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THOUGHT LEADERS SPEAK OUT: Key Trends Driving Change in the VOLUME II

THOUGHT LEADERS SPEAK OUT: Key Trends Driving Change in the VOLUME II

Edited by: LISA WOOD Vice President, The Edison Foundation Executive Director, Institute for Electric with ROBERT MARRITZ Editor and Publisher, Daily and ElectricityPolicy.com

June 2016

IEI thanks Jon Blansfield, Adam Cooper, Tyler McLeod, Niki Nelson, Cristina Rago, and Stephanie Voyda for their contributions to the . © 2016 by the Institute for Electric Innovation All rights reserved. Published 2016. Printed in the of America.

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Published by: The Edison Foundation 701 Pennsylvania Avenue, N.W. Washington, D.C. 20004-2696 Phone: 202.508.5440 : www.edisonfoundation.net TABLE OF CONTENTS

Table of Contents

INTRODUCTION...... 3 Lisa Wood, Vice President, The Edison Foundation and Executive Director, Institute for Electric Innovation

FOREWORD...... 7 Pedro J. Pizarro, President,

CHAPTER 1: INNOVATING WITH CUSTOMERS...... 11 Individualizing Green Solutions to Meet Customer Needs...... 13 Jonathan Weisgall, Vice President, Relations, Berkshire Hathaway Energy Energy Solutions for Corporate Buyers...... 17 Letha Tawney, Director of Utility Innovation, World Resources Institute Offering Customers More Energy Choices...... 21 Cindy Crane, President and CEO, Rocky Mountain Power The Next Generation of Demand ...... 25 Chris Black, COO and Chief Officer, Tendril A North Star for Energy Resilience...... 29 Dennis McGinn, Assistant Secretary of the Navy, Energy, Installations and Environment

CHAPTER 2: SMART STORAGE, SMART CITIES, SMARTER GRID...... 33 After a 100-Year Hiatus, Batteries Are Helping the Grid Again...... 35 Andrés Gluski, President and CEO, AES Corporation & Chris Shelton, Vice President and Chief Technology Officer, AES Corporation Transforming Our Energy Future with Intelligent Batteries...... 39 John Carrington, CEO and Director, Stem How Utilities Can Lead the Smart City Revolution...... 43 Russell Vanos, Vice President, and , Global Software, Services and Smart Cities, Itron Utilities as Champions, Again...... 47 Roger Woodworth, Vice President, Avista Corp. and President, Avista Development

CHAPTER 3: ENERGY FUTURE...... 51 A Clean, Efficient, Affordable, and Resilient Energy Future...... 53 Ralph Izzo, Chairman, President and CEO, PSEG What’s Here to Stay?...... 57 Bob Stump, Commissioner, Arizona Corporation Commission Electricity Today and Tomorrow: Clean, Consumer-Oriented, Collaborative.... 61 Robert Marritz, Editor and Publisher, Electricity Daily and ElectricityPolicy.com

1 Significant changes “have already occurred in the electric power industry—and more change is on the way. In the energy sector, the third wave is here.

—LISA“ WOOD

2 INTRODUCTION

Introduction

LISA WOOD Vice President, The Edison Foundation and Executive Director, Institute for Electric Innovation

ake no mistake. The electric At minimum this means: M power industry is in the midst of The mix of resources used to a profound transformation—the gener- generate electricity will be cleaner, ation mix is changing; the is and a combination of entities will becoming more digital and more dis- provide these resources; tributed; and customers have new and The power grid will increasingly more defined expectations. integrate and orchestrate a more complex mix of central and distrib- Technology, , and customers uted energy resources; are all playing a key role in driving this The power grid will become transformation, but technology is the more digital, more controllable, principal driver. While the exact course and more interconnected— of the change is unclear, it’s likely that a Grid of Things.™ a decade from now the electric power Diverse suppliers, including utili- industry will look much different than it ties, will provide a range of individ- does today. ualized services to customers. It is no secret that our is more But, what else? As Steve Case describes dependent than ever on electricity, in The Third Wave, we are at the begin- and customers want safe, reliable, ning of the third wave of the , affordable, and clean energy. Tomor- which he aptly calls the “Internet of row’s customers will want even cleaner Everything,” where the Internet will energy; greater grid reliability and become integrated into every aspect of resilience; increasingly individualized our lives. In this third wave, Case proj- services; and the ability to connect ects, major sectors of the — more distributed energy resources and including health care, , food, devices. And, they will get it! and energy—will be disrupted.1

3 INTRODUCTION

In this second volume of essays, Key Trends Driving Change in the Electric Power Industry, we examine some of the drivers of change in the industry—the need to collaborate and innovate with customers, nimbly and creatively; to lead in the application of smart storage; and to look beyond traditional electric- ity boundaries toward smarter cities. We also glimpse our energy future from different perspectives. Innovating with Customers The trends in this second volume are more specific than the broad trends we covered in the first volume of essays. What these newer trends show, spe- cifically, is how the digital grid is a crit- ical block to more innovation with customers, with , and with technology.

