Distributed Energy Generation
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DISTRIBUTED ENERGY GENERATION SYSTEMS BASED ON RENEWABLE ENERGY AND NATURAL GAS BLENDING: NEW BUSINESS MODELS FOR ECONOMIC INCENTIVES, ELECTRICITY MARKET DESIGN AND REGULATORY INNOVATION by Joseph Nyangon A dissertation submitted to the Faculty of the University of Delaware in partial fulfillment of the requirements for the degree of Doctor of Philosophy in Energy and Environmental Policy Fall 2017 © 2017 Joseph Nyangon All Rights Reserved DISTRIBUTED ENERGY GENERATION SYSTEMS BASED ON RENEWABLE ENERGY AND NATURAL GAS BLENDING: NEW BUSINESS MODELS FOR ECONOMIC INCENTIVES, ELECTRICITY MARKET DESIGN AND REGULATORY INNOVATION by Joseph Nyangon Approved: __________________________________________________________ John Byrne, Ph.D. Professor in charge of the dissertation on behalf of the Advisory Committee Approved: __________________________________________________________ Syed Ismat Shah, Ph.D. Interim Director of the Energy and Environmental Policy Program Approved: __________________________________________________________ Babatunde A. Ogunnaike, Ph.D. Dean of the College of Engineering Approved: __________________________________________________________ Ann L. Ardis, Ph.D. Senior Vice Provost for Graduate and Professional Education I certify that I have read this dissertation and that in my opinion it meets the academic and professional standard required by the University as a dissertation for the degree of Doctor of Philosophy. Signed: __________________________________________________________ John Byrne, Ph.D. Professor in charge of dissertation I certify that I have read this dissertation and that in my opinion it meets the academic and professional standard required by the University as a dissertation for the degree of Doctor of Philosophy. Signed: __________________________________________________________ J. Mack Wathen MBA Member of dissertation committee I certify that I have read this dissertation and that in my opinion it meets the academic and professional standard required by the University as a dissertation for the degree of Doctor of Philosophy. Signed: __________________________________________________________ Steven Cohen, Ph.D. Member of dissertation committee I certify that I have read this dissertation and that in my opinion it meets the academic and professional standard required by the University as a dissertation for the degree of Doctor of Philosophy. Signed: __________________________________________________________ William Latham III, Ph.D. Member of dissertation committee ACKNOWLEDGMENTS This dissertation represents a crystallization of my research journey in the domains of distributed utilities and renewable electrcity integration originally conceived almost six years ago. It began when I was a graduate student at Columbia Universitys’s School of International and Public Affairs (SIPA). A fortunate involment with the university’s Earth Institute practicum program featuring lectures by Professors Jeffrey Sachs, Steven Cohen, and Vijay Modi of mechanical engineering department provided my first exposure to how changes in business practices and technological innovations are reshaping the electricity sector. To my complete surprise, that exposure radically undermined some of my basic conceptions about the utility landscape and the interconnected business model innovation, technological advancements, customer preferences, and market forces that are driving this transformation. Whatever their pedagogic utility, those conceptions drawn from a misconception that distributed utilities were costlier and thus could not compete effectively with the centralized utility network did not at all fit the enterprise that historical data was already displaying. The result was a dramatic shift in my career trajectory, a shift from approaching this problem as a technological efficiency dilemma, to an interdisciplinary policy, engineering, and economics challenge. Without any doubt the ideas set forth in this dissertation substantially benefited from discussion and critique involving many scholars who are not readily identifiable by name. I sincerely thank my resourceful and indefatigable committee members who helped me to crystallize issues at the outset of this study. My primary advisor, and iv mentor at the University of Delaware, Center for Energy and Environmental Policy, Professor John Byrne planted in me a curious search for scholarly direction. He has supported my work since our first meeting and set me to reading works of prominent theorists of political economy, politics of energy transitions and post-modernity notably Jacques Ellul, Thomas S. Kuhn, Lewis Mumford, David Ricardo, Joseph A. Schumpeter, Langdon Winner, and Joan Martinez-Alier. In addition, the