Navigant Research Blog

Market Players Split on Energy Efficiency Opt-Out Program Options

— August 31, 2015

Walmart and a group of large energy users within Florida have proposed an opt-out option to Florida’s Energy Efficiency and Conservation Act. The proposal would allow these large companies to opt out of paying the energy conservation charge. This action would separate these payments and the demand-side management programs, which are both part of the Energy Efficiency and Conservation Act. As the Orlando Sentinel reports, Kenneth Baker, a senior manager at Walmart, stated: “We tend to pay into the rebate program … much higher numbers than we get back in rebates. I think that some of the money that we’re now spending on rebates could go towards other energy-efficiency measures.” Walmart is arguing it would have a better impact on energy efficiency measures if it were allowed to take control of these programs—and not be confined by the Energy Efficiency and Conservation Act.

Opt-out options of similar programs have been implemented in other states, with an Opt-Out Eligibility put forth by the utility and approved by the utilities commission. In order to opt out of the program in North Carolina, for example, a company must implement alternative energy efficiency measures.

The states that do not offer self direct and opt-out programs include Alabama, Alaska, California, Connecticut, Delaware, Washington, D.C., Florida, Georgia, and Hawaii. In Texas, clients develop their own energy efficiency plans if desired and are responsible for the financial impact associated with them. While self direct and opt-out programs have been implemented in other states, there is little information on the successes and failures of such programs.

Opposition

According to Energy Manager Today, Duke, Florida Power & Light (FPL), Tampa Electric, and Gulf Power all oppose the proposal. Their arguments against the proposal are increased costs to small businesses and residential customers. All businesses and residents have the potential to benefit from the programs via the lowering of utility rates, which would be limited if the proposal passed. According to the Tampa Bay Times, FPL argued, “The proposals are self-serving and discriminatory because the thresholds would benefit only select customers.” It would be a detriment to small businesses and residential customers to allow Walmart and other large companies to opt-out of energy efficiency programs. There are no regulations stopping large energy users from investing in additional energy efficiency programs on their own.

If the Public Service Commission in Florida agrees to allow Walmart and other large energy clients to opt out, it seems likely they would provide a self direct program as an alternative, which is common in many other states. While the self direct programs require these companies to provide their own energy efficiency programs, this still leaves the issue of higher costs to small businesses and residential clients who do not qualify to opt out.

The commission is waiting for staff recommendations before making its decision, which will most likely happen in September.


 

EPA Heads to Court with CPP

— August 28, 2015

The Clean Power Plan (CPP) has been a hot topic in recent months. It is about to get even hotter as 15 states band together in opposition to take the final ruling to court (details of the CPP can be found in the following links: link 1 and link 2).

Early Resistance

The CPP has met resistance since day 1, with federal court challenges filed well before the final rule was released by the Environmental Protection Agency (EPA) on August 3, 2015. Portions of the CPP were even shed in anticipation of a legal fight. The draft CPP rule included four Building Blocks (BBs):

  • BB1: Heat rate reductions
  • BB2: Switching from coal to gas
  • BB3: Renewables
  • BB4: Focused on energy efficiency (EE)

The EPA removed BB4 in order to strengthen the CPP’s legal position since EE is a demand-reducing resource, not a supply resource covered by the Clean Air Act (CAA, the CPP’s core federal law). Dropping BB4 removed a key legal concern cited by many who commented on the proposed CPP rule. However, a large block of states still oppose the CPP and plan to file in federal court to block implementation of the rule. Arguments against the rule range from its potential to substantially alter the power industry and the economic drivers of that business to unemployment and the threat of weakened power reliability.

CAA Battle

The CPP is not the only EPA rule being challenged in the courts. Florida is leading a group of 17 states over EPA startup, shutdown, and malfunction (SSM) rules. These states argue that the CAA gives the federal government the authority to set standards involving harmful pollutants, but it is up to the states to determine how they want to implement those standards.

The CAA is often upheld by the Supreme Court despite vigorously fought cases against the EPA. In the case of Coalition for Responsible Regulation v. EPA (2012), various state and industry group petitioners challenged all four EPA greenhouse gas (GHG) actions, alleging that they are based on improper constructions of the CAA. The Court upheld the GHG actions, supporting the EPA’s interpretation of the CAA in those cases. The Court also upheld provisions of the CAA in the Chamber of Commerce v. EPA (2011) case that permit the EPA to allow California to set its own automobile emissions standards. In this case, the U.S. Chamber of Commerce and National Automobile Dealers Association could not prove that these standards would cause any economic harm.

Primed for an Ongoing Battle

If the CAA’s previous Court success is any indication of the future, states need to prepare now for how they will meet the EPA’s CPP requirements. While numerous states fight the CPP (most recent state count was more than 15), many more are already preparing plans to reduce carbon emissions. In fact, a study conducted by the Union of Concerned Scientists shows that the 31 states that have already made commitments to the CPP will be more than halfway toward meeting their 2022 benchmarks, and 21 of these states will actually surpass it. Georgia, North Carolina, and South Carolina, all of which are suing the EPA, are also on track to exceed their 2022 benchmarks. The ongoing battle between states’ rights and the implementation of federal EPA rules will be on full display once the final CPP is published in the Federal Register (on or about November 3, 2015) and the opposing states file their federal court cases. The outcome of those joint cases will have a great impact on the future of the U.S. power industry.

