ORIGINAL REPORTING: How To Get The Investments Needed For A New Grid
Making the case for billion-dollar investments in grid modernization by answering 3 key questions; A “Why-What-How" framework can help guide regulators, and get stakeholder buy-in for big spending
Herman K. Trabish | Jan. 6, 2020 (Utility Dive)
Editor’s note: Trsnsforming today’s century-old grid into one capable of handling 21st century capabilities is vital to New Energy’s future.
Some of the biggest investor-owned utilities in the country have in recent years had signficant grid modernization proposals rejected by regulators. But utilities may be able to avoid such rejection by answering three basic, but critical questions…Regulators for Dominion Virginia, Duke Carolinas and others have spurned billion-dollar grid modernization proposals that would prepare the power system for 21st century renewable and distributed technologies because the expenditures were inadequately justified. Utilities can avoid that fate by adopting a "Why-What-How" framework that can keep them from being "mired in details" and "chasing shiny objects," according to a November paper from Boston Consulting Group (BCG).
With the framework, utilities first "set a vision and objectives by asking, ‘Why are we modernizing our grid?’" BCG recommended. "This naturally leads to the next question: ‘What are the solutions that will help us achieve our vision and objectives?’ After the what is defined, utilities are ready to address the how."
Nearly every state is exploring policies pertaining to new technologies foundational to the emerging customer-centric, low carbon power system. Few stakeholders debate the need for investing in the grid, but the critical question is which expenditures to prioritize, and BCG’s framework may help them answer the question, state regulators and grid modernization proceeding participants told Utility Dive.
Modernization of the distribution system is largely done through deployment of distributed energy resources (DER) and technologies that monitor and control them, like advanced metering infrastructure (AMI). The need for modernization is being driven by customer demand for DER to lower their electricity bills and the opportunities utilities see in DER to flatten peak demand and protect reliability, according to both NCCETC and BCG.
Data show they are right. AMI installations were at almost 87 million and growing at the end of 2018, according to the Energy Information Administration. Today’s two million distributed solar installations are expected to double by 2023, Wood Mackenzie (WoodMac) and the Solar Energy Industries Association reported in mid-2019. And U.S. energy storage annual capacity additions are projected to grow twelve times by 2024, WoodMac and the Energy Storage Association reported in December.
DER could meet an estimated 20% of peak load by 2030, according to a June 2019 Brattle Group study. With a modernized grid's situational awareness and controls, that flexible load could deliver over $15 billion per year in avoided system costs, Brattle estimated. In Q3 2019, there were 383 regulatory and legislative actions in 45 states and the District of Columbia on to plan and fund grid modernization, according to NCCETC Grid modernization actions jumped from 288 in 2017 to 480 in 2018, and with Q3 2019’s 39% increase from Q3 2018, there was likely another substantial year-over-year increase… click here for more