Trish Demeter, Vice President of Policy, Energy, September 6, 2018
Close your eyes and think about what the electric “grid” looks like. Wires and poles probably come to mind, but don’t worry if you’re not thinking of much else. The electric grid is elusive and largely behind the scenes. What’s important to know is that our current grid is old, and built for an energy system of the past — incredibly reliant on centralized coal and nuclear plants, where power flowed through one-way meters, and presumed that the average electric consumer was simply a passive receivers of energy and services. But the grid of today and tomorrow is more of an interconnected web of different energy-generating resources, running on more sophisticated controls with consumers more and more in the driver’s seat.
For over a year, the OEC has been following and engaging in the Public Utilities Commission of Ohio (PUCO)’s “grid modernization” workshop series called PowerForward precisely because it provided a venue for clean energy champions to talk about how we get Ohio’s electric grid ready, and correspondingly, how we get Ohio’s utilities ready, for the coming wave of clean energy innovation that customers are seeking and already implementing at their homes and businesses.
Last week, the PUCO released PowerForward’s resulting policy guidelines called Roadmap to Ohio’s Electricity Future. In stark contrast to the tiresome debates at the Ohio General Assembly over Ohio’s no-brainer clean energy standards, we are jazzed about the Roadmap.
Grid modernization is not a topic for the faint of heart; it’s weedy, nerdy stuff. If you’re looking for the cliff’s notes, Utility Dive provided a great overview, and the Roadmap provides useful summaries on pages 34-38. But, here I will do my best to link elements of the Roadmap to a clear vision of Ohio’s clean energy future.
Distribution Platform Model. At the outset, the Roadmap declares that the PUCO: “Envisions the distribution grid as a secure and open access platform that allows for customer applications to interface seamlessly with it.” This vision of a distribution platform is often compared to that of a smartphone, where the phone is the physical grid, and all the apps that run on this platform are things like rooftop solar, or a smart thermostats.
This vision of a platform articulates a key mindset needed for future clean energy development. It sets up a whole host of forward-looking frameworks that influence decisions about what utilities charge for their services, and what they earn profits on. Most importantly, the PUCO leaning into this platform model acknowledges the significance that customer choice will have not only on Ohio’s regulatory framework but on the markets fostering in Ohio’s clean energy future.
Our current electric grid is anything but an open access platform. In fact, there are quite a few barriers either deliberately or inadvertently in the way of clean energy deployment. The platform model elicits images of a distributed grid with incredibly low reliance on centralized power stations, and much more integrated with resources such as distributed solar, battery storage, smart hardware running on smart operating systems and applications, and an empowered customer that has more control and choice.
Distribution System Planning. If we’re embracing this vision of a much more distributed and resilient grid of the future, how do we get there? Importantly, the Roadmap starts with the need for distribution system planning. This is not a required planning process for Ohio utilities as of today, and if any of them do it, it’s behind the scenes. The Roadmap sets out a very open and transparent, and collaborative, planning process in which utilities, stakeholders, experts and regulators are all at the table. The planning process would speak to when and where utilities will be making investments in grid infrastructure, grid efficiencies, and other key investments that will make the grid more integrated, resilient and operable. The Roadmap goes so far as to suggest timelines on when utilities should file a “current state assessment” (April 2019) that will show the distribution system’s present capability to integrate and accommodate a wide range of initiatives being implemented by the utility, as well as competitive suppliers.
Data Access. If the data on an individual customer’s electric usage is a product, who owns it? This question has been central to the battles between competitive suppliers and regulated utilities in recent years. The Roadmap clearly that utilities must format and share this data, and that they are stewards of the data, on behalf of their customers. This is important to clean energy development because if, for example, a developer of combined heat and power projects (CHP) was working with you to figure out if an on-site CHP system would be a cost-effective solution for your factory, she would need to see and understand how much electricity you use on a daily basis, and how much you are using during peak times and off-peak times, and how much you’re paying per unit of energy. Data is essential to the calculus that goes into individual project development.
