Cleantech Market Intelligence
The iDER Playbook for Utilities: A Firsthand Report from the EEI Strategic Issues Roundtable
Michael Rutkowski and Jay Paidipati coauthored this post.
Navigant’s new integrated distributed energy resources (iDER) maturity model provides a valuable tool for immediate application to address today’s emerging industry needs. Using the tool, utility planners can evaluate their current state of readiness for DER integration and value capture, as well as provide guidance for future investments. We recently had the opportunity to apply the iDER maturity model during a highly interactive session with a senior utility audience at the Edison Electric Institute (EEI) Strategic Issues Roundtable, and the findings tell a compelling story.
After sharing some of Navigant’s latest insights on DER and our industry tipping points, we opened the dialogue to focus on the five dimensions of the iDER maturity model—Customers & Programs, Regulation & Policy, Business Models, Technology, and Operations. After outlining the context of each dimension, we described the characteristics of a utility at the highest maturity rating—Level 5—and described what such a utility would look like in terms of strategic focus, operational capability, and market structure.
Scoring DER Readiness and Importance
We prepared the audience, a group of about 80 utility executives, for deeper discussion by asking an initial strategic question for each dimension: How important is it for your utility to be mature today and 5 years from now? Respondents gave low and high scores for each dimension, and after a brief discussion, we recorded an average score across the group. The scores varied for good reasons and were dependent on the role of each utility executive, the current adoption rate for DER in their jurisdictions, and whether or not their companies were already offering DER programs and solutions in regulated or non-regulated business units.
We then asked a second question, again for each dimension: How mature is your utility today, and how mature should it be in 5 years? This resulted in a rich dialogue for each score, and afterwards we tallied average results accordingly. For example, some utilities have an active DER business unit already focused on customer product and service offerings. Naturally, their scores suggested greater importance regarding readiness and importance for Customers & Programs.
The results often reflected wide variations across different utilities, as well as divergence from different stakeholders within the same utility. Summary results are outlined in the two tables that follow.
Source: Navigant analysis
Operations (e.g., organization and processes) scored the highest in terms of importance to utilities today and 5 years from now for a fully mature iDER company. However, this dimension had one of the lowest readiness scores from the group, setting it up as an area with considerable gaps to fill over the next 5 years. Some of the reasons cited for this lag include the lack of a robust telecommunications network for high-speed connectivity to DER devices on the far edges of the grid, as well as limited ability to handle high volumes of data and provide sufficient analytics in the middle and back office. There was also mention of softer elements, such as the right cultural mindset and ability to hire talent that fully understands and embraces new digital applications and advanced customer analytics.
Furthermore, the utilities generally felt that their Business Models were not ready today but would be the most important area for readiness 5 years from now, suggesting that considerable work needs to be done along this dimension. On another level, the utilities felt that Regulation & Policy was highly important for iDER maturity and that they were further along today in this dimension. Some of the representatives in the room were from states where these regulatory constructs are well underway, including New York (i.e., REV proceedings). Others were in areas of the Midwest, where traditional, vertically integrated market structures are not expected to change in the near future.
Finally, we noticed variations in scores from representatives within the same utility. This implies that maturity model scoring needs to take place across multiple functions within a utility in order to inform an overall strategic approach. Navigant is applying this model with a number of initial utilities and will be publishing a white paper showing where the industry currently is and benchmarking against Navigant’s vision of a fully DER-integrated utility. Through this effort, we will present an industrywide view on the state of utility readiness for DER integration, as well as the top priority areas for utilities in readying their organizations to serve as a useful basis for utility strategy, planning, and resource allocation efforts as this industry transformation takes place.