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Investment in distribution is aimed at helping to ‘digitize the system’ as the grid evolves

September 21, 2015 By Finley Engineering in

The power sector’s investment in the distribution system is intended to accomplish several things, including “digitize the system” in order to allow for two-way information flows “because we’re integrating more and more distributed resources into the system every day,” said Lisa Wood, vice president of the Edison Foundation, and executive director of the Institute for Electric Innovation, at a Sept. 17 event.

The Edison Foundation is an affiliate of the Edison Electric Institute, an association that represents investor-owned utilities.

Wood made her remarks at an event held at the Brookings Institution in Washington, D.C. The event, called The evolving electric power industry: Lessons and future trends, was moderated by Jim Rogers, former Duke Energy CEO.

The jumping off point for the discussion was the book Thought Leaders Speak Out: The Evolving Electric Power Industry, which Wood edited. It includes several essays from power industry executives that were drawn from dialogues that occurred at an Institute for Electric Innovation event earlier this year.

Rogers asked Wood what she sees as the basic trends with respect to the evolution of the grid.

“We are very focused now as an industry on the distribution system and investing in the distribution system” to do several things including “digitize the system” to allow for two-way information flows “because we’re integrating more and more distributed resources into the system every day. And that’s rooftop solar, but that’s also other devices that can connect to the grid,” such as energy storage devices.

Wood also raised “the ability to provide customers with the services that they want. So I think of that as sort of the democratization of the grid. And what that means is for your customers that want clean energy, you provide clean energy. For customers that want other types of services, you’re able to provide those types of services, so we have much more flexibility in what we can do with the power system than we have in the past.”

She said at a later point that “one of the issues that is very much front and center is this idea of providing customers with different kinds of services,” and breaking free from the idea that all residential customers are alike.

“Even today, the simplest example is a rooftop solar customer is not the same as a non-rooftop solar customer… their load shape is completely different. They are served completely differently. But why are they under the same rate structure?”

This issue is around “customizing services and letting customers pick and choose and pay for the service that they’re getting and we’re not doing that today,” Wood said. “I think it will change because customers are asking for it to change and that will drive, I think, regulatory change.”

Statistics illustrate how transformation is already in progress

Meanwhile, Wood offered some facts that she said indicate how the transformation of the power sector is “already well underway.” For example, she said that as of the end of 2014, the electric power industry had already reduced carbon emissions 15 percent below 2005 levels.

The power sector “is investing heavily in renewable energy resources like wind and solar and also converting many coal plants to natural gas,” Wood said. Currently, the electric utility industry, she noted, is investing about $9 billion a year in solar energy “and we expect that to continue each year for the next five years.”

In addition, “the power sector today is spending about $20 billion annually on the distribution system alone,” Wood said. “I like to say that today the distribution system is where the action is. That investment is resulting in a more digital grid, a more distributed grid and a more democratic grid and the investment in the distribution system is only expected to grow.”

100-year-old regulatory paradigm comes into play

Wood said that “we have a tremendous amount of technology,” while at the same time “we have a hundred year old regulatory paradigm. We have a lot of recognition by regulators and other stakeholders in the industry that we need to change how we do things.” In some places, she said, “we’re starting to see some movement, I think.”

Changing the regulatory paradigm is possibly “the biggest barrier,” she said, in order to “be able to move faster, to allow maybe more risk in the system than we’re used to.”

Wood said that “what we’re starting to see happen around the country is a few pockets of places where stakeholders are getting together and saying — can we figure out a collaborative way to move forward?”

She said that one good example of this is in Minnesota, with the state’s e21 initiative. “It’s their vision of the energy future for the state of Minnesota,” Wood said. She said that it is “a voluntary effort — very grassroots — it wasn’t mandated by anyone.”

Parties involved in the effort are “thinking about where does Minnesota want to be and how are we going to get there and we’re not going to get there by sitting in regulatory proceedings and trying over a two-year process” to iron out the details, Wood said. “So that’s one way to think about a way forward and I think other people are looking at a state like Minnesota and saying maybe that’s something we want to do.”

Educating customers about electricity is a ‘huge issue’

An audience member asked Wood whether she thinks consumers need to be better educated about what electricity is.

“I think that is a huge issue — educating the public about electricity, and how it works and what it means, and even what’s on your bill or making bills a little simpler so they can understand what’s on their bill,” Wood said.

“I think one of the questions is whose role is it to educate the public about electricity,” she went on to say. “I’m not sure whose job it is” to educate the public about electricity. “I think it’s very important to do that,” she said.

Read an article by Wood in the September-October 2015 issue of Public Power magazine.