Co-ops that figure out how to discern and meet members’ changing energy needs will stay ahead of the curve.
Electric cooperatives have always embraced their history and traditions, but that hasn’t kept them from looking forward. The reason is simple: Serving member-owners requires constant adjusting to meet their changing needs.
Today’s interconnected and increasingly complex world, where consumers have more choices than ever, is driving many co-ops to the latest evolution: the energy services provider.
“As an energy services provider, the cooperative is helping its members fulfill whatever they want and need relative to use of energy for their quality of life and economic prosperity,” says Jim Spiers, NRECA senior vice president for Business and Technology Strategies.
Source: RE Magazine.coop
Energy services providers recognize that today’s consumer-members need more than electricity from their co-ops. They need help navigating an energy environment that presents them with a variety of choices and technologies.
Traditional concerns like safety, power reliability, and cost remain as important as ever, but consumers take these as a given and are looking for more.
“Electricity is a means to an end,” says Steve Collier, director of smart grid strategies at Milsoft Utility Solutions. What consumers are looking for, he says, are solutions that take advantage of the latest in technology and services to make their lives better.
As they do so, co-op members are trying to assess the value to them of things like solar power, electric vehicles, battery systems, and smart thermostats and appliances, along with apps and other software that allow them to track and manage their energy use.
NRECA members acknowledged the significance of this shift by adopting a 2017 resolution that recognizes a new consumer-centric business model. It reads: “We urge NRECA to identify, educate, and recommend potential business models or processes for cooperatives to take in adapting to the ongoing evolution from a commodity-centric model to a consumer-centric model that encompasses energy products and services such as distributed generation, automated metering structure, and energy efficiency.”
“This is a flexible model that tailors service offerings to individual systems and consumer preferences,” says Jan Ahlen, NRECA senior regulatory affairs manager. “It’s also one that delivers value to all consumers, not simply those who have the means to purchase the newest technology.”
Some electric co-ops are already taking the transformative leap into this new model. Poudre Valley REA, based in Fort Collins, Colorado, is conducting an experiment—a sort of “war game,” says President and CEO Jeff Wadsworth—in which the co-op is assessing how different time-of-use rates, price signals, and components on the grid interact and drive consumer choices.
The experiment involves two in-house teams: a “consumer” team and a “utility” team. The utility team will create various power use and rate scenarios, and then the consumer team will react to them. Special software will help them determine which responses make the most sense. For example, “if the PV [photovoltaic] solar is outputting at this level, then energy storage doesn’t make sense … or when should you use that generator, how do the different components interact with the lighting and AC control,” Wadsworth says.
The end goal, he continues, is to develop the expertise that will allow the co-op to “offer consumer-centered choices and develop them based on a blank slate—to try to figure out, if we weren’t here doing what we already do, what would be the services and technologies we would offer to those consumers?”
Spiers says understanding the synergies among different options is a key to the service model.
“You can provide energy services as a one-by-one technology play, or you can provide energy services in a way that has the most value for the consumer who is participating and hopefully the best benefit back to the members overall,” he says. For example, “instead of having a consumer who’s doing their own one-off thing, you’re now saying, ‘If you want solar, you could do it more economically and in a way that’s better for everyone if you do community solar or if you put it together with a water heater or battery storage.’
“The co-op can help tie everything together,” Spiers says.
Curtis Wynn, president and CEO of Roanoke Electric Cooperative in Aulander, North Carolina, notes that the benefits of the service model extend to G&Ts. For example, he says, North Carolina Electric Membership Corp., which supplies Roanoke Electric’s power, has a pilot program to offer consumers in participating member systems a discounted Ecobee smart thermostat for better demand response in the G&T’s network.
“This brings everything full circle to really reap the benefits of becoming a full-service co-op,” says Wynn, who is also vice president of NRECA’s board of directors. “By doing this, you’re bringing your member-owners energy-saving devices while reducing costs at the power distribution and generation levels.”
Electric cooperatives must provide guidance on a variety of technologies and services as they move toward the energy services provider model, Spiers and Collier say. Offerings will differ by co-op depending on member interest and needs, they note, but several will be common across all cooperatives as they work to help their members make wise choices in the rapidly changing energy landscape.
One of the more fascinating shifts in the energy landscape is how concern about greenhouse gas emissions has changed the environmental equation when it comes to using electricity rather than fossil fuels for a variety of end uses.
Keith Dennis, senior director of strategic initiatives for NRECA, says that in past years, electricity was considered a less efficient and often less environmentally responsible source of energy in homes and commercial or industrial enterprises. As a result, natural gas was favored for water heaters or home heating systems.
