[BETA] Fortnightly

Dollar-cost averaging has gained favor as a technique for hedging fuel-price risks. But hidden costs might outweigh the savings, leaving utilities exposed to volatile markets.

For the first time, perhaps, the electric utility industry may need to keep track not only of peak load, but also of minimum load, as the Federal Energy Regulatory Commission reviews a proposal by the Solar Energy Industries Association to employ a new definition of minimum load under a new, relaxed threshold test that would govern eligibility for fast-tracking of applications by generation developers to interconnect new, small-scale solar energy projects to the local utility distribution grid.

IIt’s ironic that in today’s market, as the cost of hedging against commodity price increases has declined, support for utility hedging programs has sunk to a historic low. The ideal time to hedge is when prices are low and markets are relatively calm, because that’s when hedging costs and risks are the lowest. Conversely, waiting until prices rise and markets become volatile will expose customers to higher costs. Convincing regulators to approve hedging programs now will require a collaborative approach to educating and enlisting support from stakeholders.

Regulators and customers are holding utilities’ feet to the fire, when it comes to investing in advanced metering and smart grid systems—and rightly so. Making the most of investments requires a systematic approach to establishing standards and monitoring performance. But it also requires policy frameworks and cost recovery regimes that provide the right incentives.

Customers in some markets are demanding the right to opt out of smart meter deployments. Their concerns involve radio frequency (RF) emissions and potential privacy breaches. Whether these concerns are valid or not, some regulators are requiring options for customers who don’t want smart meters. The right approach can satisfy concerns without undue costs and complexities.

The PJM Interconnect’s Reliability Pricing Model generally has succeeded in attracting and retaining low-cost generation and demand resources to maintain resource adequacy. But sluggish demand and low prices have weakened the market for long-term capacity contracts. Suppliers aren’t willing to lock in current low prices, and buyers don’t want to pay more for future certainty. Is the market dysfunctional, as some state lawmakers suggest, or does the lack of long-term contracts indicate a rational balance of supply and demand?

New technologies—and new expectations—require taking a fresh look at the institutions and practices that have provided reliable electricity for the past century. Collective action is needed to define the key attributes of a future grid and then to take the more difficult next step—adapting our processes and institutions to align with that future vision. A thoughtful approach will allow America to capture the potential value that’s offered by sweeping changes in technologies and policies.

(July 2011) Williams Partners L.P. expands Transco transmission lines; Google to provide fiber optic Internet service for Kansas City, Mo.; Constellation Energy picks Lynxspring Inc.; plus contracts and developments involving Servidyne, EnerNOC, Siemens Energy and others.

Smart grid technologies bring a host of cyber security considerations that need to be addressed throughout the T&D domain—and even into the customer’s home. In this exclusive report, Department of Energy authors team up with industry experts to examine how to deal with the changes and challenges of securing the smart grid.

How will the technology and policy changes now sweeping through the industry affect the architecture of the utility grid? Will America build an increasingly robust transmission infrastructure, or will we rely more on distribution intelligence and microgrids? Scholars at California’s Institute for Energy and Environment analyze various scenarios to predict the possible futures.