long discussions, helpful suggestions, and enlightened discourse with Professor Byrne have strengthened the narrative of this dissertation substantially, shaped my conception of what the business incentives of distribution utilities ideas can be, and continue to provide a powerful—indeed, inspirational—model for me. Thank you for your continued support, insightful guidance, and patience over the past four years. Professor William Latham introduced me to advanced econometric modeling of energy systems and provided valuable insights in this area which helped to sharpen the analysis and conclusions. J. Mark Wathen’s comments polished my dissertation a lot. Because he understands how challenging energy transformation is to the electric industry than I do, I could adjust my discussion of the results and policy implications to reflect the raw reality of these issues to utility business. Professor Steven Cohen agreed to join my committee despite his busy schedule at the helm of the management of Columbia University’s Earth Institute. He has been a mentor since we met during my studies at Columbia, and my thinking on regulatory innovation—and on so much else—has benefited immensely from our conversations over the years. Finally, I acknowledge the privileged consultations and advice which I have shared with the remaining faculty throughout my four years here at CEEP—an institution that have helped give form to my thought. v I owe my girlfriend, Jen, a great debt of gratitude. She has both challenged and inspired me in equal measure and her keen vision and intellectual energy are without equivalent. As the youngest in a family of many firsts and strong academic performance, my parents, brothers, and sisters have been a locus of endless love, creativity, and unwavering support and encouragement as they lead by example. Finally, I would like to thank all my colleagues at CEEP especially Job Taminiau, Mayuri Utturkar, Kathleen Saul, Joohee Lee, Jeongseok Seo, Jiajing (Athena) Bi, Nabeel Al Abbas, Soojin Shin, Benjamin Attia, and everyone I met along the way who have been a vital source of support and encouragement. vi TABLE OF CONTENTS LIST OF TABLES ................................................................................................... xii LIST OF FIGURES ................................................................................................ xiv LIST OF ACRONYMS AND ABBREVIATIONS ............................................... xix ABSTRACT ........................................................................................................... xxv Chapter 1 INTRODUCTION ......................................................................................... 1 1.1 Statement of Research .............................................................................. 1 1.2 Evolution of Electric Power Sector in the United States ......................... 3 1.2.1 Signposts of Distributed Electricity Generation Expansion ........ 5 1.2.2 Emerging Challenges of Distributed Generation on Bulk Power System ....................................................................................... 9 1.3 The Case for a More Distributed Energy Future ................................... 20 1.4 Research Design and Methodology ....................................................... 21 1.5 Organization of Chapters ....................................................................... 22 2 TRANSFORMING THE U.S. ELECTRICITY SYSTEM: BUSINESS MODEL INNOVATION ............................................................................. 25 2.1 Background ............................................................................................ 25 2.1.1 Overview of Utility Sector in the United States ........................ 25 2.1.2 Disruptive Triggers in the Utility Industry ................................ 32 2.1.3 Distributed Generation Narratology: The Détente for Natural Gas and Renewable Energy Blending ..................................... 36 2.1.4 Benefits of Gas-Renewable Energy Partnering ......................... 42 2.1.4.1 Carbon Mitigation ....................................................... 49 2.1.4.2 Energy System Integration .......................................... 50 2.1.4.3 Synergistic Benefits of NG-RE Hybrid Power Generation Opportunities ......................................... 52 2.2 The Battle Over Centralization of Economic and Physical Control of Electricity Generation ......................................................................... 57 2.3 A Brief History of the Dominant U.S. Energy Policy Paradigm ........... 59 2.3.1 Defending the Centralized Energy Policy Approach in an Increasingly Complex and Changing Environment ................ 62 vii 2.3.2 Exclusion of Alternative Voices ...............................................