BPA Conf on DG, Renewables

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Conference–Distributed Resources, Renewables and the Environment

February 2, 2000, Portland, OR

Sponsors
Bonneville Power Administration
Energy NewsData, Energy Dynamics Online project

Observations:
Sitting through this conference, I had the contradictory feelings of “same old same old”, while at the same time there seemed to be so much good stuff being said that it was hard to absorb it all. Perhaps it was the combination of a lively mood, good speakers who could clearly state the big picture, and some genuinely new ideas. The crowd was very pro-DG/Renewables, with some good cautions raised about environmental effects (you don’t want to turn on all your dirty diesels on a peak-load bad-air day!).

My own takeaways (with biases showing):
– Tech change (internet, DG) is irresistible.
– Dereg/restructuring is irresistible (though timing is uncertain).
– The “Home-Town” utility has a huge opportunity and role to play – if it wants to, and particularly if new kinds of regulation can be put in place.
– Think price, not cost. Think niches, not “the market”.

During the final panel session, Joel Gilbert gave a frightening summary of the capacity situation and vanishing reserve margins in the US, predicting a showdown in the east this coming summer. Capacity additions are not keeping pace with shutdowns, and there is zero investment in new transmission capacity.

Energy NewsData has provided a list of attendees plus a lengthy report about the conference online at: http://www.newsdata.com/edonline/groundhog

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NOTES

Introduction — Steve Wright, Sr VP, BPA

The “Energy Web ” — It’s coming, even if we’re not sure what it looks like.
1. Reliability — need for new capacity
–Gen supply – Hydro resources diminishing (fish, relicensing); coal restricted (airquality)
–RTO timing very uncertain; investments on hold pending outcome
–Opportunity for new market entrants — DG and renewables.

2. Consumer Choice — retail access coming, sooner or later, gradually or suddenly
Consumers value reliability and environmental stewardship

3. Technological change – It’s all coming together for DG, though many hurdles put in the way. Exec survey – most expect FC’s becoming a reality; State or Fed net metering laws; Fed interconnection stds (IEEE). AMR, electronic billpaying seen as very significant.

Keynote Address — Carl Weinberg

“The philosophies of one century become the common sense of the next”
i.e. renewable energy, environment, sustainability [spaceship earth]

Forces at work:
1. Market based governance — “free markets” — gov’t does things to establish markets that “do” things (instead of gov’t “doing” things directly).
2. Environment – learning necessity to live symbiotically with nature, and to include it in our P/L measures. DG/Renewables only part of answer.
3. Tech change — from economies of scale to economies of mass production. DG can be tailored to individual needs. De-integration of vertical utilities. Link pieces of system with information rather than with organizations. Mix of central and decentralized. Developing world may be better with largely decentralized ( e.g. straight to cell phones, skipping wire system).

Karl Rabago, Rocky Mountain Institute

Benefits of DG – short lead time, small units (less lumpy); portable- quick to deploy and redeploy; built “like cars not cathedrals”, genuinely diversifies portfolio risks.

For the Utility/”Residual Disco” – resiliency; increase T&D life; better capacity utilization; source of reactive power; premium power quality; cut reserve requirements; load following options.

For environment – Combined heat and power; use local (waste derived) fuels.

Randy Berggren, manager, Eugene Water & Electric Board

Municipal utility (elec, water, district heat — 100,000 customers) Intend to remain vertically integrated. Own some generation, 24 hour trading floor. Lots of public involvement in new Integrated Resource Plan; strong connections to community. Strong commitment to conservation and renewables — goal to add 1% of system load each year. Local utility (“Home Town”) can be the delivery infrastructure for PV– don’t need to cede market to new (dot com) entrants.

Larry Papay, SAIC

“Three D’s”
– deconstruction (deregulation) of the utility industry
– digitalization ( includes huge power quality requirement)
– decarbonization – environmental concerns and valuing of emission credits

Ralph Cavanagh, NRDC

Need to mobilize and incentivize existing (utility) companies for DG, rather than regard them simply as the obstacle to a “disruptive technology”. DG can enhance the grid. Need performance standards so it’s not worse for environment, noting that generation close to load means the emissions are close to people.

