There’s a lot to like in Northam’s energy plan, but missed opportunities abound

electric vehicle plugged in

Vehicle electrification gets a boost under the energy plan.

There is a lot to like in the Northam Administration’s new Virginia Energy Plan, starting with what is not in it. The plan doesn’t throw so much as a bone to the coal industry, and the only plug for fracked gas comes in the discussion of alternatives to petroleum in transportation.

The 2018 Energy Plan is all about energy efficiency, solar, onshore wind, offshore wind, clean transportation, and reducing carbon emissions. That’s a refreshing break from the “all of the above” trope that got us into the climate pickle we’re in today. Welcome to the 21stcentury, Virginia.

But speaking of climate, the Intergovernmental Panel on Climate Change (IPCC) just released a special report that makes it clear we need “rapid, far-reaching and unprecedented changes in all aspects of society” to keep warming below 1.5 degrees Celsius. That’s only half again the amount of warming that has already brought us melting glaciers, a navigable Arctic Ocean, larger and more destructive hurricanes, and here in Virginia, the swampiest summer in memory. The fact that things are guaranteed to get worse before they get better (if they get better) is not a happy thought.

Perhaps no Virginia politician today has the courage to rise to the challenge the IPCC describes. Certainly, Governor Northam shows no signs of transforming into a rapid-change kind of leader. But as we celebrate the proposals in his Energy Plan that would begin moving us away from our fossil fuel past, we also have to recognize that none of them go nearly far enough, and missed opportunities abound.

Let’s start with the high points, though. One of the plan’s strongest sections champions offshore wind energy. It calls for 2,000 megawatts (MW) of offshore wind by 2028, fulfilling the potential of the area of ocean 27 miles off Virginia Beach that the federal government leased to Dominion Energy. In the short term, the Plan pledges support for Dominion’s 12-MW pilot project slated for completion in 2020.

Other East Coast states like Massachusetts and New York have adopted more ambitious timelines for commercial-scale projects, but the economics of offshore wind favor the Northeast over the Southeast, and they aren’t saddled with a powerful gas-bloated monopoly utility.  For Virginia, a full build-out by 2028 would be a strong showing, and better by far than Dominion has actually committed to.

Another strong point is the Administration’s commitment to electric vehicles. The transportation sector is responsible for more carbon emissions even than the electric sector, and vehicle electrification is one key response.

Even better would have been a commitment to smart growth strategies to help Virginians get out of their cars. Overlooking this opportunity is a costly mistake, and not just from a climate standpoint. Today’s popular neighborhoods are the ones that are walkable and bikeable, not the ones centered on automobiles. If we want to create thriving communities that attract young workers, we need to put smart growth front and center in urban planning—and stop making suburban sprawl the cheap option for developers.

Speaking of developers, how about beefing up our substandard residential building code? Lowering energy costs and preparing for hotter summers requires better construction standards. Houses can be built today that produce as much energy as they consume, saving money over the life of a mortgage and making homes more comfortable. The only reason Virginia and other states don’t require all new homes to be built this way is that the powerful home builders’ lobby sees higher standards as a threat to profits.

The Energy Plan mentions that updated building codes were among the recommendations in the Virginia Energy Efficiency Roadmap that was developed with funding from the U.S. Department of Energy and published last spring. I hope the only reason the Energy Plan doesn’t include them among its recommendations is that the Administration is already quietly taking action.

Meanwhile, it is not reassuring to see that the section of the plan devoted to attaining Virginia’s ten percent energy efficiency goal simply describes how our utilities will be proposing more efficiency programs as a result of this year’s SB 966 (the “grid mod” bill).

States that are serious about energy efficiency don’t leave it up to companies whose profits depend on a lack of efficiency. They take the job away from the sellers of electricity and give it to people more motivated. So if the Governor’s plan is merely to leave it up to Dominion and APCo without changing their incentives, we should abandon all hope right now.

Indeed, it is strange how often the Energy Plan finishes an in-depth discussion of an issue with a shallow recommendation, and frequently one that has the distinct odor of having been vetted by Dominion.

That observation leads us straight to grid modernization. The plan opens with a very fine discussion of grid modernization, one that shows the Administration understands both the problem and the solution. It opens by declaring, “Virginia needs a coordinated distribution system planning process.” And it notes, “One important rationale for a focus on grid modernization is that the transitions in our electricity system include a shift away from large, centralized power stations to more distributed energy resources.”

Well, exactly! Moreover: “The grid transformation improvements that the Commonwealth is contemplating include a significant focus on the distribution system, but our current resource planning process (Integrated Resource Plan or IRP) does not fully evaluate the integration of these resources. One overarching focus of this Energy Plan is the development of a comprehensive analysis of distributed energy resources.”

