CALIFORNIA NEWS
WORLD-GENERATION NOV/DEC 2015
8
The utility business is facing revolu-
tionary changes. Customers are demand-
ing new services, they are installing dis-
tributed energy resources including ener-
gy storage and they are reducing energy
consumption. Furthermore, new technolo-
gies being created by start-up companies
are offering customers services never
dreamed of ten years ago.
All these changes are now putting
strains on distribution systems and the utili-
ties most heavily hit are asking that the
customers sending power to the grid pay
for distribution services. Even the rate of
return paradigm is being questioned.
Pushing utilities into the new frontier
are independent companies such as
Louisville, Colorado-based Clean Energy
Collective. It has launched the first shared
solar program that provides investor-owned
utilities (IOUs) with the ability to rate-base
a community solar program. The IOU
would offer their solar customers an imme-
diate economic benefit, without non-partici-
pant subsidization.
The program provides a utility with the
ability to own the solar system so the asset
can be included in their rate base.
Meanwhile, the federal investment tax cred-
it is monetized and cash proceeds are
returned to the utility on a schedule that
tracks the associated revenue requirement.
Utilities can earn a competitive return and
positive net present value from their solar
investment without requiring a cost-shift to
non-participants, creating no upward pres-
sure on rates.
The larger independent power compa-
nies are getting into the act as well. In an
interview with AES managers at Solar
Power International 2015 held in Anaheim,
California, in September, Robert Masinter,
COO of AES Distributed Energy, told this
reporter he foresees the creation of new
energy networks capable of developing and
integrating distributed generation with
transmission.
AES created its Distributed Energy
subsidiary when it acquired Main Street
Power and its 65 MW of diverse distributed
generation early in 2015. It has since
launched a portfolio of additional distribut-
ed energy projects to add to the 65 MW it
inherited. “We want to enable customers
with solutions, and to be the enterprise
partner for change” Masinter said.
EXECUTIVESTALK
At an SPI 15 session, “What Does the
Utility of the Future Need to be?” experts
addressed the issues utilities need to deal
with in their changing landscapes.
Jon Wellinghoff, former Federal Energy
Regulatory Commission Chair and now a
partner with Stoel Reeves, highlighted what
customers can do:
They can install their own generation
and energy storage, cut back on electricity
use when they receive signals from their
utility and put back onto the grid the extra
electricity their systems are generating.
“They have options that a grid system can
take advantage of,” Wellinghoff said.
Wellinghoff argued there is an opportu-
nity for utilities to provide services with
other competitors. Speaking at the Climate
& Energy Law Symposium at the University
of San Diego in November 2014, he out-
lined his concept of a Distributed System
Operator, modeled after the Independent
System Operator. The independent compa-
nies and customers alike could transmit,
buy and sell power locally. The distribu-
tion system operator would still be regu-
lated.
Writing in August 2014, Wellinghoff,
with coauthor James Tong, Class of 2014,
with Clean Power Finance, outlined the
concept. They wrote, “We must examine
how competitive markets can best provide
multiple grid services beyond simple deliv-
ery of electrons. Only then can we proceed
to questions about the role of regulated
utilities as owners of the distribution grid
system, and how to compensate them
appropriately for grid ownership and main-
tenance.”
Edison Energy Group has an eye on
this new competitive market and is an
example of companies seeking a foothold
in the new technology environment. Ron
Litzinger, the company’s president, said in
the SPI session his company was formed
to develop competitive transmission.
“Central generation is the last choice for
investment,” he said, noting that the distri-
bution network is changing.
Litzinger said, “We feel customers
want a networked plug and play grid
where power flows two ways.”
Furthermore, there is pressure to opti-
mize the spending and operations of the
grid and the most cost effective way to
control voltage is in the distribution grid.
“Execution of good policy is necessary,” he
said.
REGULATORY EVOLUTION
Tom Starrs, SunPower’s vice president
for market strategy and policy, said in the
same session, a tension exists between the
traditional cost-plus model and regulatory
evolution. Technology is not the driver in
and of itself, he said. It causes a regulato-
ry drive to change. In California the driver
is decarbonization. In New York, resil-
ience is driving technology choices.
Starrs said, at the end of the day under
today’s regulatory construct, you need a
distribution grid and you need somebody
to provide power at night. It’s the only nat-
ural monopoly with today’s technology and
will require fixed charges.
EXPLORINGTHE UTILITY OFTHE FUTURE
BY LYN CORUM,CLASS OF 2003
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