Wednesday, January 23, 2019

Overheard at New England Energy Conference and Exposition 2018

By Michael Kuser

FALMOUTH, Mass. — New England is up to the task of managing the tough challenges facing its wholesale market and grid — even if there is no grid in the future, regional energy experts said last week.

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Foy | © RTO Insider

“The feds are less important now, and New England used to live by its wits — we never had oil or gas — but now we’ve got offshore wind,” Douglas Foy, president of energy consultancy Serrafix, said Monday at the 25th annual New England Energy Conference and Exposition. The event is hosted jointly by the Northeast Energy and Commerce Association and the Connecticut Power and Energy Society.

Looking back on the era of restructuring electricity markets in the 1980s and 90s, “the most significant feature of those times was a collaboration between government, private industry and environmentalists,” said Foy, formerly both a secretary of commonwealth development in Massachusetts and president of the Conservation Law Foundation. “There were a bunch of very smart players all trying to get to a common goal.”

Political Split

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David O’Connor | © RTO Insider

“That’s a remarkable thing and quite a contrast to what we see today,” said David O’Connor, senior vice president for energy and clean technology at ML Strategies. “The way our country is polarized now, it’s harder to imagine collaboration.”

Kates-Garnick | © RTO Insider

Fletcher School professor Barbara Kates-Garnick, a former Massachusetts undersecretary of energy, said the challenge today is to recreate that collaborative dynamic: “I think it was both trust, collaboration and a recognition of the need to address looming issues that contributed to our willingness to tackle different problems in a collaborative rather than adversarial fashion, as is the mode today.”

“Energy efficiency created an environment where now it’s so successful, so prevalent, we’ve levelized the demand that used to be growing inexorably every year,” O’Connor said.

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McCary | © RTO Insider

Paul McCary, of law firm Murtha Cullina, said the financial incentives of wholesale markets helped form the consensus to try something different, which brought lower-cost power.

“But restructuring the electricity market was not done to face the problems we have today,” McCary said, adding that deregulation didn’t address the resource mix.

“There are a couple layers to the challenge — the state/federal split, for example,” McCary said. “Can you tweak and tweak the market until you get there? I question how many ornaments you can hang on the FERC market-structure tree. The 90s were more simple politically — today is a bigger challenge.”

“Screw the feds,” Foy said. “I’ll always bet on New England.”

Laser Grid

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Kelly-Detwiler | © RTO Insider

Speaking on the second day of the conference, Peter Kelly-Detwiler of Northbridge Energy Partners said the industry can thank the Trump administration for bringing resilience to the fore, both with last fall’s Notice of Proposed Rulemaking and the president’s June 1 order directing the Department of Energy to maintain uneconomic coal and nuclear plants. (See FERC Blindsided by Half-Baked Trump Order.)

“On climate change, irrespective of one’s political beliefs, science is science, and it ain’t going away,” Kelly-Detwiler said. “I used to think that if I put my hands over my eyes, nobody could see me, but I was 3 when I thought that.”

Kelly-Detwiler looked to the future, imagining what the energy space will be in 2050, and said experts are not good at forecasting, as evidenced by looking back to 2001 at anticipated electricity sales, solar penetration or natural gas production.

“Why? Because all our forecasts are based on what we know, not on what we don’t know, and on what trends are accelerating and why they’re accelerating,” he said. “We have to start thinking about what that new dynamic looks like and have that inform our future forecasting.”

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The 25th Annual New England Energy Conference and Exposition hosted jointly by the Northeast Energy and Commerce Association (NECA) and the Connecticut Power and Energy Society (CPES) underway. | © RTO Insider

NASA for several years has been delivering power to an experimental aircraft via laser. “Let’s fast-forward to a grid in 2050,” he said. “We can send energy to a plane with a laser right now, and we have 32 more years of high-performance computing that’s going to accelerate its ability to solve problems for us. One question that would be worth asking is: Do we have a grid at all?”

Shaping Public Policy

Eichhorst | © RTO Insider

“Even if we transition the electric power sector to zero-carbon electricity today, we still would still not be able to meet even the 2030 goals [40% greenhouse gas reduction],” said Courtney Eichhorst, lead analyst for regulatory strategy at National Grid. “Clearly the challenge is in two sectors: transportation and heating.”

