Stakeholder Collaboration

Deck: 

Consensus building is an imperative and educational art form.

Fortnightly Magazine - October 2009

Collaboration among stakeholders with widely divergent points of view never has been more critical. In a world of increasingly complex industry challenges resulting from megatrends now driving the electric industry—including the arrival of infrastructure intelligence, vastly greater customer engagement, and ongoing efforts to resolve the carbon-capacity conflict—the opportunities for misunderstanding, miscommunication, and conflict abound. Players across the electricity sector now must manage an array of constituencies, and if they’re not careful they might face greater intervention in rate cases and significant risks of litigation, as well as negative publicity and poor customer relations.

In three recent cases, utilities used a formal stakeholder collaboration process to open up utility planning and decision-making, and to build support for what could have been a contentious final utility decision. Collaboration, while certainly not a new concept, is taking on greater importance, as the interdependency among stakeholders becomes a fact of life. In one case, Arizona Public Service (APS) needed to make transparent the method it used to assess the benefit of distributed solar on its system. In a second, the Illinois Commerce Commission asked Commonwealth Edison Company (ComEd) to undertake a stakeholder collaboration process to build broad support for the design of its advanced metering infrastructure (AMI) system. In a third, the Maryland Energy Administration (MEA) began a collaborative stakeholder process to develop a smart-grid strategy that would meet the diverse needs of the citizens of Maryland as directed by the Public Service Commission. In each case, regulators played a catalytic role, requiring facilitation to bring the broad community of stakeholders into alignment on a defined challenge.

Facilitation management in this emerging era of stakeholder engagement is an art form, requiring skill and experience, as tempers, prejudices and urban legends often create an environment that easily can spin out of control.

APS: Distributed Solar

Arizona is one of 28 states seeking to increase the amount of renewable energy in its energy-supply portfolio and has committed to aggressive renewable-energy standards. The state is richly endowed with solar resources, and there is a wellspring of enthusiasm and support to move rapidly toward greater reliance on solar. However, large-scale deployment of distributed energy (DE) solar is a relatively new and contentious issue. There are myriad complexities and technical implications involved in integrating a large number of small units into the electrical distribution system. At the urging and direct involvement of the Arizona Corporation Commission (ACC), APS initiated a study in February 2008 aimed at creating a factually-based un-derstanding of the potential benefits of solar DE on the APS system, as well as the impacts on its operations. Facilitation was needed for educational purposes, as well as building a shared understanding and acceptance of the underlying methodology. Intervenors were skeptical of the proposed rates. They couldn’t find the data behind them and weren’t convinced that APS had used the right assumptions.

Stakeholder workshops were convened at each of five stages in the one-year solar study. As many as 50 stakeholders were in the room at any one time. In addition to APS and ACC, the participants ranged from the Arizona Department of Commerce and American Solar Electric, to SunEdison, the National Renewable Energy Lab, Electric Power Research Institute, and Lennar Homes.

The process began with the characterization of the solar resource and key solar technologies, specifically the technical attributes and future potential of three solar DE technologies: photovoltaic, hot-water heating, and daylighting. The characterization was subsequently used—in building-block fashion—to assess the value of solar DE on the distribution system, the transmission system and the generation system, respectively. The next step consolidated total system value and created an aggregate business case for solar DE.

The technical nature of the work required a range of experts be brought into the facilitation process to educate, build trust, dispel myths and sort out misunderstandings. Among the most contentious issues to solve were the widely varying assumptions about the uptake of new technologies by customers and in turn how much solar growth APS could expect based upon assumptions of future declining costs of PV systems. A second key issue was the value of solar in meeting peak demand. Peak solar and peak load aren’t coincident in the APS service territory; solar peaks at roughly 1 p.m. in the summer, while load peaks between 5 p.m. and 6 p.m. The importance of this differential isn’t easy for non-technical stakeholders to understand or appreciate. The common viewpoint is that since solar is putting all that energy into the system, the utility should be able to spend less money on its system. Through charts, graphs and data, the experts were able to prove to all parties that the capacity value of solar DE is less than it would be if the two peaks were coincident, and that storage could enhance its capacity value.

To be successful, stakeholder collaboration requires time, persistence and consistency. As in the case of APS, multiple workshops have the advantage of building momentum and a sense of teamwork. Starting with dozens of smart people with a diverse set of opinions and an initial sense of distrust, full, open and methodical discussion paid off. By the collaboration end, all involved had a clear sense of where everybody stood and were comfortable with the approach taken for value assessment of solar DE. APS had a methodology that was transparent, and one it could use with assurance going forward.

ComEd: Smart-Meter Startup

Regulators have become a driving force behind stakeholder collaboration. In the fall of 2008, the Illinois Commerce Commission (ICC) directed ComEd to include a stakeholder-collaboration process as an integral part of its initial AMI installation. Recognizing that interdependencies among stakeholders only would grow with the functionality of intelligent metering, the ICC wanted to bring the disparate parties into the early planning process, to avoid downstream conflict and possible paralysis. The result was a diverse group of 70 to 80 stakeholders brought together in December 2008 to begin a six-month series of workshops. Participants included utilities, regulators, citizens, ratepayer advocates, vendors, consultants and retail energy providers. The process was kicked off with a four-hour “AMI 101” class to establish a common base of understanding by reviewing the current state of technology—its capabilities, risks, benefits, and the deployment and integration issues from the utility perspective.

