ORIGINAL REPORTING: The New Energy Transition Needs Better Power System Regulation

‘Dramatic shift’ in utility regulations, better pilot designs needed to propel energy transition, DOE report finds; Innovation in regulation can greenlight a more affordable, reliable clean power system, stakeholders report

Herman K. Trabish, May 31, 2022 (Utility Dive)

Editor’s note: Regulators can clear the way for a transition to New Energy or they can obstruct it.

The speed of today’s power sector transition requires regulatory innovation that matches its pace, regulators, as well as utility and technology advocates, agreed in a new Department of Energy paper.

New power system technologies and operations can no longer await regulatory approval in litigated multi-year rate cases, said co-authors of the report, The Role of Innovation in the Electric Utility Sector, published in April by the Department of Energy's Lawrence Berkeley National Laboratory. Such delays increase the risk that states will fail to meet the rapidly growing need for new reliable, affordable, clean and equitable electric service solutions, they added.

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“Regulatory innovation is needed to meet new decarbonization mandates and goals and the accelerating pressures of climate change,” Commissioner Tremaine Phillips of the Michigan Public Service Commission agreed. In response, Michigan and other states have initiated informal collaborative proceedings “to enable utilities to keep up with today’s energy transition.”

But inertia is designed into regulatory processes to protect power sector stakeholders’ many different interests, the paper's contributions from the National Association of State Utility Consumer Advocates, the BlueGreen Alliance, the Institute for Electric Innovation, Sunrun and Build Edison showed.

More informal and collaborative proceedings "that engage people in problem solving across different interests can be exhausting,” said Regulatory Assistance Project President and CEO, and former Vermont Department of Public Service Commissioner, Richard Sedano. But those proceedings have more time and latitude to address "the full dimension of innovative ideas and not just whether they are right or wrong" and "can drive solutions,” he added.

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New approaches to regulation could, however, unjustly shift the risk of failure from utilities to ratepayers, the paper's consumer advocates wrote. Yet answers to key questions about the costs and benefits of efforts like pilot projects to test solutions are already emerging from new regulatory initiatives, regulators and utility and technology advocates told Utility Dive.

New regulatory approaches are needed where state commissions have discouraged utility investments to improve reliability and affordability and accelerate decarbonization, according to LBNL Electricity Markets and Policy Department Manager and Strategic Advisor Lisa Schwartz, the paper’s technical editor. But utilities invest only an estimated 3% of profits in research and development while more competitive industries invest 40% or more, Schwartz reported from … click here for more

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