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.