Frances Huessy and David Hill -
The Solar Electric Power Association (SEPA) 18 months ago launched an initiative that attempted to “reframe the conversations” on the growth of distributed energy resources and the implications for the traditional utility sector. That effort, known as the 51st State Initiative, is now bringing stakeholders together in a national conversation to discuss the dynamic landscape and pragmatic responses to the rapid changes and emerging opportunties.
The 51st State Initiative engages participants by acknowledging the magnitude of solar, smart grid, efficiency, transportation, and other distributed energy resources (DERs). It also recognizes the reality these resources are already fundamentally reshaping, and will continue to reshape, energy markets.
The name 51st State refers to a hypothetical state in which the way energy is produced and used is wholly new, unburdened by existing programs, structures, regulations, or restrictions. The initiative completed a preparatory Phase I, and is now concluding its Phase II activity. For Phase II, SEPA solicited papers to spur innovative and constructive conversations on the direction of the electric industry and market design. Rather than starting from discrete, existing models, this initiative began by asking authors to describe a future state, and then to consider the necessary changes that the market, current utility business models, and regulation would have to make, to reach that state.
VEIC’s contribution to Phase II is a roadmap for transitioning Vermont into an advanced solar economy in which the “future state” supplies more than 20 percent of its total electric generation needs with solar energy—by 2025.
In other work informing its 51st State roadmap, VEIC conducted comprehensive scenario modelling across all sectors of the energy economy, involving both supply and demand resources, to answer 51st State questions on market design, resource deployment, utility business models, and regulation.
VEIC suggests that three fundamental roles will be essential for supporting consumers in an advanced solar economy, as shown in Figure 1.
Starting on the left side, the regulated utility franchise is responsible for grid investment and operations. The grid services provider would also be responsible for maintaining an ability to host new DERs.
On the far right, a consumer support franchise would also be a regulated entity, functioning under a performance-based contract. This type of organization would provide market facillitation and support for consumers who face an expanding number of energy service options.
In the middle, lightly regulated registered energy service providers would offer retail energy and DER services.
Overarching all three entities are policy considerations, planning goals, and performance metrics. In some cases these might span more than one of the three entities. For example, the grid service provider and the consumer support entity might have a common, time-specific target for the share of resources coming from new DERs on the system. The regulated compensation for both of these entities would be based on some portion of this type of performance metric, although not all would necessarily be shared. The registered market service providers would be monitored by regulators on overall sector progress toward goals, and would need to meet requirements for truth in advertising and transparency. However, the pricing and services offered in this segment would be governed more by the dynamic of the competitive markets.
The proposed new structure, the new entities, and carefully defined performance metrics are, in VEIC’s view, important components of an energy market and regulatory system that can support an advanced solar economy by stimulating innovation—while simultaneously attaining other important goals, such as reducing cost burdens on low-income energy users.
This approach helps respond to the 51st State Initiative’s two goals:
- To create equitable business models and integrated grid structures to ensure that electricity is provided safely, reliably, efficiently, affordably, and cleanly; and
- To meet customer demand in the near term and long term for solar and other distributed options.
Senior members of the VEIC Policy and Public Affairs staff, David Hill and Scudder Parker, were the primary authors on the Phase II paper, a significant amount of which was informed by a U.S. Department of Energy project awarded to VEIC, the “Vermont Solar Pathway,” under the Solar Market Pathways Program of the SunShot Initiative. Other contributing authors to VEIC’s 51st State submission are Carl Linvill, a Principal at the Regulatory Assistance Project, Damon Lane, Senior Analyst at VEIC, and Frances Huessy, VEIC Senior Technical Writer.
David Hill will be presenting VEIC’s paper at SEPA’s 51st State Phase II Summit in Denver, CO on April 14, 2016.
Stay tuned for the full paper, which will be posted in our Resource Library following the Summit.