Monday Study – The Fight Now For Tomorrow’s Grid

The 50 States of Grid Modernization: 2020 Review and Q4 2020

Autumn Proudlove, Brian Lips, David Sarkisian, February 2021 (North Carolina Clean Energy Technology Center)

Executive Summary

WHAT IS GRID MODERNIZATION?

Grid modernization is a broad term, lacking a universally accepted definition. In this report, the authors use the term grid modernization broadly to refer to actions making the electricity system more resilient, responsive, and interactive. Specifically, in this report grid modernization includes legislative and regulatory actions addressing: (1) smart grid and advanced metering infrastructure, (2) utility business model reform, (3) regulatory reform, (4) utility rate reform, (5) energy storage, (6) microgrids, and (7) demand response.

2020 GRID MODERNIZATION ACTION

In 2020, 48 states plus DC took a total of 658 policy and deployment actions related to grid modernization, utility business model and rate reform, energy storage, microgrids, and demand response. Table 1 provides a summary of state and utility actions on these topics. Of the 658 actions identified, the most common were related to policies (160), followed by deployment (138), and business model and rate reform (105).

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TOP TEN MOST ACTIVE STATES OF 2020

Ten states taking the greatest number of particularly impactful actions are noted below.

Connecticut - Throughout 2020, the Public Utilities Regulatory Authority had numerous proceedings open to consider different elements of grid modernization, including advanced metering infrastructure, energy storage, resilience and reliability, non-wires alternatives, innovative pilots, and rate design. State lawmakers also enacted legislation directing the Authority to adopt a performance-based regulation framework.

Hawaii - The Hawaii Public Utilities Commission issued a decision establishing a performance-based regulation framework for the HECO utilities, including a multi-year rate period and new performance incentive mechanisms. Hawaii regulators also adopted a customer data access

Virginia - Early in 2020, Virginia regulators issued a decision on Dominion Energy’s proposed Grid Transformation Plan, approving parts of the plan and rejecting other elements. The State Corporation Commission also considered time-of-use rate proposals from utilities. Virginia lawmakers enacted legislation establishing an energy storage target of 3,100 MW by 2035, with implementing rules also directing utilities to develop energy storage incentive programs and non-wires alternatives programs.

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Colorado - The Colorado Public Utilities Commission considered distribution system planning rules, as well as performance-based ratemaking, electric resource planning, and interconnection rules during 2020. The Commission also evaluated time-of-use rate proposals, an advanced grid rider, and a community resiliency initiative incorporating utility-owned energy storage, all proposed by Xcel Energy.

Minnesota - In Minnesota, regulators considered proposals from Xcel Energy to adopt new performance incentive mechanisms and implement new time-of-use rate options, as well as a proposal from Minnesota Power to transition its residential customers to default time-of-day rates. Utilities also filed distribution system plans, and the Public Utilities Commission opened a new proceeding to investigate grid and customer security related to distribution grid data.

California - In California, regulators considered a proposed decision adopting rates, tariffs, and rules to facilitate the commercialization of microgrids in the state. The Public Utilities Commission also considered changes to integrated resource planning rules, as well as distributed energy resource tariff frameworks for projects that can defer distribution system investments. Utilities also filed their 2020 energy storage procurement plans, and regulators considered modifications to the Self-Generation Incentive Program.

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North Carolina - A state working group released a report examining utility business model reforms during 2020, while Duke Energy and other southeastern utilities announced plans to implement a bilateral energy exchange market. Regulators considered Duke Energy’s proposed Grid Improvement Plan, as well as a settlement that would adopt climate resilience planning requirements. Work also continued to develop Duke Energy’s Integrated System and Operations Planning process.

New York - During 2020, the New York Public Service Commission approved advanced metering infrastructure deployment proposals put forward by National Grid, New York State Electric & Gas, and Rochester Gas & Electric. Regulators also approved new dynamic load management programs designed to encourage the use of energy storage and help achieve the state’s energy storage target.

Arizona - In Arizona, regulators issued a decision revising many of the state’s energy rules. The decision includes an energy storage target of 5% of peak demand to be achieved by December 31, 2035, with at least 40% being customer-owned or customer-leased distributed storage. The order also requires utilities to establish energy storage incentives and makes changes to integrated resource planning rules. The Commission also opened a proceeding to investigate performance incentive mechanisms and considered retail competition rules during the year.

Michigan - The Michigan Public Service Commission continued its MI Power Grid initiative in 2020, establishing a new workgroup to examine new technologies and business models. The Commission also considered demand response tariffs, releasing a report making several recommendations to improve the performance of demand response resources. Regulators also approved a settlement delaying Indiana Michigan Power’s proposed advanced metering infrastructure deployment.

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TOP GRID MODERNIZATION TRENDS OF 2020

Utilities Pursuing Innovative Pilot Programs

Many utilities are proposing innovative pilot programs to test new technologies and program designs. In Wisconsin, Xcel Energy requested approval for a new pilot to provide resiliency as a service, deploying battery storage at customer locations. Tampa Electric in Florida proposed a DC microgrid pilot program that would supply power to homes with utility-owned nanogrids, and in Vermont, Green Mountain Power proposed a frequency regulation pilot that will aggregate battery storage systems to participate in the ISO-New England market.

