Calif., N.Y. are rebuilding the grid in ‘parallel’

Source: Debra Kahn, E&E reporter • Posted: Tuesday, November 1, 2016

The states that have been the earliest to embrace a shift to smaller-scale energy generation are now slowly refining their approaches to reforming the grid.

New York and California are the first states to attempt to corral and direct the changes to utilities’ traditional business models wrought by distributed generation. Officials from both states have been trying to take a loose, incremental approach and have so far avoided “any big failures,” a California regulator said last week.

“In contrast with restructuring of the generation level where we took a gigantic leap, I think we’re doing it differently this time and really taking the baby steps,” California Public Utilities Commissioner Michel Florio said at a discussion last week on both states’ approaches to distributed generation.

“Let’s pilot, let’s see what works,” Florio said. “I think because of that, we haven’t had any big failures, which is nice because we’ve been there and done that.”

Over the past three years, the two states have begun proceedings to determine the cost and value to the grid of rooftop solar, what kind of functions solar and other forms of distributed energy like batteries and electric vehicles can serve, how the grid should be upgraded to take the most advantage of distributed generation, and what role utilities should play.

New York’s “Reforming the Energy Vision” proceedings were jump-started by Superstorm Sandy-related blackouts, while California’s “Integrated Distributed Energy Resources” rulemaking is more motivated by broader greenhouse gas and renewable energy goals. The two are now converging, officials said.

“I don’t see a huge difference,” said Rudy Stegemoeller, a former adviser to the New York Public Service Commission. “I see California moving in very much of a parallel direction,” he said. “It is important to have a policy vision to guide developments, but the vision in New York is not very prescriptive about exactly how we’re going to get it done. It leaves lots and lots of room for incremental implementation.”

Small bets

Last week, New York’s PSC released a report outlining an interim method for valuing distributed resources. It recommends allowing existing distributed projects to keep current net energy metering payments in place for 20 years but creating a new pricing model for future projects.

“How much tolerance for market messiness can regulators have in an industry that is highly structured, highly risk-averse, historically very little tolerance for error?” Stegemoeller asked. “In New York, the answer is loosen the reins a little bit. Utilities make small bets; if some things don’t work out, that’s fine.”

One example of a small bet is Southern California Edison Co.’s pilot project in Orange County to try to offset some of the loss of the San Onofre Nuclear Generating Station by using renewables, energy efficiency, storage and conservation rather than gas-fired power plants. The utility has purchased about 100 megawatts of “preferred resources” so far and plans to procure another 150 MW this year, to be delivered by 2018.

“Preferred resources, it was kind of like dessert,” Florio said. “After you eat your meat and potatoes, you got to have dessert.” Now, he said, “We’re moving the preferred resources front and center. They’re not just some afterthought that we add on after we’ve built the real stuff; it is now the real stuff.”

Many companies and trade groups, including NRG Energy Inc., SolarCity Corp. and energy storage groups, are involved in both states’ proceedings, which has helped link the two efforts, an outside observer said.

“What started out as two different approaches … I think over the last three years have started to converge,” said Paul De Martini, a consultant with ICF International who has worked on both efforts.

Florio agreed that the private sector is going to play a large role and should be encouraged to experiment.

“Give them some space and let’s see what they can do,” he said. “We don’t want it to be so much space that it breaks down the grid, but give people some opportunity and see what they can bring to the table.”

The states are still working on figuring out who will own these resources and also how to manage the data that they will generate and rely upon.

“One clear lesson to me is, don’t think it’s going to be easy or quick, because just the amount of information and the new forms of analysis that have to be done are just inherently going to take a while,” Florio said.