But Dennis says a convergence of trends is moving the consensus toward greater consideration of the benefits of electrification, including efforts to limit greenhouse gas emissions, the declining level of emissions from electric power plants, the growing efficiency of electrical appliances, and the need to better manage the growth of intermittent, renewable energy options on the grid.
“Beneficial electrification is the idea of electrifying end uses like space heating, industrial processes, appliances, or automobiles with the result of reducing greenhouse gases and other emissions,” he says.
Spiers says one facet of becoming an energy services provider will be to recognize this trend and assist members in taking advantage of it.
“Ensuring your members understand the broad benefit of electrification and helping them integrate these devices into their homes and businesses will be key to improving member satisfaction,” he says. “And it will have the added benefit of satisfying environmental concerns and reversing negative load growth trends.”
A recent study by NRECA examined the benefits of switching from forklifts powered by fossil fuels to those powered by electricity.
Forklifts that depend on an internal combustion engine remain more popular than electric models, although the gap has been narrowing in recent years. The NRECA case study found that electric forklifts had lower overall ownership costs and reduced health risks to operators while providing significant environmental benefits.
Great River Energy, a G&T headquartered in Maple Grove, Minnesota, has 12 member cooperatives participating in an electric forklift rebate program to encourage con versions. Since 2015, 72 electric forklifts have been added in Great River’s service territory.
The benefit to Great River and its member co-ops comes in the form of new electric load that is replacing fossil fuel use, and it largely comes at off-peak hours when forklift batteries are being recharged. The program also strengthens and deepens the relationship between the cooperatives and members by providing a business solution that cuts costs and improves their bottom line.
Dennis says he expects more industrial equipment and processes to transition to electric power. On the consumer level, electric vehicles are likely to continue to grow in popularity, while in the residential sector, “more new homes are being built with electric space and water heating. We’re seeing a trend. The question is, in the future, will more and more homes be all electric? I think there’s a good chance that more people will have all-electric systems, especially if they’re putting solar on their house.”
Solar and Other Distributed Generation
Photovoltaic power, hardly a new technology at this point, continues to grow. The Solar Energy Industries Association(SEIA) forecasts that the grid will add 12.4 gigawatts of new solar capacity this year. Other forms of renewable energy, such as wind and biomass, also continue to increase.
In 2016, renewable energy sources accounted for more than half of all new capacity, according to the U.S. Energy Information Administration.
But within this overall growth, important changes are occurring to the fuel mix that are significant for electric cooperatives that want to help their members make wise distributed generation or renewable energy choices. For example, the rooftop solar market seems to be slowing, while commercial and utility-scale photovoltaic growth is becoming more robust.
The utility-scale segment represented 58 percent of the PV capacity installed in the second quarter of 2017, according to SEIA, the seventh straight quarter in which the United States added more than a gigawatt of utility-scale solar.
Industry analysts are debating the reasons for the decline of rooftop solar. Some blame regulatory changes they say have made it less attractive to consumers in some states, while other industry observers say the proliferation of rooftop solar companies means many of the most likely consumers have already been targeted, particularly in Sun Belt states.
Other experts say utility-scale solar has been grabbing a larger share of investment because it offers a better price-to-performance ratio. A 2015 study by Massachusetts Institute of Technology researchers found that rooftop solar can cost 80 percent more per peak watt than utility-scale photovoltaic arrays.
Still, many consumers remain interested in investing in solar energy, both as an expression of their commitment to the environment and in the hope it can trim their electric bills. Third-party vendors also continue to tout the benefits of long-term rooftop array leases or purchases across co-op territory.
Helping co-op members understand their choices among renewable and distributed energy resources is essential to being a trusted energy services provider, Spiers says. It’s an area where cooperatives are already taking the lead, particularly through their investment in community solar.
“The community-owned model offers several advantages over rooftop solar,” says Brian Sloboda, an NRECA program and product manager, “including a better economic value without the hassle associated with installing a solar array on the roof of the member’s home.”
NRECA numbers show more than 130 cooperatives offer community solar projects in 30 different states.
Poudre Valley REA is among the cooperatives tailoring their community solar offerings to meet their members’ needs. Poudre Valley built its first community solar project in 2012 and now has two fully subscribed systems.
It opened a third in September, which CEO Wadsworth says is being evenly targeted to lower income members, nonprofit groups, and other co-op members. The goal, he says, is to make sure that Poudre Valley is offering options to all its members.
“We believe that our members want choices,” he says, “and we want to be able to offer those choices.”
When Tesla Energy announced its residential Powerwall battery and Powerpack commercial-sized battery system in 2015, it kicked off a wave of interest in home energy storage. Tesla’s products were not the first to hit the market, but they were the first to gain widespread public attention.