States Considering Utility Business Model Reforms

Actions related to utility business model reforms were the second most common type of action taken during 2020. States considered many different types of reforms, including decoupling, performance-based regulation, and energy market reform. Hawaii regulators adopted a performance-based regulation framework during the year, while utilities in the Southeast announced plans for a Southeast Energy Exchange Market

Regulators Requiring Utilities to File Distribution System Plans

Regulators in a number of states are adopting distribution system planning rules and requiring utilities to file plans that include specific elements. The Oregon Public Utility Commission adopted a requirement for utilities to file distribution system plans including a hosting capacity analysis, while Colorado regulators initiated a rulemaking to develop distribution system planning rules with requirements related to non-wires alternatives

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States Requiring the Use of All-Source Competitive Procurement

A growing number of states are requiring utilities to use all-source competitive procurement mechanisms to meet needs for energy and capacity. Arizona and Washington regulators both approved new rules requiring utilities to issue all-source requests for proposals based on needs identified in utilities’ integrated resource plans. These solicitations will allow supply-side and demand-side resources to compete on an equal basis.

States Adopting Energy Storage Targets

A growing number of states are adopting targets requiring utilities to procure a certain amount of energy storage capacity by a particular date. Virginia lawmakers enacted a bill in 2020 adopting a state target of 3,100 MW of energy storage by 2035. In Nevada, following a study considering the costs and benefits of a storage target, regulators approved a target of 1,000 MW of energy storage by 2030. Arizona regulators also adopted an energy storage target, with 40% of the target to be met with distributed storage systems.

Utilities Proposing Advanced Rate Design Pilots A growing number of utilities proposed advanced rate design pilots during 2020, including elements such as time-varying rates, critical peak pricing, and peak time rebates. Residential time-of-use rate pilots were the most common, with utilities increasingly incorporating three or four time-of-use periods plus seasonal variation. Some utilities are also requesting approval to make pilot time-of-use rates permanent options, or even the default rate for residential customers.

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Growing Focus on Electric Grid Resilience

States and utilities are increasingly focusing on electric grid resilience in the context of planning and investments. A proposed settlement in North Carolina would require Duke Energy to undertake climate resilience planning, and California regulators are developing rules to ensure reliable electric service in the event of extreme weather events. Colorado regulators approved Xcel Energy’s community resilience initiative, and Xcel proposed a similar pilot program in Wisconsin that would deploy resiliency service assets at customer locations.

Utilities Planning Extensive Battery Storage Deployment

Energy storage deployment led grid modernization actions for the fourth year in a row, with utilities planning numerous pilot projects, as well as more extensive deployment resulting from competitive procurements or efforts to comply with state storage targets. Many utilities are also planning to add new storage capacity in their integrated resource plans, and some utilities are even planning customer-sited storage deployment.

Policymakers Considering AMI Opt-Out and Data Access Policies

As more and more utilities deploy advanced metering infrastructure (AMI), policymakers and regulators are tasked with establishing rules for opting out of AMI and obtaining access to the interval data generated by AMI. Several states considered legislation concerning AMI opt-out, while regulators evaluated at least 14 utility opt-out fee proposals. Regulators in South Carolina adopted rules governing access to customer AMI interval data, while the New Hampshire Public Utilities Commission worked to develop a statewide energy data platform.

Utilities Offering Smart Thermostat Incentive Programs

Several utilities requested approval for smart thermostat incentive programs during 2020, including Dominion Energy, Portland General Electric, Duke Energy, Madison Gas & Electric, and Dayton Power & Light. These programs typically offer a bill credit for participation and allowing the utility to control the thermostat during peak events. Some programs also offer rebates for the thermostats themselves.

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LOOKING BACK: 2017 to 2020

Total grid modernization action increased by about 8% over the past year, with states and utilities taking approximately 658 actions in 2020, compared to 612 actions in 2019, 460 actions in 2018, and 288 actions in 2017. In 2020, activity increased in every category tracked by this report except studies and investigations. The two categories that saw the greatest increase in activity were financial incentives (41%) and deployment (17%). The number of states taking actions increased or held steady in each category except planning and market access from 2019 to 2020.

Q4 2020 GRID MODERNIZATION ACTION

In the fourth quarter of 2020, 46 states plus DC took a total of 405 policy and deployment actions related to grid modernization, utility business model and rate reform, energy storage, microgrids, and demand response. Table 2 provides a summary of state and utility actions on these topics. Of the 405 actions identified, the most common were related to policies (93), followed by deployment (85), and utility business model and rate reform (69).

TOP 5 GRID MODERNIZATION DEVELOPMENTS OF Q4 2020…MOST ACTIVE STATES AND SUBTOPICS OF Q4 2020…

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