The “home-town” utility can and should be involved, and do it, but not as a monopoly. Need new kind of regulation with incentives to provide reliable wires at lowest cost; not rewards based on system throughput. Need to deal with stranded system fears. Need incentives to invest.

Joel Gilbert, CEO, APOGEE Interactive Inc

“Bubba don’t care” when it comes to energy, restructuring, environment, etc.. At most 2% of the population is really motivated, but even they aren’t well informed.

People do want “business interruption insurance”, for both business and personal, but they don’t care about the difference between a fuel cell and a microturbine. There are some people who want a fuel cell for fun, as a luxury — so sell it to them, and never mind how many $/KW.

The Home Town wires company could do this — turnkey installation, dispatch it too (outsource it if you have to). Enron doesn’t want the wires-co talking to the customer, but they’re the ones who fix things after the storm.

What is the customer’s motivation? Appeal to their fear and greed. “Reduce it to a bumper sticker.” Life Insurance didn’t sell at first, until they stopped calling it “death insurance.

Recommended reading- a book “Revenue Management” by Robert Cross, on how the airlines use price signals to educate the customer and maximize their revenues. Electricity doesn’t have price signals (i.e. time of day), and even California hasn’t been able to get a demand response from customers.

Alison Silverstein, Texas PUC

The “Texas Model” for DG interconnection policy is freely available to other states to use as basis for their own program. It was largely a “win-win”, or at least “equal grumbling”. The process went fast, achieving “80%” consensus. For the rest, decisions were made, so as to move ahead.

The objective was to remove barriers to entry by DG, to set forth the rules, and then get out of the way and let the market do its work. A DG has the right to get on the T&D system. (T pricing was standardized in ’95, and D pricing is being developed). There are standard agreements, procedures, deadlines and fees. There are limits on how much DG can be hooked up to a given circuit. An interconnection cookbook manual is in the works, along with a equipment pre-certification process.
http://www.puc.state.tx.us/rules/rulemake/21220/21220.cfm

Eric Heitz, The Energy Foundation

While not opposed to DG, per se, concerned that hype is far surpassing reality, and the environmental issues are serious. Small diesels are plentiful, and very dirty. Microturbines emit far more NOx than CCGT, and fuel cells more CO2. Combined Heat&Power only brings microturbines up to the level of CCGT. [There are sure to be arguments over these assertions. It sounded like not much attention was given to emissions performance of new technology.]

Recommendations: DG should be required to be as clean or cleaner than new CCGT, and standards should ratchet down over time. Reward CHP and efficiency. Make manufacturer responsible for lifetime emissions performance.

Pamela Lesh, Portland General Electric

(See Feb 4 UFTO Note – A Proposition for a New “Regulatory Contract”)

At the BPA Conference in Portland (Feb 2), one of the distinct highlights was a presentation by Pamela Lesh, VP Rates & Regulatory Affairs at Portland General Electric. She outlined a remarkable new approach for regulating distribution utilities that goes well beyond “performance based rates”. It was the first public airing of ideas she’s been developing for some time.

The real conceptual breakthrough is to separate the basis on which the utility gets paid from the way the customer is billed, so the right incentives can be presented to each one. Here’s the next to last slide (the complete text appears below):

——————————-
– Price to the utility to align success so that the more effectively the utility achieves the results, the better it does, i.e., unit-based, not usage-based, pricing.

– Price to the customer to encourage conservation and prevent abrupt shifts in cost, e.g., usage or demand-based, not flat, pricing.

– Yes we can price differently to the utility and to the customers! We will just need to balance collections with payments.