But just when you feel sure that the plan is about to announce the administration is setting up an independent process for comprehensive grid modernization, the discussion comes to a screeching halt. The plan offers just one recommendation, which starts out well but then takes a sudden turn down a dead-end road:

To ensure that utility investments align with long-term policy objectives and market shifts, Virginia should reform its regulatory process to include distribution system level planning in Virginia’s ongoing Integrated Resource Planning requirement.

Seriously? We need regulatory reform, but we will let the utilities handle it through their IRPs? Sorry, who let Dominion write that into the plan?

It’s possible the Administration is punting here because it doesn’t want to antagonize the State Corporation Commission (SCC). The SCC pretty much hated the grid mod bill and resented the legislation’s attack on the Commission’s oversight authority. And rightly so, but let’s face it, the SCC hasn’t shown any interest in “reforming the regulatory process.”

The Energy Plan’s failure to take up this challenge is all the more discouraging in light of a just-released report from the non-profit Grid Lab that evaluates Dominion’s spending proposal under SB 966 and finds it sorely lacking. The report clearly lays out how to do grid modernization right. It’s disheartening to see the Administration on board with doing it wrong.

Dominion’s influence also hobbles the recommendations on rooftop solar and net metering. This section begins by recognizing that “Net metering is one of the primary policy drivers for the installation of distributed solar resources from residential, small business, and agricultural stakeholders.” Then it describes some of the barriers that currently restrain the market: standby charges, system size caps, the rule that prevents customers from installing more solar than necessary to meet past (but not future) demand.

But its recommendations are limited to raising the 1% aggregate cap on net metering to 5% and making third-party power purchase agreements legal statewide. These are necessary reforms, and if the Administration can achieve them, Virginia will see a lot more solar development. But why not recommend doing away with all the unnecessary policy barriers and really open up the market? The answer, surely, is that Dominion wouldn’t stand for it.

Refusing to challenge these barriers (and others—the list is a long one) is especially regrettable given that the plan goes on to recommend Dominion develop distributed generation on customer property. Dominion has tried this before through its Solar Partnership Program, and mostly proved it can’t compete with private developers. If it wants to try again, that’s great. We love competition! But you have to suspect that competition is not what this particular monopoly has in mind.

The need to expand opportunities for private investment in solar is all the more pressing in light of the slow pace of utility investment. Legislators have been congratulating themselves on declaring 5,000 megawatts (MW) of solar and wind in the public interest, and the Energy Plan calls for Dominion to develop 500 MW of solar annually. I suspect our leaders don’t realize how little that is. After ten years, 5,000 MW of solar, at a projected capacity factor of 25%, would produce less electricity than the 1,588-MW gas plant Dominion is currently building in Greensville, operating at a projected 80% capacity.

Offshore wind capacities are in the range of 40-45%, so 2,000 MW of offshore wind will produce the amount of electricity equivalent to one of Dominion’s other gas plants. It won’t quite match the 1,358-MW Brunswick Power Station, or even the 1,329-MW Warren County Power Station, but Dominion also has several smaller gas plants.

But at this point you get the picture. If all the solar and wind Virginia plans to build over ten years adds up to two gas plants, Virginia is not building enough solar and wind.

That gets us back to climate. The Administration can claim credit for following through on developing regulations to reduce carbon emissions from power plants by 30% by 2030, using the cap-and-trade program of the Regional Greenhouse Gas Initiative (RGGI) of the northeastern states. If successful, that still leaves us with 70% of the carbon emissions in 2030, when we need to be well on our way to zero. And for that, we don’t have a plan.

Of course, Ralph Northam has been Governor for only nine months. He has some solid people in place, but right now he has to work with a legislature controlled by Republicans and dominated by Dominion allies in both parties, not to mention an SCC that’s still way too fond of fossil fuels. Another blue wave in the 2019 election could sweep in enough new people to change the calculus on what is possible. In that case, we may yet see the kind of leadership we need.

 

This article first appeared in the Virginia Mercury on October 15, 2018.

After the grid mod bill, the SCC wants to know how much authority it still has over utility spending

offshore wind turbines

Offshore wind turbines, Copenhagen, Denmark. Dominion Energy has asked the SCC for permission to proceed with building two wind turbines off the Virginia coast as a test project. Photo by Ivy Main.

It’s no secret the State Corporation Commission didn’t like this year’s big energy bill, the Grid Transformation and Security Act. SCC staff testified against SB 966 in committee, and their objections played a major role in amendments removing the “double dip” provision that would have let Dominion Energy Virginia double its earnings on infrastructure projects. Since passage of the bill, the SCC has raised questions about the constitutionality of the law’s provisions favoring in-state renewable energy, and its staff has issued broadsides about the costs of the legislation.