Despite the publicity, batteries from Tesla and its competitors are still a very small part of the energy grid, with sales estimated only in the thousands of units. The market is expected to grow as prices fall and as more consumers and commercial users turn to battery storage for backup power.
Cooperatives likely will investigate battery storage at the utility, commercial and industrial, and residential levels.
At the utility level, a handful of cooperatives, such as Orcas Power and Light Cooperative, which serves 20 islands off the coast of Washington, and Golden Valley Electric Power Association in Fairbanks, Alaska, have incorporated battery storage into their systems to improve reliability.
Other co-ops are looking at the possibility, says Sloboda.
“We’re seeing this more at the substation level, and it’s usually about peak reduction,” he explains. Co-ops that buy their power from the wholesale market are more aggressive and tend to be more interested.
Interest among commercial and industrial (C&I) members in pairing battery storage with distributed generation has created “a good bit of interest from some co-ops,” Sloboda says, “partly because a lot of these commercial accounts are increasingly being approached by third parties about this.”
The possibility creates a difficult calculation for a cooperative. An NRECA study found that factors involved in a co-op’s decision to provide this service include equipment installed costs, operating and maintenance costs, electricity prices, demand charges, and wholesale power impacts.
“What does it mean to the co-op’s financial bottom line? Does it make more sense for them to provide a shared battery asset? How does it benefit the member and impact the co-op overall?” Sloboda says. “These are all questions that each co-op will be addressing based on their own rates and policies.”
The NRECA study noted that one possible way of monetizing battery systems would be leasing and shared-savings programs that cooperatives could offer their commercial accounts in coordination with their power supplier.
At the consumer level, Sloboda says, the equations are simpler for now. While the idea of pairing rooftop solar with a battery backup has appeal for members who like the idea of freeing themselves from the grid, the option still doesn’t make economic sense in most cases.
“It’s going to be really hard to justify if you’re talking about spending $30,000 for photovoltaic and batteries so you don’t have to buy power from the grid,” Sloboda notes. “$30,000 buys an awful lot of power from the grid.”
The exception, he notes, could be using batteries to handle end-of-theline challenges.
“In the future, there are likely going to be a small number of applications where the cost of service to build a new line is going to be high enough that it just makes sense to put them on a battery with a solar PV system or other renewable source rather than building out miles of power line, especially if it is in an environmentally sensitive area,” Sloboda says.
As cooperatives look to provide their members the energy services and expertise they need, Sloboda says, helping commercial and consumer members figure out where storage makes sense is going to be an important responsibility.
He adds that it’s going to involve gaining experience with the technology in real-world situations.
“There’s a major experience curve that co-ops and all utilities are going to have to scale to really be experts and really understand how these devices and programs work.”
Broadband and Smart Systems
The thing that will tie together all the energy services offerings of the future will be smart grid technology, Spiers says. Much, if not all, of that technology will be dependent on broadband internet connections.
Electric cooperatives have recognized the importance of reliable high-speed internet service for their members since the web first became a part of daily life. NRECA and its members are campaigning to reduce the digital divide that leaves some rural or poorer parts of the country without the level of internet access that other areas have.
Championing that cause is an important part of the co-op mission on behalf of its members. More than 80 cooperatives are providing high-speed internet access to their members as a service, running fiber cable or using a combination of fiber and wireless to connect consumers. Many other cooperatives are evaluating a buildout of their energy services platform with high-speed communications that then can help support partnerships and technology options for broadband expansion to their members.
“There is a business need for more high-speed data communications capabilities to effectively manage today’s electric cooperative,” says Paul Breakman, NRECA’s senior director of cooperative systems. “NRECA is working with a number of cooperatives to evaluate the best fit for their members.”
Milsoft’s Collier says it’s also essential that co-ops make sure their own online offerings for customer bill payment, energy management, and other services are meeting members’ changing expectations.
“Their homes are getting smarter. Their businesses are getting smarter. Are the co-ops offering them the internet-based interface they’re becoming accustomed to?” Collier asks. “At my house, we do everything through the internet. But many of our customers are still not able to do everything they want to do with their co-op, even the existing services, through the internet.”
Developing an expertise in broadband applications is also going to become more important as more and more household and commercial devices are hooked up as part of the “internet of things.” Many of the appliances and devices connected to the internet will offer opportunities for load management, he adds, furthering the need for cooperatives to embrace their leadership role in that area.
All this may seem far from the original cooperative business of bringing electric power to rural America, but NRECA’s Spiers notes that providing a full range of energy services fits squarely in the co-op tradition.
“It’s part of the trajectory of co-ops, always finding the right tool to meet their members’ needs,” he says. “This is really what co-ops have done from the beginning.”