variables that influence pricing
      will increase


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