Sloan | © RTO Insider

Michael Sloan, managing director of natural gas for energy services company ICF, said public policy should be set with an eye to the future, especially regarding electrification of the residential sector.

“First of all, would residential electrification reduce carbon emissions? It’s not clear. What are the impacts on the grid? What are the impacts on consumers, on voters? We’ve seen policy changes that hurt consumers lead to a change in government in Ontario,” he said.

Solomon | © RTO Insider

“Policy-driven residential electrification would be a very expensive approach to reducing greenhouse gas emissions,” Sloan said. “We should look at the most efficient ways to reduce emissions first, and let the market decide how best to meet residential heating load, at least until the less expensive approaches to reducing GHG emissions have been exhausted.”

On the issue of eliminating the internal combustion engine and turning to electric vehicles, Matt Solomon, transportation program manager for the Northeast States for Coordinated Air Use Management, said “there are so many advantages, so many ways that driving electric is a better experience for the consumer,” and people “get it” in one drive.

“States aren’t the best communicators … but Massachusetts is the first state to have actually put money into putting on test-drive events,” Solomon said. After an event targeted at high-earning, tech-savvy people, 68% of participants say they are more likely to buy an EV, he said.

Schneider | © RTO Insider

On residential distributed energy resources, Ian Schneider, a Ph.D. candidate at the Massachusetts Institute of Technology, said that tariff design has to match the grid reality.

“If we don’t design the markets correctly, then outdated tariffs will leave this energy revolution to not necessarily benefit all customers,” Schneider said.

DERs are disrupting an already outdated rate design, he said. MIT’s Energy Initiative identified four obvious inefficiencies with current rate designs: They’re neither time-based nor location-based, and “they tend to recover fixed costs volumetrically, so the utility is recovering fixed costs for previous expenses” on a per-kilowatt-hour basis.

As those who can afford solar panels consume less of the utility’s power, lower-income people are forced to pay a higher percentage of those fixed costs, which is inherently unfair, he said.

The fourth inefficiency: that the rates don’t account for capital investments going forward, “so in a world where the marginal cost of producing electricity is very low, but capacity costs, both for the distribution system and for generation, can be very high, it becomes more important to think about coincident peaks and how consumers are driving peak costs on the system,” Schneider said.

New Delivery Model

Allegretti | © RTO Insider

Daniel Allegretti, Exelon vice president for state government affairs in the East, said there is a continuing tension between the utility and competitive paradigms.

Philip O’Connor | © RTO Insider

Philip O’Connor, president of energy consultancy PROactive Strategies, said flat load, disruption of traditional generation economics and digital deployment are driving the electricity industry toward a second wave of competitive restructuring.

“We’ve had a decade in this country in which overall electricity consumption, served by the grid, has not increased,” O’Connor said. “The entire business model and the regulatory scheme for the traditional, vertically integrated utility, and for the wires-only company, is predicated on the idea of growth and expansion.”

Digital deployment leads to one big thing — customer sovereignty, he said. “Unfortunately, the structure of the industry, especially the vertically integrated part, stymies that development. So what are we left with? We have rising fixed costs, particularly in the monopoly environment, but flat sales, so you’ve got to keep raising the price.”

Conroy | © RTO Insider

Brian Conroy, Avangrid director of network projects, said, “We see ourselves as a platform provider, and our collection of projects will deliver the platform and functionality envisioned for a future marketplace and a future grid operating environment.”

Public policy for reducing greenhouse gases or increasing the use of renewables usually means starting demonstration projects, he said.

Grubbs | © RTO Insider

“As we plan the future, everything we do … for least-cost planning, we have to look at what are the non-traditional alternatives,” Conroy said. “We see ourselves as a smart integrator, pulling all these diverse things together with a very smart or intelligent platform … to squeeze the value out of the distributed energy resources to get the most for our customers.”

The smart grid might outsmart the customer, according to Harrison Grubbs, director of strategic partnerships at marketing firm KSV. The firm surveyed people on their attitudes on renewable energy and found that utility customers don’t think much about their energy use.

“We wanted to drill down and get an understanding, what exactly customers do know and where those opportunities are,” Grubbs said. “We asked customers where does the majority of their electricity come from. Thirty percent said they don’t know. We also found that 27% of customers in New England believe that the majority of their electricity comes from coal and oil.”