* * * * * The authors of the essays that follow provide their unique views in three key areas—innovating with customers; smart storage, smart cities, smarter grid; and Smart Storage, Smart Cities, a transition to our energy future—the Smarter Grid beginning of the third wave.2 Significant changes have already occurred in the electric power indus- try—and more change is on the way. In the energy sector, the third wave is here.

1. Steve Case. The Third Wave: An Entrepreneur’s Vision of the Future. Simon & Schuster. 2016. 2. Many of the essays in this book are drawn from dialogues that occurred at the Insti- tute for Electric Innovation’s Powering the People: Key Trends Driving Change event on March 17, 2016, in Washington, D.C. Energy Future

4 INTRODUCTION

5 All of us in the energy “arena need to work together as never before to build a system that benefits all customers. It’s imperative that we get this right.

“—PEDRO J. PIZARRO

6 FOREWORD

Foreword

PEDRO J. PIZARRO President, Edison International

f you didn’t know it already, Thought that together we “get this right” in terms Leaders Speak Out: Key Trends of technology, regulatory , mar- IDriving Change in the Electric Power ket models, fair and equitable cost allo- Industry, Volume II will confirm for cation, and more. To borrow a phrase you that the electric power industry from Commissioner Bob Stump’s essay has begun a remarkable era of self- in these pages, we’re all “attached for reinvention. Our industry hasn’t seen an life” and learning how to live together opportunity to chart our forward course productively and beneficially. like this since the early 20th century. In , the facts on the ground There are few certainties about the tran- tell a compelling story. Our state hosts sitions ahead, but I believe that South- more than 50 percent of the nation’s ern California Edison’s (SCE's) central distributed solar generation capac- mission—shared by utilities all over the ity, and more than 40 percent of U.S. world—to safely deliver reliable, afford- plug-in electric sales. These able, and clean energy to our custom- numbers attest to how rapid technol- ers will last well into the future.1 The ogy advancement, the state’s ambi- issues surrounding just how that will tious environmental policy goals, and be accomplished, in with the need to satisfy customers’ growing whom, and what needs to happen next, appetite for choices—of energy sources, are what this collection of essays exam- rate structures, and service offerings— ines in thought-provoking detail. act as powerful forces for change in the Here’s another certainty: All of us in the energy landscape. energy arena—utilities, regulators, tech- The expected growth of DERs is partic- nology providers, distributed energy ularly exciting as they are able to pro- resource (DER) advocates, customer vide significant value to their owners, representatives, and a range of commit- the utility, and society as a whole. At the ted stakeholders—need to work together same time, this growth introduces its as never before to build a system that own complexity into the energy system. benefits all customers. It’s imperative

7 FOREWORD

At the time of this writing, the role of Grid operations to maintain safe, utilities in a DER-filled future figures reliable, and affordable service for prominently in multiple proceedings at all our customers, as well as build- ing out, operating, and maintain- the California Public Utilities Commis- ing a modernized “plug and play” sion. Our Commission is considering grid into which customers can plug a number of critical topics, including in any technology—electric vehi- the utility’s role in DER integration and cles, solar panels, battery storage— adoption, future utility models and have it work seamlessly; and incentives, DER benefits and costs, DER procurement through com- and DER compensation mechanisms, petitive solicitations to defer or among others. avoid costly system upgrades; and, A common thread through operations where custom- ers can provide grid services and these proceedings is the utility’s transi- be compensated fairly. tion, over time, from centralized system planner to the new model of managing This future role of the utility serving and supporting a modernized grid that as the Distribution System Operator enables greater customer choice. Tradi- (DSO) is a natural and logical progres- tionally, central generation and the bulk sion, since all but the last of the above power transmission system were con- functions are thoroughly integrated sidered the core of the electric power into SCE’s current operating model. universe. Yet, with public policy tilting Further, a utility DSO will be well-suited toward greater DER deployment, SCE to bringing “smart cities” off the draw- sees that proverbial center of gravity ing board and into reality. As Itron's shifting to the distribution side, as the Russell Vanos says in his essay, “Electric interplay between distributed and cen- utilities need to be principal players in tralized resources continues to evolve. implementing what we might call the next generation power grid, an active SCE envisions a future where we play and intuitive grid that responds to sys- a key role in supporting widespread tem changes and makes decisions in deployment of DERs, incorporating the real-time at the edges of the distribu- following key elements: tion network.” System planning for future grid This represents not only a shift in needs, incorporating DERs into the system planning toolkit as an technology and grid architecture but alternative to traditional distribu- also a cultural shift. For companies tion solutions; to navigate successfully through this

