IEEE Power & Energy Magazine - May/June 2016 - 24
Envisioning a transactive grid is a
very different task from actually defining
the path forward and achieving it.
increasing their operating expense. We are now confronting
the question of whether the cost-of-service approach continues to work when essential aspects of the natural monopoly
are not aligned with or are potentially threatened by beneficial
technology and market developments.
Placing the customers' interests in total bill management,
including reliance on DERs, at the center, rather than the
fringes of the utility's operating and business models, means
that third-party and customer capital and market risk need to
be added dimensions to how utilities meet their monopoly service functions. By allowing DER providers to contribute services and capital that result in greater value, innovation, and
DER penetration onto the system, utilities' capital requirements and associated returns from traditional cost-of-service
regulation may be reduced, and utilities will necessarily incur
additional expenses to accommodate these changes. In other
words, to achieve the benefits to customers that REV-enabled
reform contemplates, utilities will need both mechanisms to
recover the expenses they incur to support the developing
market and opportunities to earn on them.
DER investment should produce net beneficial results for
both the participating customer and the system as a whole.
This can be achieved by improving both the compensation
for DER services provided to the grid and recovery of grid
costs properly assigned to the DER customer. Adopting a rate
design and compensation mechanism based on a more precise
calculation of system value should greatly improve the proper
valuation of DERs. This will provide greater confidence in
the market and will make investment decisions in DER more
stable and predictable.
Allowing DER providers to contribute services and
capital can result in greater value, innovation, and DER
penetration. A utility's capital requirements and associated
returns from traditional cost-of-service regulation can then
be reduced, and utilities will necessarily incur additional
expenses to accommodate these changes.
Other REV Initiatives
Several other REV initiatives are under way in 2016. The
value of D process, described in "Key Proceedings in REV,"
will address the interim future of net metering, breaking out
of the traditional debate by adding more tools that allow fair
valuation. Related efforts of the commission include community distributed generation and community aggregation rules
as well as consumer protection rules governing DER providers. These are measurable outcomes that are at the core of
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REV, and we will be looking for incentives that move away
from input focused and will, instead, be based on outcomes.
As REV progresses in 2016 from the policy and broadbrushed planning phase into granular implementation, these
six policy objectives detailed previously are now joined by a
set of priorities against which implementation items will be
measured. These priorities include the following:
✔ developing liquidity in DER markets by increasing the
numbers of participants
✔ establishing certainty and stability in DER markets so
that investments can be made with confidence
✔ developing scale in DER markets to increase the costeffectiveness of DER options
✔ creating mechanisms to determine the full values of
DER and grid reliance to improve and ensure the costeffectiveness of DER investments
✔ establishing transparent access to relevant data and
✔ ensuring the maintenance of consumer protections and
the extension of essential consumer protections into
new types of transactions and commercial relationships
✔ Enhancing the social equity of the electric system to
improve general affordability, maintain the principle of
the electric system as a fundamental social good, and
increase access of lower-income customers to markets
✔ developing the system infrastructure needed to implement market reforms.
Just as the grid should be viewed as a single interdependent
entity, so, too, should REV. If we are to achieve the laudable
and important goals of REV, we must reach consensus on the
actions and decisions necessary to get us there. Various parties may disagree with particular details, but these objections
should not be used to derail REV. The present model is inefficient, too costly, and unsustainable in light of climate change
and the cost of maintaining aging and inefficient power systems.
With the advent of distributed energy resources and new information technologies, REV will bring us a dynamic clean energy
economy that empowers communities and customers-across
all income levels, geographies, and demographics-to take control of their energy use, driving local economic growth and revitalization, improving the resiliency of our energy system, and
protecting our environment.
Audrey Zibelman is with the New York State Department of
Public Service, Albany.