Now the SCC is mulling the question of how much authority it still has to reject Dominion’s proposals for spending under the bill. Dominion has filed for approval of a solar power purchase agreement (case number PUR-2018-00135) and two offshore wind test turbines it plans to erect in federal waters 24 nautical miles out from Virginia Beach (PUR-2018-00121). The utility has also requested permission to spend a billion dollars on grid upgrades and smart meters (PUR-2018-00100).

In an order issued September 12, the SCC asked participants in the solar and offshore wind cases to brief them on legal issues arising from the legislation. The SCC has focused in on two new sections of the Virginia Code. One is the language making it “in the public interest” for a utility to buy, build, or purchase the output of up to 5,000 megawatts (MW) of Virginia-based wind or solar by January 1, 2024. The SCC noted that subsection A of the provision says such a facility “is in the public interest, and the Commission shall so find if required to make a finding regarding whether such construction or purchase is in the public interest.”

The other new Code section gives a utility the right to petition the SCC at any time for a “prudency determination” for construction or purchase of a solar or wind project located in Virginia or off its coast, or for the purchase of the output of such a project if developed by someone else.

Together these sections give Dominion a good deal of latitude, but they don’t actually force the SCC to approve a project it thinks is a bad deal for ratepayers. In other words, wind and solar may be in the public interest, but that doesn’t mean every wind and solar project has to be approved.

The SCC asked for briefs on seven questions:

  • What are the specific elements that the utility must prove for the Commission to determine that the project is prudent under Subsection F?
  • Is the “prudency determination” in Subsection F different from the “public interest” findings mandated by Subsections A or E?
  • Do the public interest findings mandated by either Subsections A or E supersede a determination under Subsection F that a project is not prudent? If not, then what is the legal effect of either of the mandated public interest findings?
  • If the construction (or purchase or leasing) is statutorily deemed in the public interest, is there any basis upon which the Commission could determine that such action is not prudent? If so, identify such basis or bases.
  • In determining whether the project is prudent, can the Commission consider whether the project’s: (a) capacity or energy are needed; and (b) costs to customers are unreasonable or excessive in relation to capacity or energy available from other sources?
  • Do the statutorily-mandated public interest findings under either Subsections A or E override a factual finding that the project’s: (a) capacity or energy are not needed for the utility to serve its customers; and/or (b) costs to customers are unreasonable or excessive in relation to capacity or energy available from other sources, including but not limited to sources of a type similar to the proposed project?
  • Does the utility need a certificate of public convenience and necessity, or any other statutory approval from the Commission, before constructing the proposed projects?

Even if the Commission decides it has latitude in deciding which wind and solar projects to approve, that doesn’t necessarily spell disaster for the two projects at issue. The SCC could still decide they meet the standard for prudency and approve them.

Oral argument on the issues is scheduled for October 4.

Should approval of smart meters depend on how the meters will be used?

The SCC is also mulling over its authority in the grid modernization docket. One day after it asked lawyers in the solar and offshore wind cases to weigh in on the meaning of prudency, it issued a similar order asking for input on what the new law means by “reasonable and prudent” in judging spending under the grid modernization provisions. (Yes, the grid mod section of the law insists that spending be “reasonable” in addition to “prudent,” begging the question of whether spending can be prudent but not reasonable. Perhaps thankfully, the SCC order does not pursue it.)

The SCC’s questions to the lawyers show an interest in one especially important point: Dominion wants to spend hundreds of millions of dollars of customer money on smart meters, without using them smartly. Smart meters enable time-of-use rates and customer control over energy use, and make it easier to incorporate distributed generation like rooftop solar. None of these are in Dominion’s plan. Is it reasonable and prudent for Dominion to install the meters anyway, just because they are one of the categories of spending that the law allows?

Or as the SCC put it:

If the evidence demonstrates that advanced metering infrastructure enables time-of- use (also known as real-time) rates and that such (and potentially other) rate designs advance the stated purposes of the statute, i.e., they accommodate or facilitate the integration of customer-owned renewable electric generation resources and/or promote energy efficiency and conservation, may the Commission consider the inclusion or absence of such rate designs in determining whether a plan and its projected costs are reasonable and prudent?

Reading the tea leaves at the SCC: Staff comments on Dominion’s IRP

The SCC’s question about smart meters surely indicates how the commissioners feel about the matter: they’d like to reject spending on smart meters, at least until Dominion is ready to use them smartly. If the SCC concludes it has the authority to reject this part of Dominion’s proposal as not “reasonable and prudent,” it seems likely to do so.

It is harder to know where the SCC might land on the solar and offshore wind spending. The SCC’s staff, at least, are skeptical of Dominion’s plans to build lots of new solar generation. In response to Dominion’s 2018 Integrated Resource Plan (IRP), Commission staff questioned whether Dominion was going to need any new electric generation at all, given the flattening out of demand. But if it does, according to the testimony of Associate Deputy Director Gregory Abbott, Dominion ought to consider a new combined-cycle (baseload) gas plant, not solar. (Combined-cycle gas was the one generating source Dominion almost completely ruled out.)