8 FOREWORD

transformational era, being oper- ationally agile and nimble will be essential to meeting customers' ris- ing expectations. Letha Tawney of the World Resources Institute says it best in her thought piece, stating that customers can be “open to explor- ing solutions with their utility—pro- vided that utility is nimble, solution- oriented, and customer-centric.” The successful transition to the next generation requires thinking about our industry in entirely new ways. The perspectives provided by Bob Stump, Russell Vanos, Letha Tawney, and the other contribu- tors to this volume represent the kind of creative and forward thinking needed at this critical time. I was inspired by their essays, and I think you will be too.

1. SCE, one of the nation's largest investor- owned electric utilities, delivers power to more than 14 million people in a 50,000-square-mile service area in southern California.

9

CHAPTER 1 INNOVATING WITH CUSTOMERS

s the power grid becomes increasingly digital and distributed, companies are providing more individualized services to their customers. The essaysA in this chapter explore some of those customized solutions. Berkshire Hathaway Energy’s Jonathan Weisgall details the experience of one of its , NV Energy, and one large customer, Switch. Switch wanted something NV Energy initially wasn’t sure it could provide: 100-percent . But NV Energy responded, negotiated, collaborated, and figured out how it could meet Switch’s needs and still show benefits to its other customers from the arrangement. Now, other corporate customers are eager to participate in similar arrangements. World Resources Institute’s Letha Tawney, working with a group of corporate renew- able energy buyers that represent millions of megawatt-hours, discusses how dozens of corporations want to meet sustainability goals and lower their costs. They are new deals with electric companies to access large-scale renewable energy solutions. Rocky Mountain Power (RMP) CEO Cindy Crane describes her company’s Subscriber Solar program, which enables customers to subscribe, in 200-kilowatt-hour blocks, to a new solar farm that RMP is building. After a survey revealed that most RMP customers would choose a solar subscription over having their own rooftop installation, because a subscription provides more benefits and flexibility, RMP decided to offer just that. Solar is indeed popular, but meeting customers’ needs is not all about solar. Chris Black, Tendril’s Chief Technology Officer, envisions a new form of demand manage- ment—one that turns traditional for residential customers from “a blunt object” that rations energy to “a nimble tool that meets customers’ needs.” Assistant Secretary of the Navy Dennis McGinn extends the scope of the military’s rela- tionship with electric companies—from providing the reliable, resilient energy services required on military bases—to the communities that adjoin and support them. When the three work together—the military, the electric company, and communities—both the military and nearby communities can have the crucial services they need. Really, it’s all a piece of the new normal. From large corporate buyers with sustainability goals, to small customers who want specific types of energy services, to military bases and communities that support them, electric companies are positioned to offer their customers more individualized services and innovative solutions than ever before.

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Be open-minded “and innovative. Look for solutions, not roadblocks. Work collaboratively with your customers and your regulators. That’s the recipe for becoming an ‘agile’ electric company. —JONATHAN“ WEISGALL

12 INNOVATING WITH CUSTOMERS

Individualizing Green Energy Solutions to Meet Customer Needs

JONATHAN WEISGALL Vice President, Government Relations, Berkshire Hathaway Energy

eliable, affordable, and clean NV Energy immediately responded. A energy. This three-part formula potentially adverse relationship quickly Rdefines today’s demands on the elec- led to negotiations and collaboration tric power sector. Now it’s time to add a among NV Energy, Switch, and state fourth adjective: agile. Today’s electric regulators; the parties soon reached companies must be more responsive to an agreement. Under Nevada’s green customers and move quickly to come energy rider tariff, NV Energy could, in up with innovative solutions to meet fact, provide 100-percent renewable customer needs. energy to Switch. Switch is now NV Energy’s first south- REAL LIFE LESSON ern Nevada customer to receive 100- Switch, a data storage company with percent renewable energy under the deep roots in Nevada, approached NV green tariff. Bringing on a new car- Energy—Berkshire Hathaway Energy’s bon-free resource with an energy out- regulated electric company in Nevada— put equivalent to Switch's load assures to request 100-percent renewable that no new carbon-emitting energy energy to meet its growing electric- is produced to serve them. Switch will ity needs. It wasn’t readily apparent to receive power from a new dedicated Switch how NV Energy could satisfy that 100-megawatt (MW) photovoltaic sys- type of request—under existing regula- tem (aptly named Switch Station) that tions, NV Energy could only offer sys- will go online later this year and pay a tem power. So Switch decided to switch! small premium per kilowatt-hour (kWh) Switch filed an application with the Pub- for that power. lic Utilities Commission of Nevada to leave NV Energy’s system and obtain How did NV Energy meet the regu- renewable energy from a third party. latory standard of showing that this

