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US utility role questioned as technologies bring changes

Highlights

The increasing role of energy storage and new technologies in the US power sector was viewed with both excitement and questions about regulatory challenges at the Energy Bar Association's annual meeting in Washington Tuesday.

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The integration of rooftop solar facilities, distributed generation or microgrids should be a slow process for the utility industry, said Bob Blue, president of Dominion Virginia Power. Dominion is establishing microgrids, which can be separated and provide power to communities without any support from the bulk power grid, in Richmond, Virginia, and on the Outer Banks of North Carolina, and developing pilot projects on rooftop solar to enable more "democratization of the grid," Blue said.

Rather than a dramatic, rapid shift, integrating new technologies should be an incremental process, Blue said. Other speakers on the same panel asserted that as battery storage devices, photovoltaic facilities and power inverters that change direct current to alternating current come down in cost, customers will be wanting to take more control of their own energy future.


"We need to change the paradigm" that has monopoly utilities at an advantage and makes integrating new technologies a challenge, said Chris Shelton, president of AES Energy Storage. Regulators should empower customers to be able to make more decisions on their own about back-up power facilities, DG assets and electric vehicle charging options, added Cortney Madea, senior counsel -- regulatory, at NRG Energy.

Storing electricity "is at the heart of the changes being seen" among new technologies, because it enables a customer to use intermittent renewable resources combined with storage to be completely separated from the utility grid or self-sufficient to a large extent, said Commissioner John Norris of the Federal Energy Regulatory Commission.

"I don't expect the utilities to be driving the change, but they're going to have to respond to it or they'll be left behind," said Norris. He later backtracked and agreed with Blue that utilities can be leaders in the use of new technologies, such as Dominion's use of voltage reduction at the transmission level that saves electricity for utilities.

Attorney Scott Hempling, former executive director of the National Regulatory Research Institute, moderated the panel, noting that what may be viewed as consumer empowerment by DG advocates can be seen as a death spiral for utilities. The death spiral theory is based on utility customers using less power from the grid and imposing more costs on those using the grid all the time, making it more attractive to leave the utility grid in some way.

Allocating costs through net metering rules and other provisions for customers with DG or storage technologies is getting to be a challenge for state regulators, but the issues are not new, Blue said. Dominion is not waiting for all of the "what if" scenarios to play out, it is investing in infrastructure security and other measures to maintain grid reliability. "We are not fretting . . . we're building," Blue said.

Speaking before the panel, James Woolsey, former CIA director and chairman of the Foundation for Defense of Democracies, said there is no way to make renewable resources work on a large scale without batteries. He is forecasting a relatively rapid move for the power sector to have more DG and microgrids, which can enhance grid security and resiliency.

Whether utilities are going to be buyers or sellers of technologies such as energy storage services, DG or renewable resources, they are going to be dealing with the changes coming their way. And state regulators, rather than federal regulators, will be forced to make most of the tough decisions on allocating costs and integrating such technologies, panelists said.

The natural gas pipeline sector "took a lot of heat" for a study on the amount of gas-fired generation that will be needed to back up wind power and other renewable facilities, and who should pay for gas infrastructure additions to support those facilities, recalled Dena Wiggins, president and CEO of the Natural Gas Supply Association.

Shelton referred to transmission planning in PJM Interconnection and $100 million in stranded costs from examining transmission facilities for many years that have proven to be not needed due to fuel switching and increased use of demand response resources. Utilities are recovering those costs, but it is time to examine how the monopoly utility system should be changed, he said.

Having politics involved in fuel choices or stranded costs will involve more industry bickering, Norris said. "I think you have Armageddon coming" as industry players look to keep assets already on the books useful in the future, he said.

--Tom Tiernan, tom.tiernan@platts.com
--Edited by Katharine Fraser, katharine.fraser@platts.com