Abbott criticized Dominion’s presentation of the case for solar, though he took note of the technology’s dramatic cost declines. Instead of seeing that as a reason to invest, however, he suggested it would be better to wait for further cost declines, or at least leave the construction of solar to third-party developers who can provide solar power more cheaply than the utility can. Remarkably, he also suggested Dominion offer rebates to customers who install solar, urging that Dominion’s spending under the grid transformation law “is designed specifically to handle these [distributed energy resources].”

Abbott also seemed supportive of Dominion’s venture into offshore wind. The only offshore wind energy in the IRP is the 12 MW demonstration project known as CVOW, but as Abbott noted, “the Company indicated that it will pursue a much larger roll-out of utility-scale offshore wind, beginning in 2024, if the demonstration project shows it to be economic.”

This suggests staff are inclined to support Dominion’s spending on the CVOW project, but for Abbott, it was one more reason Dominion should not invest in solar. He concluded, “If the demonstration project proves that utility-scale offshore wind is economic compared to solar, then it may make sense to get the results of the CVOW demonstration project before deploying a large amount of solar.”

This post originally appeared in the Virginia Mercury on September 24.

On the heels of its big legislative win, what kind of grid does Dominion want to build for us?

white electric tower

Photo by Pixabay on Pexels.com

Note: This post originally appeared in the Virginia Mercury on July 23. Virginia Mercury is a nonprofit, independent online news organization that launched just this summer. Subscribe to its free daily newsletter here.

Imagine that you have hired a builder to design and build a three-story house for you. He brings you the plans for the first floor and proposes to start work right away. “These look okay,” you say, “but I need to see the plans for the whole house.”

“Don’t you worry about that,” says the builder. “I have it all figured out. I’ll show you the second floor when the first is done, and the third floor after that.”

You argue with the builder, pointing out that as it is your money, you have the right to assure yourself the result will be what you want. If you haven’t even seen the blueprint for the whole house, how can you approve the ground floor? Heck, you can’t even judge if all the stuff he wants to put in is actually needed. (It looks awfully expensive.)

“Please,” says the builder, now deeply offended. “I’m an expert. You should trust me.”

If this scenario sounds far-fetched, that’s because you don’t live in the world of Virginia utility regulation. In that world, Dominion Energy Virginia, the state’s largest utility, has just filed a plan with the State Corporation Commission (SCC) to spend almost $1 billion of its customers’ money for the first phase of what it says will be three phases of grid modernization, amounting to $3.5 billion. The company maintains that all the things it plans to do now are necessary to the overall strategy, but it isn’t saying what that strategy is.

“During Phase 1 of the Plan,” writes Dominion Energy Senior Vice President Edward Baine, “the Company will focus on installing the foundational infrastructure that will enable all other components of the Grid Transformation Plan.” That sounds like it ought to lead into a discussion of what the grid of the future will look like, but sadly, the other “components” turn out to be just more spending.

That might in fact be the whole plan: spend money, lots of it. Baine explains the “drivers” of the plan, like recognizing threats to the grid, and he describes how it will “enable” things like new rate structures and integrating renewable energy. But new rate structures and renewable energy integration aren’t actually part of the plan Dominion wants the SCC to approve.

This will make it very hard for the SCC to judge whether the investments are “reasonable and prudent,” as Virginia law requires. Knowing this, Baine argues the SCC shouldn’t impose a cost-benefit test on its plans. Already that position has drawn sharp criticism even from supporters of the legislation that authorized the spending.

Take smart meters, also known as “advanced metering infrastructure” (AMI). Smart meters don’t just measure electricity use, but do so on an hourly or more frequent basis, and they provide two-way communication instead of just one-way reporting to the utility.

Properly designed and deployed, smart meters are central to the grid of the future. Dominion proposes to spend over $500 million to provide all its customers with this advanced technology during Phase 1. Unfortunately, that doesn’t include making full use of their potential.

Where ordinary electric meters mostly just tell the utility how much electricity a customer has used, smart meters provide detailed information that can be used to help pinpoint power outages and spikes in demand. That’s helpful for the utility, but just using them that way, as Dominion proposes, leaves most of the benefits of smart meters untapped.

Justifying the expense of smart meters requires using them to allow customers to control how and when they use electricity, as well as to make the most efficient rate designs and determine how to get the most benefit from solar panels, batteries and electric vehicle charging. That only happens where a utility offers time-of-use rates and other incentives to change behavior and prompt investments by consumers.

Using smart meters this way would result in lower energy use, more customer-investments in solar and batteries, and savings for everyone. But time-of-use rates and similar incentives aren’t in Phase 1, and they don’t look to be part of Phases 2 or 3 either.