Facilitation focused on three goals. The first was education, to provide a consistent working knowledge of AMI among all the participants. The second was to formally channel stakeholder input into ComEd’s planning process. In that regard, the sessions were used to surface what was important and not important to the various stakeholder communities. Also, workshops covered the process for selecting the geographic sites for the initial installations, and to design the testing program to benefit all parties. The third goal was to achieve alignment among the stakeholders on the basic direction of the AMI program.

In this context, facilitation wasn’t used to elicit consensus or unanimity of opinion. Rather, the facilitation fostered the concept of alignment; that is, a consistency of understanding and awareness of ComEd’s plans, intentions and motivations.

The launch followed a series of half-day workshops on key topics pertinent to AMI, including customer impacts, impacts on utility operations, and AMI’s role in demand management (DM) and energy efficiency. Attendance remained consistently strong at one workshop location and grew at another as word spread. Plus, a Web site was established to serve as a communications tool and a repository for all the project documents. The Web site afforded continuous engagement.

Among other things, the collaborative process involves inviting disparate viewpoints, even disagreement, and being open enough to hear the aired concerns, complaints, and misunderstandings. In the case of ComEd, the participants began with a healthy portion of skepticism, dissent and questioning of what ComEd was doing in this area, and why. As to be expected in this kind of environment, utilities are dealing with greatly varying knowledge about AMI technology, its benefits and its impacts on utility operations. And as in the APS case, many people had very little appreciation of the value of managing peak load or its economic implications. Facilitation afforded a very dynamic exchange at the outset that, with time and seasoning, coalesced into a plan. The sequencing of workshops helped build and sustain commitment. In the end, the stakeholder process significantly influenced the size, location and the type of AMI customer programs. ComEd’s filing with the ICC recommended a program of roughly 141,000 smart meters, deployed in the city of Chicago and 11 surrounding suburban communities.

Testing of the installed system, along with various scenarios and customer programs will take place through the spring, summer and fall of 2010. The results are expected to be reported back through the stakeholder community to the ICC in early 2011. To ensure that the stakeholder commitment continues, an interim meeting is planned for the spring of 2010.

Maryland: Smart-Grid Strategy

There is no area more important for collaborative decision-making than AMI and related smart-grid investments. By offering consumers a new energy-management platform, intelligent metering promises to redefine the relationship between utilities and their customers, creating a customer-based information system that in time will cut across the entire utility.

The Edison Foundation estimates the utility industry will invest nearly $600 billion in distribution systems, including smart-grid technology, during the next 20 years. At that scale, coordination becomes paramount. Smart-grid planning efforts, which have been emerging on a utility-by-utility basis around the country, now are beginning to come together. In that regard, the U.S. Department of Energy (DOE) recently gave the Maryland Energy Administration (MEA) a grant to analyze smart-grid options for the entire state of Maryland. MEA pulled together a project team consisting of the American Council for an Energy Efficient Economy, Energetics and R. W. Beck to join in the analysis and stakeholder engagement of the Smart Grid Maryland Project with two overriding goals. First, to identify strategies that can be used to help the state achieve the specific objectives of the EmPower Maryland Energy Efficiency Act of 2008. These include a 15-percent reduction in per-capita energy use by 2015 and a 15-percent reduction in peak summer demand. The second is to develop a long-term smart-grid strategy for the state.

Smart Grid Maryland approached the project methodically, employing a five-step sequence of activities. The first task was to review the state-of-the-art of smart-grid technology, which was completed in April 2009. The second step was to conduct stakeholder forums to provide background on the project, as well as to solicit input and support. Two forums were undertaken in parallel in May 2009, one at Chesapeake College in Wye, on the Eastern shore of Maryland, the other at the University of Maryland, in College Park. The stakeholders included people from five utilities in the state, plus regulators, government officials, consultants, vendors and various advocacy groups.

The participants were given a summary of results of the first task and a quick overview of the purpose and direction for tasks three, four and five. Three will involve economic modeling of all the smart-grid elements to come up with an optimum implementation plan, the ordering or phasing in of 15 smart-grid elements. Task four is to create an overall smart-grid design, and task five is to provide regulatory and policy options for MEA to take to the Maryland Public Service Commission.

Collaboration requires a variety of techniques to keep stakeholders continuously engaged. As in the case of APS and ComEd, a Web site was created as a central repository for papers and announcements, for ongoing communication, to keep the public informed, and to provide thoughtful answers to some of the complex questions raised during the forum. A third Smart Grid Maryland stakeholder forum was scheduled for the fall of 2009 to bring participants up to speed on the results and to help keep them committed.

The project is expected to be completed in 2010. Each of the five utilities involved—Baltimore Gas & Electric, PEPCO, Allegheny Power, Delmarva Power & Light and Southern Maryland Electric Co-op—have smart-grid related pilots and programs. Smart Grid Maryland will help to integrate these programs into a comprehensive statewide system.

Lessons Learned

The valuation of solar DE on the APS system, ComEd’s pioneering AMI deployment, and the statewide smart-grid strategy for Maryland are three examples that reveal how stakeholder processes are evolving, and reinforce how they increasingly are being used to help utilities cope with the megatrends driving the industry, such as intelligent infrastructure, customer engagement, and solutions to the capacity-carbon conflict.

No other industry is as deeply embedded in society as is the electricity industry, or has so many diverse stakeholders who desire inclusion in the decision-making process. The megatrends driving the industry forward all have one thing in common: the rapidly growing interdependencies among suppliers, customers, regulators, vendors and advocates. Processes that facilitate more effective stakeholder collaboration are imperative.