 

Distribution Resource Plans: Integrated Capacity Analysis

— August 24, 2015

As discussed previously, California investor-owned utilities recently submitted their inaugural Distribution Resource Plans (DRPs), establishing a framework for the integration of distributed energy resources (DER) into the existing electric grid. As adoption rates for rooftop PV generation, behind-the-meter storage, and electric vehicles (EVs) rise, it becomes increasingly important to determine the extent to which the distribution system can accommodate the newcomers. To this end, the DRP filings include an integration capacity analysis (ICA), providing utility estimates of the ability of each of their circuits to incorporate DER. One of the goals of this analysis is to improve the efficiency of the grid interconnection process by providing DER hosting capacity data to the general public and third-party providers.

Integration Constraints

Per the guidance of the California Public Utilities Commission (CPUC), the utilities collaborated and developed a common set of constraints on integration capacity. The distribution system is designed to operate below equipment thermal limits, maintain voltage within acceptable bounds, avoid compromising protection schemes, and function safely. Therefore, each circuit segment was evaluated to determine the maximum amount of DER that can be connected to the existing electric systems without violating these rules. Southern California Edison (SCE) performed this analysis on a set of representative feeders and extrapolated the results to its entire service territory while Pacific Gas and Electric (PG&E) studied each individual circuit. Navigant expects that the next iteration of the DRP filings will require individual circuit analysis. In addition, there are plans to extend the set of evaluated criteria, as well as include an assessment of hosting capacity during expected switching operations and abnormal conditions.

Integration Capacity Criteria

Fig 1 blog
(Source: Pacific Gas and Electric)

DER Profiles

Because each category of DER has its own effect on the grid, the utilities had to perform different calculations for each resource type. Each utility had a different approach for this task. SCE separated resources into load-reducing (PV and storage) and load-increasing (EVs and storage) resources, while PG&E considered the hourly profile of each resource type separately. As the integration metrics are driven by net load, using hourly load impact profiles for each resource type will be necessary to optimally perform the analysis in the future. San Diego Gas & Electric (SDG&E) notes that it will acquire customer demand profiles from its advanced metering infrastructure (AMI) and localized DER impact profiles in order to improve the locational granularity of its next ICA.

DER Profiles 

Fig 2 blog
(Source: Pacific Gas and Electric)

Streamlining Interconnection Processes

One of the requirements of the CPUC guidance on DRP content was consideration of the applicability of the ICA to Electric Rules 15, 16, and 21 governing EV and distributed generation interconnection requirements. Perhaps contrary to CPUC expectations, while the utilities each allowed that the results of the ICA could be used to inform the interconnection process, none allowed it to immediately replace any of the required screens for fast track analysis. An augmented iteration that includes fast-tracked circuits and estimates of locational value would strongly support the integration of distributed resources.

The approach to the ICA displays a consistent theme across the DRP filings. Despite organizing around the same principles, the outcome methodologies are different enough to portend plenty of alignment discussions heading into the 2017 filing period.

 

ComEd and S&C Electric Push Utility Distribution Microgrids in Chicago

— August 17, 2015

The market for microgrids is evolving, with many utilities shifting their stance from curious bystanders to active participants. Utilities ranging from Duke Energy to San Diego Gas & Electric are building microgrids, with many others scratching their collective heads as they try to figure out what their role might be.

If we take a bird’s eye view, the East Coast seems to be the hot bed for regulatory reforms to enable microgrids in a deregulated policy environment—the New York Prize funding for 83 projects being the prime example. California is more focused on long-term planning for a rich variety of distributed energy resources (DER). The country’s heartland is taking yet a different approach, with microgrids that have much more in common with a utility smart grid innovation.

Microgrids in the Chicago Area

The key differentiator in the Chicago area is the large-scale microgrid on the utility side of the meter. These microgrids can take advantage of the expertise of S&C Electric’s portfolio of products. For example, the company’s offerings center on smart switch and smart inverter products to optimize energy storage. Working in conjunction with one another, these hardware devices reduce permanent outages resulting when lateral fuses operate in response to momentary faults—including brief interruptions on feeder lines when substation breakers trip. Other S&C microgrid offerings include an automatic restoration system that can restore power within seconds. This approach—unlike the more typical behind-the-meter microgrids—is designed to manage DER on behalf of the utility first (rather than the customer-focused approach of the majority of microgrids deployed to date).

While S&C Electric serves as an example of vendor innovation, ComEd is exploring the microgrid market with proposals for the rate-basing of utility distribution microgrids. Along with being awarded a grant from the U.S. Department of Energy (DOE) to develop a microgrid controller capable of managing multiple microgrids, ComEd is plowing new ground on the regulatory front. Unlike New York or California, the fate of ComEd’s broader microgrid program designed to steer $300 million in rate-based funding toward six microgrid projects is dependent upon state lawmakers. The proposed legislation—HB 3328/SB 1879—encompasses much more than just microgrids. If approved, however, it would set a major precedent in supporting the concept of rate-basing microgrids to support critical infrastructure. Due to the unique configuration of these proposed systems, the proposed legislation appears to be a major step forward for utility distribution microgrids.

Navigant Research has published its first Leaderboard Report on microgrids. The company ranking is focused on project developers and/or systems integrators that also offer their own controls platform for optimizing a microgrid. As a result, many key innovators in the space were left out—among them, utilities such as ComEd and S&C Electric. Yet, both of these firms are moving the market forward in ways not imagined just a short time ago.

 

Blog Articles

Most Recent

By Date

Tags

Clean Transportation, Electric Vehicles, Policy & Regulation, Renewable Energy, Smart Energy Practice, Smart Energy Program, Smart Grid Practice, Smart Transportation Practice, Smart Transportation Program, Utility Innovations

By Author


{"userID":"","pageName":"Policy & Regulation","path":"\/tag\/policy-regulation","date":"9\/3\/2015"}