As distributed energy resources (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.
Power market Outlook Grid Transformation and the Impact of Distributed Energy Resources
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- 14th Annual Platts Utility Supply Chain Management Conference
- January 1820, 2016
Introduction
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- 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
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- 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
- 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.
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- 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
- 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??
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- 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
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- A Continuum of Responses
- Distributed Energy Resources Impact
- Net Metering
- Pilot Programs
- Grid Modernization
- Business Model Redesign
- Pure Dereg Market
Market is King
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
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
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- 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
Building Blocks
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- 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)
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- A Continuum of Responses
- Distributed Energy Resources Impact
Grid Transformations Impact on Supply Chain
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- 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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