Ratemaking & Rate Design. Implicit in the vision for transforming the electric grid is the question of how will we pay for it? Naturally, there are costs associated with getting the grid in shape, but what of the needed upgrades are the utility’s responsibility versus what should be shouldered by the customer? The Roadmap stakes out the reforms that rates and ratemaking will need to undergo, because the distribution platform necessitates a utility business model that is based on services provided to customers, rather than simply the sale of raw electrons and capital expenditures.
Ensuring rate design optimizes clean energy means structuring rates in a way where the benefits of efficiency investments are seen and felt by customers, and the value that distributed energy resources provide to the grid (i.e, peak load shaving and peak demand reduction, voltage regulation, etc.) have been fully valued in both markets and rates.
Rate reforms start with solid cost/benefit analyses to ensure that customers will be getting more benefits delivered to their meter through savings, flexibility, and control. But, in a bold move, the Roadmap indicates that in utility grid modernization plans, “the Commission expresses a desire herein to implement performance based ratemaking (PBR)” replete with financial and managerial audits. Additionally, in an important nod to consumer advocates, the Commission is also recommending cost caps on grid modernization plans to protect against concerns that the utilities will use grid modernization efforts to “gold plate,” the grid (i.e., charging customers for investments that maximize capital investments that deliver earnings for shareholders but do little to nothing to benefit customers).
Electric Vehicle Charging Infrastructure: In the realm of grid modernization, one of the most complex chicken-and-egg conundrums is that of balancing the construction of electric vehicle (EV) charging infrastructure with trends in consumer demand for EVs. Do you wait for enough EVs to be on the road before building a lot of new charging stations or do you build the charging stations first, hoping their availability will encourage people to buy and EV that may only travel up to 50 miles on a single charge? While the Roadmap doesn’t answer this question, it clearly articulates a demarcation between what the private competitive marketplace should work to solve vs. what aspects of building EV charging stations is better suited for electric utilities to take care of.
The Commission opines that utilities should focus on the more technologically-challenging fast-charger stations that can charge EVs in much less time, and therefore are better suited for constructing along major transit corridors. On the other hand, charging stations at private businesses and in residential settings are the realm of the competitive marketplace.
PowerForward Collaborative, Working Groups & Forthcoming Case Filings. While the Roadmap has a ton of great stuff in it, the vision, objectives and principles will have to be lived through the collaborative efforts of PCUO staff and stakeholders as well as opinions and orders of future commissioners. The Roadmap calls for the creation of an ongoing PowerForward Collaborative, as well as for a Distribution System Planning Workgroup and a Data and the Modern Grid Workgroup.
These entities could be a place that is functional and collaborative, but without strong leadership and backing by commissioners and staff, they could be places where stakeholders and regulators simply dial it in, go through the motions, but fail to find common ground or wield any influence over case filings or commission decisions. The process, nonetheless, is hopeful and one in which we plan to invest our education and advocacy moving forward.
Behind the meter vs In front of meter. The PowerForward Roadmap largely plays it safe in terms of hitting on any hot-button issues, but the Roadmap dips its toe a few times into the controversial area of who can own electric generation systems. This issue is at the heart of the debate over Ohio’s regulatory environment, and we see this play out in the Roadmap’s staking out the territory of regulated utilities (in front of the meter) versus competitive suppliers (behind the meter).
Customers are increasingly installing their own clean energy solutions such rooftop solar, biodigesters, small wind projects, etc. This irreversible trend is putting strain on the utility’s business model the tension around who can own these systems, who operates them, and how much the utility can dictate rules or processes for interconnecting these systems to the local grid. The Roadmap maintains this clear demarcation that customers, competitive innovators, and utilities have traditionally used, but they cite two possible exceptions in which the utility could be allowed to own an asset on the customer’s side of the meter: When the competitive marketplace has not yet met the need that has been deemed as essential to advance the state, and when social inequity in the deployment of customer applications. These are important exceptions, but with so much innovation occurring on the customer’s side of the meter, it’s likely that we’ll see future scuffles over who can own widgets and systems installed at a customer’s home or business, and what is the responsibility of the utility.
In conclusion, the Roadmap is an underpinning to realizing a cleaner energy future in Ohio. Transformation of our electric sector is not just about getting the right resources in the mix – wind and solar and energy efficiency – but it’s also about shaping the mechanisms that will deliver clean energy to our homes and businesses into the future.