Dominion seems to think it can get approval to spend money on smart meters based on how they could be used, rather than on how the company actually plans to use them. Baine notes that smart meters can tell customers how much electricity they’re using in any 30-minute period. “Customers will be able to choose their preferred mode of communication,” writes Baine, “and then receive high usage alerts when their energy usage exceeds a certain level.”

Yes, and then what? Baine doesn’t say.

It’s not just a matter of wanting to take it slow. Since 2009, 400,000 of its customers have received smart meters, Dominion tells us, giving it ample time to try out all these features. It hasn’t.

Merely installing another 1.4 million smart meters isn’t going to lead to grid nirvana.

Grid “hardening” is another example. Physical upgrades in the name of security and resilience make up more than $1.5 billion of Dominion’s proposed spending. This is not grid transformation, it’s the opposite: beefing up the old grid. Most of the proposed investments are the same kind of capital investments Dominion makes routinely, with nothing modernized about it. Unfortunately, Dominion wrote the law to give itself permission to use customer money for grid hardening, so all the SCC can do is ask whether the specific spending proposals are reasonable and prudent.

Again, since Dominion isn’t telling us what kind of grid it is building for us, there is no way to know whether any given project will contribute to it, or even be necessary at all. If the grid of the future will be based on distributed energy, microgrids, and consumer control, we might not need the substation Dominion wants to make into an impregnable fortress. Modern solutions like solar-plus-storage, demand response, and energy efficiency could provide greater resiliency and security at a lower cost.

Of course, we have every reason to suspect Dominion is not interested in building a grid that empowers consumers, lowers energy use and spurs private investment in solar and storage. Its business model depends on keeping control over the grid and getting people to use more energy rather than less. If it can’t do that, it figures, the next best thing is to find ways to spend our money.

The amount of customer money at stake makes the SCC’s oversight role very important. It can insist Dominion lay out its full vision for the grid, demonstrate how each spending item fits that vision, and prove it meets a consumer cost-benefit test. With a little dose of courage, it could even go further, and insist on seeing a plan that makes full use of smart meters, including time-of-use rates and other incentives for efficiency, solar and storage.

The General Assembly, too, has a role to play, by filling a vacancy on the SCC this summer. If legislators are unhappy with Dominion’s cavalier approach to spending, they have one last chance to appoint a commissioner who will side with consumers, and send Dominion back to the drawing board.

Grid Transformation for the 21st Century: why Virginia needs to get this right

Thomas Hadwin served as an executive with electric and gas utilities in Michigan and New York. He is actively involved in promoting a modern energy system for Virginia.

With proper planning, the 21st century power grid will be smart, efficient and resilient. Without good planning, it could be an expensive mess. Photo credit McKay Savage, India.

The General Assembly recently passed a bill intended to promote modernization of our existing electricity grid. It is important for Virginians to understand the costs, benefits and various ways of upgrading our state’s grid, so that they can decide for themselves whether the new legislation provides the best path forward. Making the right choices about this affects our family finances and the competitiveness of our state economy.

An electricity grid is the system of wires and facilities that move electricity from where it is produced to where it is used. Thomas Edison created the first utility in New York City in 1882. A portion of it was still in use until 2007.

The Traditional Grid

For over a century, the grid met the same basic functions and contained equipment that Edison would have recognized, at least in concept. The system evolved to have electricity produced at a distance from where it is used. Since more electricity is lost the farther it is transported, high voltage transmission lines were developed to minimize these losses. These are the very tall, usually lattice-like, steel towers with long drooping lines that you see from the highway. We can’t use electricity at such high voltage, so it is stepped down using big transformers to lower levels. Sometimes several types of lower voltage lines are used to get the energy closer to where it needs to go.

The transmission lines bring the electricity to a population center or industrial complex to where it will be used. At this point a complex set of equipment called a substation is used to reduce to reduce the voltage to the various levels used by industries, businesses and residences. Once the voltage is reduced at the substation, it enters the distribution system. These are the lines that you see on the poles along the street where you live, where the voltage is reduced one last time to the level you use in your home. Other wires are also on those poles for telephone and cable TV service. If you live in a city, or a new subdivision, those lines are often underground.

Electricity doesn’t move like cars on a road, from Point A to Point B. So you can’t really say where electricity was produced or where it was used.

For about 100 years, the design of the system worked well. There was a steady increase in demand. As generating stations got bigger, electricity became cheaper to produce. The centralized power plants feeding distant loads were easy to manage. Electricity flowed one-way, as did the information back to the utility grid supervisors.

Some things began to change in the second half of the 20th century. Transmission lines were interconnected between utilities so a surplus in one area could be used to meet a shortfall in another. These early “power pool” arrangements evolved into the sophisticated Regional Transmission Organizations (RTOs) and Independent System Operators (ISOs) that we have today. PJM is the organization that manages electric generation and transmission in a 13-state region that includes Virginia.

