By Henry Curtis
The Hawai`i Public Utilities Commission clearly broke from any perception that it was a puppet of the utility, a captured regulator at the beck and call of the utility, when it issued several landmark rulings on April 28, 2014. Attached to these rulings were white papers.
In rejecting the HECO Companies Integrated Resource Planning (IRP) Report the Commission attached a 30-page “Inclinations on the Future of Hawaii's Electric Utilities Aligning the Utility Business Model with Customer Interests and Public Policy Goals.”
The Inclinations discussed the need to develop new business models for modernizing the grid. The Inclinations called for “Creating a 21st Century Generation System,” and for “Policy and Regulatory Reforms to Achieve Hawaii's Clean Energy.”
“Hawaii has unique challenges and opportunities requiring the State to leap ahead of many other jurisdictions by modernizing the electricity generation system to integrate clean energy resources that cost less than today's oil-fired generation.
With the high cost of today's system and long lead times required to implement projects in this sector, the electric utilities need to move with urgency to modernize the generation system on each island grid as delays are lost savings opportunities.”
“An advanced distribution system is a condition precedent for high penetration of distributed generation, supporting other new customer energy options such as electric vehicles (EV), and improving customer service through enhanced outage detection and timely restoration.
These investments would allow a transition from today's one-direction distribution network into a smart distribution system where distribution circuits and substations are capable of bi-directional power flows.
The future distribution system must have the capability to act both as a delivery service and an aggregator of customer-sited distributed energy resources to benefit the customer and the grid.”
The distributed resources including electric vehicles, solar array inverters and energy storage must be interconnected into the grid in a seamless way.
The Inclination also included several caveats among them being blank checks, privacy and Non-Transmission Line Alternatives.
No blank check for Smart Meters (advanced metering infrastructure).
“The HECO Companies have proposed a smart grid program to include advanced metering infrastructure. Although the Commission believes advanced metering technologies are the key foundational infrastructure for an advanced distribution system, the Companies will need to provide strong supporting evidence and justification that this major investment will improve customer service and system efficiencies from the outset and complement broader efforts to upgrade their distribution systems.”
The HECO Companies must “develop data privacy policies prior to widespread rollout of smart grid infrastructure and ensure continual reassessment and updating of such policies.”
Non-Transmission Line Alternatives
“New transmission projects must consider non-transmission alternatives - New, replacement or upgrade high-voltage transmission projects generally represent significant, lumpy capital investments that will be given careful scrutiny. Non-transmission alternatives (NTAs) such as local peaking or back-up generators, energy storage, demand response and smart grid resources are technically and commercially viable alternatives and must be evaluated as part of any economic justification for new transmission system projects.”
The essence of the Inclinations document was the need for re-alignment.
Traditionally utilities make money on investments, not on the flow of fuel through their equipment. Thus the more generators and transmission lines they build, the more money they make. The need for power during peak periods of demand, which may occur only a few hours per year, drive the demand for infrastructure and hence increase profits.
Running counter to utility interests are state and consumer interests aimed at lowering cost, decreasing energy consumption, flattening the demand curve, increasing the use of renewable energy and decoupling sales from profit.
There was no need for utilities to change when there were no alternatives. But today on the Neighbor Islands a non-grid connected solar-battery combination is cheaper than remaining attached to the utility grid. As the price of solar and batteries continue their downward trend, this exit ramp to stand-alone systems may snowball.
Re-aligning the business, regulatory and consumer interests may allow for a smooth transition during this period of technological instability.
This re-alignment is not unique to Hawai`i.
A recent Utility Dive blog post covered New York State’s ongoing effort to manage the transition. “Today’s utility industry faces a long list of challenges — from aging infrastructure and stagnant demand growth to federal emissions standards and renewables integration. But rather than tackle any number of these issues separately, the REV seeks to solve one overarching problem at the root of them all: The utility business model is not aligned with societal goals.”
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