Comments to the Organization of MISO States Distributed Energy Resources Workshop
Mike Bull, CEE's director of policy and external affairs, presented these comments at the Organization of MISO States workshop on Distributed Energy Resources, hosted by the Wisconsin Public Utilities Institute in early August. The conference leads the discussion of Distributed Energy Resources (DER) within the MISO footprint. Minnesota's e21 initiative unites utilities, consumer advocates, regulators, environmental advocates, and others to develop a 21st century energy system that aligns a financially viable utility business model with evolving customer expectations and policy goals.
Thanks so much for the invitation — I think this has been a terrific day, and I’m humbled to be a part of it.
Before I start, I want to give a quick introduction to Center for Energy and Environment. We’re a nearly 40 year-old clean energy nonprofit headquartered in the Twin Cities, with about 120 or so staff, and a primary focus on energy efficiency. We conduct technical research, deliver a number of efficiency-related programs and services, and work on policy issues that advance the public interest in clean energy and a healthy economy.
Much of what I’m going to say today will be from my perspective as co-director of the Minnesota e21 Initiative, a utility business model stakeholder collaborative that’s been operating since February of 2014.
As we’ve been discussing all day today, the electric industry is changing —
All of that puts a strain on the current regulatory framework and utility business model, and how we deal with that will ultimately impact all of us — utilities, regulators, consumer advocates, clean energy advocates, etc. So I reached out to my friend, Rolf Nordstrom at the Great Plains Institute, to talk about all of this, and together we got the e21 collaborative up and running.
- The grid is becoming more digital and decentralized
- Customers and communities are asking more from their electric utilities
- We’re experiencing historically low natural gas costs, as well as dramatic reductions in the cost of wind and solar
- Our utilities are facing low to flat to sometimes declining load growth
- While at the same time, they’re having to make significant infrastructure investments to maintain reliability, improve environmental performance, and modernize and refresh aging infrastructure
The goal of the Minnesota e21 Initiative is to evolve the regulatory framework of a vertically integrated, fully regulated state like Minnesota to better align a financially viable and more resilient utility business model with meeting increasing customer expectations and evolving public policy goals.
The project has been made possible through funding by the McKnight Foundation.
We drafted a series of white papers in the first phases of e21 covering important topics such as grid modernization, multi-year utility rate plans, performance-based utility compensation and integrating DERs into our integrated resource planning process.
A few things have emerged as common themes:
- One — Proactive, collaborative stakeholder engagement leads to better regulatory outcomes, reducing transaction costs and regulatory risks for participants.
- Two — Utility financial incentives should be performance-based and align with desired public policy outcomes and customer expectations.
- Three — Regulators must be more supportive of utility innovation and partnerships and, in fact, should be actively encouraging more of that.
- Four — Distributed resources are increasingly important to a more customer-centric grid with more resilient service and more customer options.
- And Five — None of the foregoing will matter if reliability or affordability are jeopardized.
We’re now in a “learning by doing” phase in e21, where we’re focused on a couple of projects. One to capture stakeholder input for an Xcel Energy time of use rate design pilot, and the other to review the financial implications of performance-based utility compensation through a modeling exercise led by Seventhwave and Lawrence Berkeley National Lab.
So that’s an overview of e21. Now I want to share a couple of other thoughts, not as a co-director of e21, but as the Policy Director for CEE. As many of my friends in Minnesota know, I’m an unabashed defender of the regulatory compact — I think that as long as electric utilities are providing top-notch consumer services — investing in infrastructure, maintaining affordable service and providing guaranteed universal access, improving their environmental performance, and undertaking long-range planning for reliable, affordable electric service with dramatically lower carbon emissions — that they should be given the opportunity to succeed as the primary electric service provider to their customers.
However, left to their own devices, neither electric utilities nor their regulators will likely be able to provide the innovation that’ll be necessary to fully address the industry changes that we’re seeing. In my experience, utilities tend to be compliance driven and risk averse, and regulators are, of necessity, more reactive than proactive, responding to ideas that are brought before them.
I think we will find much of the innovation we’re looking for from providers of distributed energy resources and their advocates, and we should encourage our utilities to partner with these folks, to push new ideas and technologies into the utility system, and to help us identify new and better ways to address consumer and system needs. We need to integrate their ideas and technologies into the grid, and to work with and through utilities to innovate and serve utility customers, thereby both maintaining the regulatory compact and continuing to advance the public interest.
And with that, I’ll say thanks and look forward to the conversation with my fellow panel mates.
Great Plains Institute, e21 co-coordinator
Image Credit: By Kaceyageorge via Wikimedia Commons