A Shift 40 years in the making

By the mid-1970s, new power plants became so expensive (especially nuclear units) that a fundamental change occurred. Every time a new conventional power plant (fossil or nuclear) was built, the price of electricity went up.

As fuel costs and electricity prices increased, appliances and buildings were designed to use energy more efficiently. Demand continued to increase, however, as a larger population and greater economic activity kept electricity use rising.

When the recession hit in 2008, families tightened their belts and businesses found ways to produce more goods and services using less energy. For the first time, growth in population and economic activity no longer created a higher demand for electricity. Over the past ten years, growth in U.S. electricity demand has been relatively flat. In 2017, a year of population growth and greater economic activity, total electricity use in the U.S. was 2.1 % lower than the year before.

Stable or declining growth in demand disrupted the utility business model which depended on the steady increase in electricity use to provide enough revenue to cover past investments and provide funds for new projects.

About the same time, new technologies were introduced that further complicated matters for utilities. Concern about environmental impacts associated with extracting and burning fossil fuels increased interest in methods of generating electricity using ways that did not require fuel. Electricity generated from solar and wind power used energy that was naturally renewed. These fuel-free methods were primarily technology driven and took advantage of a learning-curve that has resulted in on-going price reductions of 50% every 4-5 years.

Small modular solar units allowed electricity to be generated at customer locations. Although this reduced customer costs, it made things more challenging for utilities. It reduced their revenues at a time when those revenues were already challenged by flat growth in demand. And these units were located within the distribution network which could result in the flow of electricity opposite to the direction for which the system was designed.

The Modern Grid

It is a huge shift for utilities that have operated in the same way for 100 years to move to a new way of doing business. The energy industry is undergoing a similar transition to what the computer industry experienced several decades ago. We once had highly centralized mainframe computers controlled by a few specialists. Now we have networks of personal computers that provide choices and new possibilities for everyone.

Putting customer needs at the center of the modern grid requires a new mindset. Utilities, especially those owned by private holding companies, have been mostly focused on creating revenue streams to reward shareholders and reducing the effects of regulators’ actions on profits. Many utilities do not even think in terms of “customers.” Instead they talk about “ratepayers” because, from their private parent company’s point of view, that’s where the money comes from.

Smart meters, solar, and batteries

Creating a modern grid will require replacing old electro-mechanical controls and monitoring equipment with modern digital devices. Having a two-way flow of information will help utilities more quickly determine when a line is down and dispatch a crew to the correct location. Smart meters provide utilities with more information about customer usage and save the cost of reading meters. But regulators should be sure that the hundreds of millions spent on new meters (and paid for by ratepayers) also benefit the customers. If designed correctly, with reliable, rapid communications, customers can access that data for use by home energy systems that optimize comfort and lower costs. Water heaters, as well as heating and cooling systems, can be controlled remotely by utilities or private aggregators to turn off for a short period to reduce peaks and save customers money.

A system dependent on digital devices and software control is much more vulnerable to cyber-security threats and must be designed with that in mind.

Creating a two-way flow of energy will also make the grid more capable. Utility-scale solar provides clean energy at a lower cost, but it still follows the old central station philosophy and requires a connection to transmission lines. By installing a significant amount of new solar at dispersed locations within the distribution system, it improves the reliability and resiliency of the grid.

Output from solar units can be variable. But those variations can be highly predictable. Anticipated changes can be matched from other contributions throughout the grid, especially with PJM’s large surplus of generation. Batteries have economic applications now, but will be even more useful as prices decline by half every 4-5 years. Energy storage can supply backup power, frequency and voltage regulation, and other valuable grid services.

Consolidated Edison, the utility that serves New York City, is intending to use distributed solar, storage, energy efficiency and other grid improvements to avoid the need to construct a new $1 billion substation. When utilities avoid building new facilities in order to save customers money, they need to have other means of remaining financially sound.

Soon the use of electric vehicles will be widespread. Batteries paid for as part of the price of the vehicle can be used to store renewable energy during the times when it is plentiful for use at other times when it is more valuable.

Resilience and Reliability

Some grid investments improve the ability to withstand stresses without loss of service. This is called resilience. It can involve undergrounding distribution lines to reduce the exposure to storm damage. Resilience is in a large part about what does not happen and therefore, is closely related to reliability. But investments in undergrounding can be very expensive and have diminishing returns. Other investments might be more cost-effective.

Having some local generation and the ability to temporarily isolate from the larger grid, using microgrids, can maintain some level of operation if the larger grid goes down. Public buildings, hospitals, university and commercial campuses, and industrial parks can benefit from this. Battery storage can also contribute to both resiliency and reliability. These are complex issues and the tradeoffs must be carefully evaluated.

