Game-changing new technologies, consumer demand for cleaner more efficient energy, an aging and increasingly obsolete grid, dramatic reduction in the cost of renewables: these are among the many forces radically reshaping America’s electricity sector. A new era is dawning, and analysts agree we are at a pivotal moment in America’s energy history. Decisions and investments made in the next decade will shape the course of the power industry, the economy and public health for decades to come.
Will legal economic and regulatory structures designed for the last century continue to thwart innovation and constrain consumer demand? Will $100 billion per year in needed infrastructure investments lock in business as usual, or foster innovation?
America’s Power Plan — a toolkit for state and local decision makers developed by over 150 of the nation’s top energy experts — is the first national effort to take a comprehensive look at the challenges faced by the electric power system and outline potential policy and market design solutions.
“The train has left the station. Consumers are leading a ‘bottom up’ market transformation by going to their local Home Depot for solar panels, clicking Amazon.com to buy smart thermostats and much more — with greater impact than anyone in government or industry planned or anticipated,” said Andy Karsner, CEO of Manifest Energy and former Assistant Secretary for Energy Efficiency and Renewable Energy under President George W. Bush.
“America's Power Plan has started an important and timely discussion, mapping a path forward that should be considered by every serious utility executive and PUC commissioner across the country,” Karsner said.
America’s Power Plan — curated by the Energy Foundation in partnership with Energy Innovation — will be published in Elsevier’s October issue of the Electricity Journal and was unveiled yesterday during the annual meeting of the National Association of State Energy Officials (NAESO) in Denver. At its heart: seven white papers offering state-of-the-art recommendations on the following key topics:
- Utility business models
- Transmission and grid operations
- Finance policy
- Wholesale market design
- Siting of new power infrastructure
- Distributed generation
- Distributed energy resources
“To get a sense of the magnitude of the changes that need to be made, imagine trying to launch the iPhone in the days of rotary dials and a monopoly phone company,” said Hal Harvey, CEO of Energy Innovation and Senior Fellow for Energy and the Environment at the Paulson Institute at the University of Chicago.
“Regulators, policy makers and utilities will need to rewrite their playbooks if we are going to build a more reliable, more sustainable, more affordable power system that takes full advantage of clean technologies,” Harvey said.
The growth of on-site generation — from rooftop solar to wind-powered factories — along with smart appliances, competitive power suppliers and demand response efforts are changing the relationship between American consumers and electric utilities. And that can be difficult for utilities, especially when red tape gets in the way, said Jonathan Weisgall, Vice President of Legislative and Regulatory Affairs for MidAmerican Energy Holdings Company.
“If Apple wants to put a new product in the marketplace tomorrow it can do it. It doesn’t need anyone’s approval,” Wiesgall said. “A utility with a new product needs the approval of regulators. And we are not known for being the fastest movers,” he said.
“I think utilities need to be given a little more flexibility to try new products or new programs in order to take advantage of changes in the marketplace, be it charging electric vehicles, distributed generation or the like. Smarter regulation and market design — along the lines of the recommendations in America’s Power Plan — can facilitate this,“ Wiesgall said.
Some utilities are finding ways to innovate under the existing system. For example, the PJM Interconnection — which serves 60 million people from New Jersey to Chicago — leverages the Internet and automated controls to let customers respond to the market price of electricity in real time. Controls automatically adjust thermostats, lights and appliance settings, reducing demand during peak hours when electricity is most expensive.
“This ‘demand response’ program gives the grid a break when it needs it most, and is good for consumers,” said Jeanne Fox, who sits on the Public Utilities Commission in New Jersey. “In August 2012 alone, for example, it saved PJM customers $650 million.” A recent report by the Edison Electric Institute, which represents investor-owned utilities, said that emerging “disruptive technologies” — including solar, wind, geothermal, electric vehicles and advanced battery storage — could compete with utility-provided services, and in time, “directly threaten the centralized utility model.”
Changes are also coming to the nation’s power infrastructure. “The grid needs to be readied to integrate large amounts of wind and solar power. We need to make sure our policies and institutions are capable of doing this at least cost and greatest reliability,” said Jon Wellinghoff, chairman of the Federal Energy Regulatory Commission (FERC). “And rate structures need to be adjusted to recognize the costs and benefits of distributed resources.”
The market is not waiting. Total power generated from on-site, grid-connected solar systems — like rooftop solar panels on homes and businesses — has increased by 500 percent over the past seven years, according to the Interstate Renewable Energy Council’s yearly solar report. And the cost of solar energy has plummeted 80 percent in the past five years, according to Bloomberg New Finance.
Power companies and regulators are facing huge decisions. Will they pave the way for innovation, or solidify barriers against it?
America’s Power Plan was written to help facilitate this conversation among decision makers across the country. Recognizing that every part of the country is different, the project’s aim is not to provide a one-size-fits-all solution. Rather, it offers a toolkit of strategies to help jumpstart discussion among policymakers and stakeholders who know how best to tailor these recommendations for local realities.
Lead authors and subjects:
- Overview: Hal Harvey and Sonia Aggarwal, Energy Innovation
- Power Markets: Mike Hogan, The Regulatory Assistance Project
- New Utility Business: Ronald Lehr, former Public Utilities Commissioner
- Finance Policy: Todd Foley of ACORE, Uday Varadarajan of Climate Policy Initiative, and Richard Caperton of Center for American Progress
- Distributed Energy Resources: James Newcomb, Virginia Lacy, Lena Hansen and Mathias Bell of Rocky Mountain Institute
- Distributed Generation Policy: Joseph Wiedman of Interstate Renewable Energy Council, Inc and Tom Beach of Crossborder Energy
- Transmission Policy: John Jimison of Energy Future Coalition and Bill White of David Gardiner & Associates
- Siting: Carl Zichella of Natural Resources Defense Council and Johnathan Hladik of Center for Rural Affairs