IEEE DistGen Stds update

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IEEE SCC21 P1547 Web Site Available:

(The first is the html home page, the second one is simply an archive file log.)

http://grouper.ieee.org/groups/scc21/1547
http://grouper.ieee.org/groups/scc21/1547/archives

The site includes a P1547Background file, a P1547MeetingPattern file explaining meeting logistics, and folders for past and ongoing notices, agendas and minutes. (Meeting minutes “annexes” are not available electronically.)

The January 2000 meeting (Albuquerque NM) minutes have just been posted at the “archives” site. <>

The next meeting is April 26-27, 2000 hosted by Cutler-Hammer in Pittsburgh PA Next after that is June 7-8, 2000, hosted by Capstone Turbines in Los Angeles

Contact is: Tom Basso, 303-384-6765, thomas_basso@nrel.gov

(For additional background, see:
UFTO Note – IEEE Stds for DR Interconnection, 09 Jul 1999)

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In related developments: (February 10, 2000)

Sandia’s PV News: IEEE Interconnection Standard For Utility-Intertied Photovoltaic Systems Is Approved

An IEEE-sponsored working group has developed an interconnection standard that will simplify the process of interconnecting photovoltaic systems with an electric utility. Photovoltaics (PV) is a solar-electric technology that uses solid-state solar cells to convert solar energy to electric energy. Not only does this standard vastly simplify PV interconnection, but it is the first IEEE standard of its kind for allowing utility interconnections of non-utility-owned distributed generation equipment. The unique aspects of this standard include tightly-defined requirements for the interconnecting hardware that can be tested by an independent test laboratory such as Underwriters Laboratories. This removes former barriers to PV use throughout the country.

John Stevens, Sandia National Labs, chaired the working group, which included about 25 members representing the utility industry, the PV industry, PV inverter manufacturers and PV researchers. The effort was sponsored by IEEE Standards Coordinating Committee 21 (SCC21). It required a little over three years from initial announcement of the project to final approval by the IEEE Standards Board. Its value is that it provides a standard that PV interconnection hardware can be designed to, thus removing the requirement for specialized hardware for different utility jurisdictions. The standard includes very specific requirements for systems of up to 10kW, but it covers systems of all sizes. The IEEE PV interconnection standard, identified as IEEE Std 929-2000, is known informally as IEEE 929.

The standard actually applies to the PV inverter, the device that converts the PV dc energy into utility-compatible ac energy. Similar inverters are used in other distributed generation systems such as fuel cells and microturbines. Many of the requirements for interconnection that are described in IEEE 929 might also be adopted for these other technologies.

IEEE 929 provides guidance for operating voltage and frequency windows, trip times for excursions outside these windows, requirements for waveform distortion, as well as defining a non-islanding inverter. An important parallel effort was performed at Underwriters Laboratories where a test procedure, UL 1741, was written that will verify that an inverter meets the requirements of IEEE 929.

In support of the IEEE 929 process, several development projects were completed at Sandia that addressed interconnection issues. The performance of several inverters operating in parallel when a utility line is de-energized was characterized to better understand the potential for unintended operation during a utility outage (“islanding”). A control scheme was developed to assure that islanding doesn’t happen. A test was developed to allow testing of single inverters to identify the presence, or lack, of an adequate anti-islanding scheme. Several specific tests were performed at the request of some electric utilities to examine such issues as ferroresonance with inverters under fault conditions and response of inverter protection schemes to the non-sinusoidal waveforms that are sometimes associated with abnormal conditions on utility systems.

This working group was an outstanding example of people with different backgrounds working together toward a common goal — simplifying the interconnection procedure. IEEE SCC21, which is chaired by Dick DeBlasio of NREL, has sponsored numerous PV-related standards since its inception in the late 1970s.

For further information on this PV interconnection standard
contact John Stevens, jwsteve@sandia.gov
Sandia PV Projects (505) 844-3698 (phone) (505) 844-6541 (fax)
pvsac@sandia.gov http://www.sandia.gov/pv

A Proposition for a New “Regulatory Contract”

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At the BPA Conference in Portland (Feb 2), one of the distinct highlights was a presentation by Pamela Lesh, VP Rates & Regulatory Affairs at Portland General Electric. She outlined a remarkable new approach for regulating distribution utilities that goes well beyond “performance based rates”. It was the first public airing of ideas she’s been developing for some time.