Transmission lines put underground can have lower reliability than overhead lines, which are typically not very vulnerable to storm damage. Underground transmission is projected to have half the life span of overhead lines. Once the great disruption during the lengthy construction period is complete, they do have less of a visual impact, however. But this comes at a much higher cost.

Creating a Modern Grid: the roles of regulators and utilities

States that are well underway with grid modernization have begun with a legislative directive that broadly defines the goals to be achieved and empowers the state regulator to embark on the process of establishing the regulatory framework to facilitate the necessary activities. Usually milestones are specified to evaluate progress.

Legislation often specifies the major goals of the modernized system such as: a more flexible grid that offers a wider variety of more personalized energy options; that is more secure against threats; with decisions made considering both cost and environmental sustainability; and has a more diverse mix of both centralized and distributed generation, etc. New laws also often encourage the development of research and development activities to attract innovative new businesses, and the establishment of funding sources that provide low-cost financing for energy efficiency and small-scale renewable projects.

The regulators then convene a series of stakeholder workshops to better understand the challenges faced by the utilities and the desires of their customers. This can be a transformative experience for a state. Collaboration between many interests can set the stage for long-term cooperation that lowers costs, provides new employment, and makes the state an attractive location for both businesses and residents.

Utility regulators must be strong and independent to objectively review and balance the various interests. A cooperative relationship with the legislature and the executive branch is helpful when new laws might be required to ensure the financial health of utilities serving in a new role.

Utilities have a central role in developing our modern grid, but not the only role. States that have provided opportunities for innovative private companies to provide various energy services have created a path for lower energy costs and greater employment. Utilities must provide the platform for this to take place and they can profit by providing services that enable transactions between private companies and utility customers.

We must give utilities a fair return on their legacy investments and provide an opportunity for them to prosper by serving their customers better, perhaps with performance based rates. A modern grid should not create winners and losers. It should be a place for many to prosper by providing value to customers.

The wires are the natural monopoly. The utilities have accepted regulatory oversight and fair rates in exchange for a fair return and freedom from competition (on the wires side). That agreement should remain intact and proper regulatory oversight must occur. Utilities can be responsible for the distribution platform and still allow opportunities for private companies to provide a variety of services that have value to customers and the grid. This leads to a vibrant state economy, lower costs and increased employment.

The high cost of doing it wrong

If we do not move forward, we will pay a price. If utilities are allowed to drag 20th century habits deep into the 21st century, it will eventually harm them and the rest of the state as well. For example, Duke Energy has proposed a $13 billion grid modernization program. Critics, including Google and the North Carolina ratepayer advocate, say the plan has little justification and will not benefit customers or clean energy.

The North Carolina Utility Commission has said that Duke has not provided “compelling evidence” that its plan to modernize the grid would result in “meaningful benefits to ratepayers despite its cost.” Duke, like Dominion, is struggling to justify building new power plants in the face of flat demand for electricity. Investments in “gold-plated distribution infrastructure” will provide it with the revenue it desires. A Google representative said the costs attributed by Duke to grid modernization are “seemingly arbitrary.” The staff of the state regulatory commission agreed, saying that they are “not persuaded that all the components of the . . .  initiative will result in modernizing the grid.” The staff went on to say there is “substantial uncertainty regarding what exactly will be included.”

The general counsel of the North Carolina Sustainable Energy Association noted that, “Some grid modernization is certainly needed, but the price tag put forward by Duke is shocking, and what’s in their proposal is shocking as well.” He added that “there’s been very little meaningful public input.”

“If the customers are paying for 100 percent of these programs in their rates,” said an EDF spokesman, “then let’s give them 100 percent of the benefits.”

Lessons for Virginia

This sounds like the opportunity just squandered by the Virginia General Assembly. Instead of putting us on the path to an effective modern grid, the legislators have given the utilities permission to spend billions over the next 10 years with diminished regulatory involvement. This will add significantly to utility bills in Virginia that are already the 10th highest in the nation. There are no specifics in the bill that identify how this money will be spent or whether the money paid by customers will actually result in a modern grid similar to what is being developed in other states.

Virginia can do much better than this. We should immediately embark on a program to get this right in the next legislative session in a way that is fair to the regulated utilities and their customers. Bringing in objective outside specialists could guide us toward an innovative, lower cost, clean, efficient and reliable energy future.

 

General Assembly chews on, spits out healthy legislation, while still trying to digest a huge hunk of pork

They just keep getting fatter.

If you were bewildered by the sheer volume of bills addressing solar, efficiency, storage, and other energy topics that I outlined last month, take heart: clean energy advocates don’t have nearly as many bills to keep track of now. So few bills survived the Finance and Commerce and Labor Committees that it will be easier to talk about what is left than what got killed.

