Fortnightly Magazine - June 2011

The Transformation Myth

Telecom-style revolution is beyond our reach.

In the information age, big growth doesn’t come from putting steel in the ground; it comes from innovating and creating value. But if electricity customers care only about reliability and price, how can utilities create real value that didn’t exist before?

Michigan Morass

Competitive energy suppliers are infuriated by Michigan’s regulatory framework. The state partially unbundled its utilities, but left generation tied to retail operations. Then it opened the retail market to alternative suppliers, but capped their participation at 10 percent — severely limiting true competition. Former FERC Commissioner Bill Massey says Michigan’s schizophrenic approach is stifling innovation and saddling customers with unnecessary risks and costs.

People (June 2011)

Dynegy appoints interim president and CEO; Navigant adds new energy practice director; plus senior staff changes at Emera, ConEdison, Energyplus Holdings, and others.

Retirement is Coming

Preparing for New England’s capacity transition.

A wave of coal-fired plant retirements presages a possible crisis in the New England market. As load-serving utilities in ISO New England become increasingly dependent on natural gas-fired capacity and large-scale renewable generators, the region might be forced to rely on expensive cost-of-service reliability contracts to keep the lights on. Stakeholders are considering alternative approaches to encouraging power plant development, including special rate incentives previously reserved for transmission projects. Paul J. Hibbard, former Massachusetts DPU chairman and now vice president with the Analysis Group, analyzes how resource constraints are blurring the lines between competitive markets and integrated resource planning in New England.

Techno-Regulation

The smart grid and the slippery business of setting industry standards.

Four years ago, Congress made its wishes known: it tabbed the National Institute of Standards and Technology to develop a set of standards for the smart grid, and then instructed FERC, the Federal Energy Regulatory Commission “adopt” those standards, but only after finding a ”sufficient consensus,” and only “as may be necessary” to assure “functionality and interoperability.” Yet what is known is not necessarily clear. Who decides if consensus prevails? What does “interoperability” mean? Should FERC’s “necessary” finding extend to retail smart grid applications, arguably outside its purview? And the biggest dispute — must standards be mandatory? — finds PJM at odds with much of the utility industry.

Growing Pains

Utilities work toward a more mature relationship with customers.

The notion that utilities don’t do a good job of consumer engagement is only half true. The fact is, many customers don’t want to be engaged. They just want cheap, reliable electricity, no questions asked. But smart grid advancements call for a dramatic improvement on both sides of the conversation. Utilities are struggling to create a more mature relationship with their customers.

Renewables at a Crossroads

Investment opportunities in an evolving environment.

Some of the key policy mechanisms and market factors that triggered the boom in renewable energy development have weakened in the face of one of the most severe economic downturns in modern history. In some ways, though, the renewables sector is richer and more dynamic today than when the boom began. A shakeout might be coming among renewable power players, and those that survive will strengthen their capabilities, hone their strategies, and take advantage of industry consolidation to build scale.

Top 10 EV Challenges

Utilities prepare for a bumpy road.

Electric vehicles promise major benefits for utilities, including increased electricity sales and accelerated transformation of passive energy consumers into collaborative stakeholders. But EV integration faces major challenges, from transformer overloading to the complexity of managing mobile transactions. Addressing these challenges in a collaborative way will allow the industry—and the country—to realize the benefits of a healthy market for electric transportation services.

Green Power Control

Preparing the grid for large-scale renewables.

With large solar arrays and wind farms being proposed to connect to transmission and sub-transmission systems, are utility companies sufficiently prepared to handle the challenge of integrating these large intermittent resources? The industry now must decide whether transmission reliability factors — most notably dynamic voltage support and system frequency management — need to be resolved by renewable generators, or whether they should become a cost of doing business for transmission providers and reliability coordinators.

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