The real conceptual breakthrough is to separate the basis on which the utility gets paid from the way the customer is billed, so the right incentives can be presented to each one. Here’s the next to last slide (the complete text appears below):

——————————-
– Price to the utility to align success so that the more effectively the utility achieves the results, the better it does, i.e., unit-based, not usage-based, pricing.

– Price to the customer to encourage conservation and prevent abrupt shifts in cost, e.g., usage or demand-based, not flat, pricing.

– Yes we can price differently to the utility and to the customers! We will just need to balance collections with payments.
——————————-

Contact Pamela Lesh,
VP Rates & Regulatory Affairs, Portland General Electric.
503-464-7353, pamela_lesh@pgn.com

==============================

“What If’s, Why Not’s, and So What’s”

What If?
– Distribution utilities could become the drivers of new distribution technology, including distributed energy resources?

– The best and the brightest came to work in distribution utilities because, at these companies, commercial success was synonymous with innovative solutions, customer focus, and value, value, value?

Why Not?
– Because words like rate base, cost of service, disallowance, and prudence comprise our vocabulary and constrain our actions

– Because we reward increased electricity sales in the short term and increased rate base in the long term

– Because we are still using the system built to drive the finance, construction, and use of electric infrastructure even though we have long since achieved this purpose

Why not CHANGE?
Change the “frame” — change the framework

From a regulatory compact to one or more regulatory contracts
– make explicit that which is implicit
– pay for performance, not investment
– price on value and what, not on cost and how

Why not get what we–utilities, commissions, public interest representatives– want from distribution directly and up front in the same way that commercial parties bargain?

From a regulated entity to one or more regulated services, at regulated prices
– Distribution services
– Demand-side services
– Supply services
Why not free utility organizations to look for other ways to give and
receive value in the communities they serve and know so well?

The new framework
– A series of “regulated” contracts between a utility and a Public Utility Commission that express and price the values of those who use and/or are affected by a regulated service.

– Times at which the contracts expire, followed by extension, re-negotiation, and the possibility of termination and replacement.

– A permanent abandonment of rate base and cost-plus ratemaking.

What the heck is a “regulatory contract”?

A document with the following key terms:
– Scope
– Performance commitments
– Restrictions on how
– Consequences for non-performance
– Change orders and change process
– Term, termination and “unwind”
– Pricing

What is Scope?

Scope identifies the activities and facilities from which the service provider produces the committed results, e.g.,
– Design – Finance – Construction – Maintenance
– Restoration – Replacement – Access

What are performance commitments?

Measurable results based on what the buyer values, e.g.,
– Reliability – Power quality – Safety – Environmental responsibility
– Information accessibility

What’s all that other stuff?

Everything else except price affects price!
– Constraints are specific means the utility may not use to meet its commitments.

– Consequences are the penalties or damages for failure to meet commitments.

– The change process is the way the parties anticipate and cope with
uncertainty.

– Term is the length of the initial bargain and the process by which a new bargain is struck — or not, and what happens then.

How would you price this?

– Price to the utility to align success so that the more effectively the utility achieves the results, the better it does, i.e., unit-based, not usage-based, pricing.

– Price to the customer to encourage conservation and prevent abrupt shifts in cost, e.g., usage or demand-based, not flat, pricing.

– Yes we can price differently to the utility and to the customers! We will just need to balance collections with payments.

So what?

– So we remove the obstacles to deployment of distributed energy resources that the current regulatory system forces on us
? displacement of rate base
? displacement of utility kWh sales
? utilities precluded from participation because of concerns about
cross-subsidization

– So we enable utilities and others alike to compete to provide customers energy solutions, with the same distribution service available to all

So why not START NOW ??