Working towards a sustainable energy future can often seem like fixing an aircraft while it is still flying. In this exploration of Fixing the Plane in Mid-Air Three Keys to Energy Transformation, we uncover the essential strategies that hold the potential to revolutionize the way we harness and utilize energy.
Despite market forces and a seemingly endless flood of media addressing “death spirals”, utility business models, and customer disintermediation, power utilities should be confident about their future. The following is a brief list of positive developments:
This Accenture study is just one of many that confirms the utility is still the go-to source for reliable energy data. Reducing prices for renewable energy is making it easier and more affordable to achieve policy goals. New York State’s Renewing the Energy Vision is an example of how regulators are pointing to the possibilities for broader methods of making money.
But it’s become harder for utilities to strike a balance between maintaining service and investing in necessary infrastructure upgrades with their huge, capital-intensive assets. Distributed energy resources are becoming more cost-effective, faster, and more popular with customers, which is offsetting the overall amount of money needed for power plants, transmission lines, and necessary distribution upgrades.
Integrated, intelligent microgrids offer a long-term path to deliver sustainable energy for communities while retaining reliability and the vital function of utility, based on observations of these worldwide developments in the United States and elsewhere. Cities all over the world have the potential to become “smart,” but we need to address many problems first.
- Making sure that market rules take into account the quickness of innovation and the variety of options available to consumers
- Allowing energy to display varying degrees of worth, quality, and service within the bounds of the law
- Facilitating the “plug and play” integration of new goods and services
It would be nice to imagine that we could solve only one of these problems and save the most vulnerable members of society from rising energy expenses while still realizing the modern vision of developers, utilities, and energy service corporations.
This is an illusion; enormous resources have already been invested in constructing the grid, and it cannot be immediately replaced with a whole new system. Why comprehensive market reforms like New York’s “REV” proceeding are necessary because of the reality of sunk investment vs new investment the potential New York State Department of Public Service is requesting funds and a willingness to share risk from both existing energy providers and new entrants to the market. An extremely difficult task performed in one of the world’s most significant and influential cities.
Transforming electricity markets is challenging since you can’t pause the system and have everyone rearrange their components at the same time. In order to “repair the plane while flying” and achieve the goals of national, state, and local policies for clean, abundant, and inexpensive energy, the three processes outlined below must proceed in a coordinated, intentional fashion.
The Policy Should Incentivize Utility Performance
The recent interest in “performance-based regulation” is quite encouraging for our business. By tying rewards to specific results, performance-based regulation can lengthen the investment payoff period (by 5 – 8 years) (safety, interconnection rate, policy compliance).
This paves the way for the utility to collaborate on the development of cutting-edge technologies, increase product uptake, and distribute profits to their clientele, third parties, and software creators.
Procurement is currently driving the development of particular technologies in our business, such as community solar, energy storage, electric vehicle chargers, and so on. This conventional approach to resource development results in technologically driven innovation rather than a systemic shift in how energy is produced and used.
There will be no new financial structure that allows utilities and developers to share risk until there is substantial reform to the cost of service regulation. If it takes years to set compensation through recurrent, adversarial rate disputes, cities that want to move forward with ambitious smart city initiatives, utilities that want to experiment with dynamic pricing, and developers that want to provide “instant load” will eventually withdraw. This LBNL study is one example of recent research that suggests a way ahead.
The Burden of Ensuring Reliability Must Be Shared
Not-sharing-mid-text-image: Microgrids, smart cities, and other projects will require new transactional connections between customers and providers, the speed and size of which will depend on identifying a new legal arrangement for reliability. System operators at the “bulk” level and local utilities at the “retail” level are clearly vested with the duty of ensuring that customers always have access to electricity under the current legal framework.
It is important for the overall system’s reliability that communities who want to construct for increased reliability, greener energy, or any other aim do so within the constraints of a web of complex interconnection laws and legal tariffs. Regardless of technological progress, political agendas, or the desire for short-term economic advantage, these regulations exist for the benefit of all customers.
Rules Based on An Integrated Microgrid Design are the Key to Solving this Issue.
For dense metropolitan contexts, it may be possible for neighbouring cities and utilities to work together to solve problems using integrated systems thinking, as opposed to constructing highly localized distributed energy projects. Demand response, energy capacity, renewable energy credits, and flexible resources are aggregated throughout the dispersed utility footprint in order to meet the needs of the system and the community in integrated microgrid development. As a result of the growth of interconnected and neighbouring microgrid developments, the utility might leverage a significant load drop in one area while increasing generation in another.
This is obviously very different from the current contractual agreements and regulatory regulations for system reliability. When using a microgrid, different components of the network would “own” the financial and operational risk of the system if something were to go wrong, so that dependability requirement would be shared.
The interconnected nature of neighbouring microgrids would allow for instant re-routing of power and load, but the penalty of downtime and outages would be charged to a smaller node of the network rather than falling squarely on the utility’s shoulders.
There Need to be More People in the Network to Lower the Risk
There is a heightened risk to our energy infrastructure. In fact, the number of entry points into the distribution system is growing due to the ad hoc use of sensors, connectivity, and automation. Increased network utilization from these access points may seem contradictory, but it will actually improve security and flexibility for utilities, municipal planners, developers, and others in the industry.
Blackouts and energy shortages caused by physical and cyber threats can be mitigated by a flexible, dynamic, and interconnected network of microgrids. Since the energy system can benefit from modern control systems and contracts that ensure supply and demand at crucial moments for the utility, the fundamental laws of networking can be applied to the energy sector.
If customers’ demand and energy supply can be swiftly channelled over the current utility network, it is more difficult to knock out hospitals, data centres, and a dense urban housing hub.
The regulatory and financial rules surrounding reliability, utility franchises, and the ability of state regulators to provide flexibility for utilities to partner in new ways to maintain their crucial role as the operator in a competitive environment pose a significant obstacle to the development of a cheaper, more resilient, and distributed energy system.
The relationship between traditional energy suppliers and consumers, including individuals and enterprises that want to engage in generation and supply, needs to be reset due to stagnant growth and a lack of real-time visibility into changes occurring in the network.
We can take baby steps toward building an integrated, intelligent, and community-driven energy network if we reform regulation, distribute risk, and broaden the scope of what we consider to be reliable. Thus, it is considered that for fixing the plane in mid-air three keys to energy transformation are to be used.