Energy Exchange

Utility 2.0: NY’s New Business Model Should Properly Value the Costs and Benefits of Distributed Energy Resources

Source: AtisSun

Source: AtisSun

As we’ve mentioned before, New York is changing how it evaluates and compensates electric utilities. One goal of this change is increased consumer engagement, which makes customers allies in the development of a more reliable, resilient, and ‘smart’ electric grid.

Many customers have begun taking advantage of new energy technologies and their falling prices by turning to community microgrids, installing on-site distributed generation, like rooftop solar, or investing in more efficient appliances, among other actions. Advances in telecommunications and information systems have also created new opportunities for energy services we could not have imagined just a few years ago. For example, innovative tools like demand response allow third parties or utilities to turn off pre-approved appliances – like swimming pool pumps and air conditioners – remotely when the power grid is stressed and needs a quick reduction in energy demand. Read More »

Posted in Clean Energy, Energy Efficiency, Grid Modernization, New York, Renewable Energy, Utility Business Models / Tagged | Language: / Comments are closed

Utility 2.0: NY Utility Regulators Should Consider Change to “Formula for Success”

Source: Daniel Schwen, Wikimedia Commons

Source: Daniel Schwen, Wikimedia Commons

Acquire more customers, sell more electricity. This primary formula has fueled the runaway success of utility companies in America, as well as the rest of the world, for well over a hundred years.

But today, in an era when customers are technologically savvy, price conscious, and environmentally aware, more families are pursuing opportunities that will cut electricity bills and carbon emissions. Options once considered fringe, like installing rooftop solar panels and driving electric cars, are now becoming so mainstream that utilities everywhere are seeing their bottom lines crunched and even fear for their survival. The electricity sector needs a new formula that can account for these changes, while still providing reliable, safe, and affordable electricity for all.

As a result of increased energy efficiency and heavier reliance on local, distributed energy resources, it’s clear our country is moving toward a reality in which less electricity will come from centralized, fossil fuel power plants. At the same time, customers want utilities to continue providing basic electricity services while allowing them to benefit from new energy-efficient solutions and clean technologies in order to waste less electricity and generate our own power.

How will this be possible? A key first step is moving away from the existing regulatory paradigm, which rewards utilities for investing in more power stations and equipment, to a model that rewards utilities for the performance we seek today. Read More »

Posted in Clean Energy, Energy Efficiency, Grid Modernization, New York, Renewable Energy, Utility Business Models / Tagged | Language: / Read 9 Responses

New York Takes a Major Step toward Rethinking Utility Economics

NY Lights BridgeThroughout the United States, utilities earn a profit through a tried and true regulatory model that has worked well for over 100 years. This model was built on the assumption that customers would use ever increasing amounts of electricity, and it worked for some time. But, as the need to save power and make electric systems more efficient becomes essential to adapt to climate change, this and other assumptions no longer hold true. Without changing how utilities are compensated, we run the risk of experiencing a true irony: utilities, the cradles from which our modern civilization rose, may become the chains preventing us from advancing toward a clean energy future.

Last week, the New York State Public Service Commission (PSC) – which regulates the state’s utilities – took action to transition to a new model aligned with Reforming the Energy Vision (REV), the state’s initiative to transform the electric grid into a cleaner, more efficient and affordable system. By issuing the “Order Adopting a Ratemaking and Utility Revenue Model Policy Framework,” the PSC is changing how New York’s utilities will be compensated, taking a major step to break the chains holding utilities back, and moving from a system where utilities get paid according to how much electricity they sell to one where utilities are compensated for producing environmental benefits aligned with the public good. Read More »

Posted in Grid Modernization, New York, Utility Business Models / Language: / Read 9 Responses

Creative Utility Accounting: Estimating the True Cost of a Subsidy

rp_coal-88064_640-300x199.jpg$5 billion is a lot of money, yet that’s the difference in cost estimates between an Ohio-based, consumer advocacy group and FirstEnergy for the utility’s proposed bailout plan.

FirstEnergy, the giant Akron-based company that owns power plants and transmission lines in several midwestern and northeastern states, calculates its proposed plan to raise electricity rates will eventually save Ohio customers $2 billion. The Ohio Consumers’ Counsel, in contrast, estimates the subsidies will cost Ohioans $3 billion.

To appreciate the differences, consider a little history.

Several years ago, FirstEnergy thought it could profit in emerging regional electricity markets, so it convinced regulators to allow it to set up a separate subsidiary that would generate and sell electricity. That unit was to be independent from another subsidiary company, which managed the power wires and delivered power to customers. This partial step toward free markets, however, didn’t work out too well for FirstEnergy. Now, it’s asking regulators to abandon competition. Read More »

Posted in Clean Energy, FirstEnergy, Ohio / Language: / Read 3 Responses

Illinois Considers Greenhouse Gas Metric for Evaluating Utility Performance

Source: pgegreenenergy

Source: pgegreenenergy

A new utility business model – “Utility 2.0” or “reform” – is the hot topic in statehouses and regulatory commissions across the country. This is due to many factors: technological innovations in the energy sector, changing consumer expectations, increasing electricity prices, tighter regulations, and the need to decarbonize our energy sector as we grapple with climate change.

Some argue utility earnings should be based on performance rather than volumetric electricity sales. They suggest utilities’ monopoly interests should be aligned with enabling clean energy services – such as on-site renewable energy and home energy management – instead of simply delivering more electricity.

Key to this new approach is the ability to define – and then measure – performance. This will require a set of metrics by which utility investments can be judged and rewarded. Illinois was the early adaptor of performance-based metrics for its historic smart meters roll-out and is finalizing a set of metrics this week that are critical to designing a utility business model for the future. Read More »

Posted in Clean Energy, Demand Response, Electricity Pricing, Energy Efficiency, Grid Modernization, Utility Business Models / Language: / Read 1 Response

‘Utilities 2.0’: The Future May Be Sooner Than We Think

Source: NASA Earth Observatory

Source: NASA Earth Observatory

Last month, I had the pleasure of moderating a panel called “Utilities 2.0: The Role of Distributed Generation and Demand Response in Evolving Utility Business Models.” The topic may sound esoteric, but to the more than sixty people in attendance, and at least fifty more watching online, the event, which was sponsored by clean energy networking group Agrion, offered insight into how these options will in a not-too-distant future revolutionize the way all of us consume electricity.

The energy industry is abuzz with talk of how distributed generation, which enables consumers to draw power from on-site sources, such as rooftop solar, and demand response, which rewards customers who use less electricity during times of peak demand, are transforming the electric utility industry. A once-in-a-generation paradigm shift is already in motion, and exactly how it will play out is anyone’s guess. Read More »

Posted in Clean Energy, Demand Response, Electricity Pricing, Energy Efficiency, Grid Modernization, Renewable Energy, Utility Business Models / Language: / Read 2 Responses