The Power of Policy: Engaging Utilities to Build our Renewable Energy Future
It is impossible to ignore the unprecedented shifts occurring within the United States' energy landscape driven by political and social pressures. As policymakers rely on ambitious renewable energy targets to modernize the electric grid, utilities must face the burden of securing new generation resources, building out the transmission and distribution system, and incorporating new processes and platforms, all with little regulatory assurances or protection.
Renewable energy and electrification are going to happen regardless of political directions. However, continuing to sound the alarm about our energy future, while offering inadequate regulatory structures to support the physical and technical requirements to meet these objectives creates fatigue and pushback. Achieving these renewable energy targets can feel unrealistic, especially when considering the enormous amount of transmission required to move it across state lines and the uncertainty about tax equity to fund these projects.
Utilities should be a key contributor to the modernization of power consumption. A green energy economy will not happen without their direct engagement and participation. It may be necessary to mandate service providers to take a particular course of action, but this is not ideal. Instead, utilities should be rewarded for incorporating advanced platforms and processes into their operations, provided adequate rate recovery for such investments, and be legally protected for the challenges expected with this level of overhaul of legacy processes.
With engagement across investor-owned and public power utilities, we can find practical and sustainable ways to meet both our energy needs and social objectives. Utilities can advance the adoption of proven platforms to mitigate short-term uncertainty while supporting the development of new solutions. To demonstrate how this can be accomplished with utilities, consider energy storage, virtual power plants, and grid automation.
Energy Storage
Utilities across the country are finding innovative ways to use the fast, bi-directional capabilities of electrochemical batteries. The Midcontinent Independent System Operator (MISO) led the way with the first FERC-approved tariff that affords cost recovery for storage acting as a transmission asset. Despite this progress, the reality for energy storage is that the business case is still limited to electrochemical batteries providing short-duration services, especially during high system utilization.
FERC Order 755 created a performance-based mechanism that provided added compensation to batteries providing frequency regulation more efficiently than other grid resources. A similar outcomes-based model that reflects service requirements coupled with social objectives could transform storage into a clean, modern reliability asset. Storage should be incentivized to charge with the lowest-emissions, lowest-cost marginal energy, avoiding curtailment of these resources, and then discharge on-demand during extended periods of consistent grid utilization.
Virtual Power Plants
Virtual Power Plants (VPPs) are an aggregation of distributed resources, such as solar and batteries, and load that are controlled remotely to act as a smart, cost-effective grid resource for both individual consumers and private industry. VPPs represent both a challenge and a tremendous opportunity for service providers. These systems require a significant amount of study, integration, and data management to be used to their fullest potential. These challenges are magnified when the projects are developed, deployed, and operated by third parties. It’s critical that VPPs remain open to commercial participants. Thus, rules must be standardized to maintain efficiency and consistency for both the developer and the host system operator. Metering and data reporting requirements must be streamlined and optimized to ensure hardware costs do not sink the economic viability of these resources. FERC Order 2222 is helping to standardize rules across the organized markets.
The utility opportunity with VPPs is significant. Localized sources of supply and load control could provide the service companies responsible for managing supply and demand and service reliability with great precision. Even deregulated utilities that do not own generation and only operate the transmission and/or distribution system can help coordinate these endpoints to maximize system efficiencies and manage load during times of grid constraint. Leveraging the advantages of VPPs is a smart and effective way to manage the scale of resources required to modernize the U.S. power grid.
Grid Automation and Grid Enhancing Technologies
Grid automation and Grid Enhancing Technologies (GETs) represent what feels like a near limitless category of processes, platforms, and hardware that allow grid operators to move electrons, optimize the supply fleet, and manage load via non-traditional pathways. The innumerable acronyms we must now learn are just as limitless: DLR (Dynamic Line Rating), AGIS (Advanced Grid Intelligence & Security), IVVO (Integrated Volt-Var Optimization), FAN (Field Area Network), and WiSUN (Wireless Smart Utility Network) capture just a handful.
While such advancements are tremendous tools for utilities, employing such changes can require significant capital investment, and in turn, approval of cost recovery on the part of regulators. Additionally, grid operators don’t have the luxury of turning things off when they make major upgrades to the system. An overhaul of processes must happen while maintaining sustained, reliable service. Utilities must have adequate assurances and flexibility should they be expected to embrace this level of change. FERC Order 881 and, to some extent, Order 2023 are directing grid operators down this pathway. However, U.S. regulators struggle with the right balance of mandates versus incentives to enable widespread adoption. Getting this balance right is critical for driving innovation and ensuring compliance.
Possibly the greatest roadblock for service providers to enact innovative solutions are the demands the U.S. places on utilities for perfect service quality. It is unreasonable to assume deploying something as unique as some of the aforementioned platforms will proceed without a glitch. Utilities must not be held accountable when executing these transitions under careful planning and best intent. Outages resulting from these efforts must not be counted towards System Average Interruption Duration Index or System Average Interruption Frequency Index (SAIDI/SAIFI). Most important, utilities cannot be exposed to litigation for issues resulting from service interruptions that are a function of these efforts.
Regardless of the political winds dictating policy, renewable energy and electrification are part of our energy future. The path forward may not be linear, but ultimately the grid must evolve. U.S. policymakers should collaborate with utilities to create and execute a practical strategy that moves away from rigid, time-bound ambitions. Instead, the emphasis should be on exploring innovative alternatives to effectively and sustainably achieve our future energy objectives.
John Fernandes is policy & regulatory director at Ulteig.
