Part 2: Key choices on the way forward.
Sonia Aggarwal is the Director of Strategy at Energy Innovation: Policy and Technology LLC, where she works on policies to transform the electric grid and reduce emissions. Robbie Orvis is a policy analyst for Energy Innovation’s Smart Energy Policy program area. Michael O’Boyle works as a policy analyst for Energy Innovation’s Power Sector Transformation area. The authors thank Kurt Adelberger (Google), Katherine Hamilton (Energy Storage Association), Devra Wang (Natural Resources Defense Council), Eric Gimon (independent consultant), and Hal Harvey (CEO, Energy Innovation), for their valuable insight.
In last month's issue and in the first part of this series, we reported how advances in technology in the electric utility industry have outpaced both markets and rules, inviting a new look at how we operate the distribution side of the grid. In some ways, it's a replay of the 1970s and 1980s, when a revolution in cogeneration and small power production upset long-held notions and led eventually to restructuring in transmission and wholesale power - a restructuring that introduced regional grid operators (RTOs and ISOs) and bid-based regional power markets.
During those prior decades, utilities came face-to-face with competition from new actors, forcing costs up even as revenues were falling. This influx of new actors exposed the need for smart long-term transmission planning and impartial short-term transmission system operators.
Today, as then, the distribution system faces some similar market conditions. Rising utility costs coupled with falling sales because of the emergence of distributed energy resources (DERs), particularly energy efficiency and rooftop solar, have led to rising retail rates, falling revenues, and cries of a new "death spiral" (the same term used in the 80s).1 In some situations, DERs can provide services more cost-effectively than traditional utility assets. But their adoption has met resistance from many utilities, that see them as a threat.