The bigger story, of course, is the Dominion Ratepayer Rip-Off Act of 2018, which the utility would dearly love you to think of as the “grid modernization bill,” but which might be better imagined as an oozing pork barrel. Recent amendments do make it less obnoxious than it was last week (begging the question of why it wasn’t introduced that way in the first place). The Governor now says he supports the bill, the Attorney General continues to oppose it, and the SCC keeps issuing poisonous analyses.

But right now let’s just run down the fate of the other bills we’ve been following. For explanations of these bills, see previous posts on solar; efficiency, storage and EVs; and energy choice, carbon and coal.

Of the bills affecting customer-sited solar, only a handful remain:

  • HB 1252 (Kilgore), expanding the pilot program for third-party PPAs in APCo territory to cover all nonprofits and local government: amendment ensures current Dominion pilot is unchanged, passes the House, goes to the Senate
  • HB 1451 (Sullivan), allowing a school district to attribute surplus electricity from a solar array on one school to other schools in the district: amendment turns it into a pilot program, passes House C&L
  • SB 191 (Favola), allowing customers to install solar arrays large enough to meet 125% of previous demand (up from 100% today): amended to exclude customers in coop territory*, passes Senate C&L

Delegate Toscano’s bills promoting energy storage remain alive. HB 1018, offering a tax credit for energy storage devices, passed a House Finance subcommittee last week with an amendment to delay its start date to 2020. HJ 101, calling for a study, passed Rules but then was sent to Appropriations, where it was to be heard yesterday. (The Legislative Information Service does not yet show its fate.)

HB 922 (Bulova), allowing localities to install EV charging stations, has been reported from General Laws with amendments. The companion bill, SB 908 (McClellan) passed the Senate.

The Rubin Group’s land use bills passed their respective houses with amendments. The bills are SB 429 (Stanley), its companion bill HB 508 (Hodges), SB 179 (Stanley) and companion bill HB 509 (Hodges).

All other customer-focused solar bills died. So did energy efficiency goals, the mandatory renewable portfolio standard, LED light bulb requirements, and tax credits for EVs and renewable energy. Direct Energy’s energy choice legislation died in both House and Senate in the face of Dominion’s opposition, in spite of an astonishingly diverse array of business supporters; even the support of Conservatives for Clean Energy was not enough to garner any Republican votes in the House C&L subcommittee.

Republicans also killed the Governor’s RGGI bills while passing Delegate Poindexter’s anti-RGGI bill, HB 1270, in the House. Delegate Yancey’s anti-regulation HB 1082, appears to be alive in a subcommittee, though Delegate Freitas’ anti-regulation bill died, and Senator Vogel’s effort to change the constitution to allow legislative vetoes of regulations died in committee.

Delegate Kilgore’s HB 665, restoring tax subsidies to coal companies to facilitate destroying Virginia mountains, passed House Finance on a party-line vote. Shockingly, Senator Chafin’s similar bill, SB 378, passed the Senate with support from Democrats Marsden, Petersen, Edwards, Dance, Lewis, Mason and Saslaw.

So once again, in spite of a remarkable election that swept progressive Democrats into the House and nearly upended Republican rule, clean energy advocates have done poorly this year. Some of their priorities are now part of the Dominion pork barrel legislation, to be sure. But that legislation enables utility solar and utility spending; it does nothing for customer-owned renewable energy, market competition, climate action, or consumer choice.

Dominion still rules the General Assembly, though the legislators who voted in line with the utility’s wishes won’t admit it—or give any other explanation. The Republican members of the House Commerce and Labor subcommittee slashed their way through the pro-consumer bills with ruthless efficiency, and did not bother explaining their votes. (A special shout-out goes to Democratic delegates Kory, Ward, Heretick and Bourne for just as stubbornly voting in support of the good bills.)

But over in Senate C&L, chairman Frank Wagner tried to maintain the pretense that he was merely “referring” his colleagues’ bills to the Rubin Group instead of actually killing them.

The closed-door, private, invitation-only, utility-centric Rubin Group has no legislators among its members and proposes only changes to the law that all its members like, so “sending” a bill there that the utilities oppose is pure farce. Yet that was the fate of Senator Edwards’ bills on third party PPAs, agricultural net metering, and community solar, and Senator Wexton’s community solar bill. Wagner instructed these Senators to “work with” the Rubin Group on their bills. None of the other committee members objected.

But it’s not like the Rubin Group achieved much, either. Its hallmark legislation putting 4,000 MW of utility solar in the public interest got thrown into the Dominion pork barrel (and was later upped to 5,000 MW), along with energy efficiency bills designed to eliminate the SCC’s over-reliance on the RIM test, requirements for utility spending on energy efficiency, and Delegate Habeeb’s nice battery storage pilot program. They all became tasty morsels designed to offset legislators’ queasiness over the ratepayer rip-off and, not incidentally, to maneuver advocates and bill patrons into supporting Dominion’s bill as the only way to get their own legislation passed into law.