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arrangement would not shift costs to participate in building a new renewable its other customers? In fact, NV Energy energy project along with NV Energy, was able to show beneficial impacts, and for what participation period. primarily because Switch’s payments Within a span of less than two years, NV will help buy down the cost of this new Energy is building or has already built solar plant more quickly. more than 329 MW of large-scale solar As a result of the collaboration and plants, with much of that capacity going negotiation, Switch gets 100-percent to meet specific customer needs for renewable energy from NV Energy and 100-percent renewable energy. Now remains a full-requirements customer. more customers want to participate. Indeed, the deal was so successful that And, NV Energy is currently exceeding the parties have negotiated another its state’s renewable portfolio standard agreement for 79 MW of of 20 percent. to facilitate Switch’s expansion in both northern and southern Nevada.

INNOVATION BRED MORE INNOVATION Utility Customer Within a matter of months, this basic Solutions template was repeated with the City of Las Vegas, whose full load will The green energy tariff approach that now be served by renewable energy— NV Energy used works, and it works for every streetlight, park, cen- all parties. The customer that wants to ter, public building, and fire station. be 100-percent green gets the energy This approach has become so success- solution it wants—together with long- ful that on May 3, 2016, borrowing from term energy price stability. The electric the pipeline playbook, NV company, in collaboration with custom- Energy announced it would accept cus- ers and regulators, is able to provide tomer requests to be served by more a customized service to meet the cus- renewable energy. NV Energy, which has tomer’s needs. And, the customer now already issued a request for proposals views its electric company—not some for new renewable resources, will now third party—as the provider of choice. offer a price and a delivery timeline and Will this model work for other electric will learn how many customers want to companies? First, you need customers

14 INNOVATING WITH CUSTOMERS

that want to be served by more renew- Energy and Switch for the new 100-MW able energy, and are willing to pay a solar system was seven months. small premium for it. That type of cus- To meet the customer’s expectation in tomer is growing, as more and more a very cost-effective way, NV Energy companies have public sustainability was able to provide the lowest-cost goals and are making clean energy solar resource known up to that point, pledges. Second, the electric company a power purchase agreement with First must be able to provide the renewable Solar for 100 MW of at $0.0387 energy to the customer. per kWh. Switch was able to support a What lessons did NV Energy and Berk- project built in Nevada—meeting a pri- shire Hathaway Energy learn from mary criteria of having a local renew- these developments? And what lessons able resource—and NV Energy was able might a like-minded electric company to make further progress toward reduc- draw from them? ing carbon intensity and adding further Engage with your customers; diversity to its resource mix. Communicate; From my perspective, that’s the recipe for Be open-minded and becoming an “agile” electric company. innovative: look for solutions, not roadblocks; and Work collaboratively with your customers and your regulators. In the case of Switch, NV Energy took the initiative to engage its regulators in finding a solution that would meet Switch’s needs. Specifically, the com- pany was able to pursue and receive approval to offer the green energy - iff in southern Nevada; previously, this tariff was only available to customers of NV Energy’s northern utility. Overall, the time between Switch filing an appli- cation to leave the NV Energy system and the signed agreement between NV

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Utilities will find allies “in their corporate customers who value reliable, affordable, and sustainable electricity. Utilities just have to be agile enough to meet all three benchmarks— and quickly! “ —LETHA TAWNEY

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Energy Solutions for Corporate Buyers

LETHA TAWNEY Director of Utility Innovation, World Resources Institute

arge commercial and industrial Buyers’ Principles. Their requirements energy users, including Procter will exceed 44 million megawatt-hours Land Gamble, , Microsoft, Kai- (MWh) of renewable energy annually ser Permanente, and many more, are by 2020. looking for cleaner energy that meets Large corporate buyers are aware that their sustainability goals and lowers utilities can bring substantive value to their costs. They are moving beyond the customer relationship. The utility the green power products of the last is expert at power purchasing, deeply decade and forging new deals and experienced at integrating power into regulatory approaches to access the the system, and is a reliable partner as financial benefits of large-scale renew- well as being financially stable. These able energy projects. From Nevada to attributes make corporate buyers open Virginia to North Carolina, these large to exploring solutions with their utility— corporate customers are crafting new provided that utility is nimble, solution- solutions together with their electric oriented, and customer-centric. utility companies. The result has been a boom in spe- Driven by the economics of renewable cial contracts and green tariffs that energy, demands from their own cus- mirror the overall growth in corporate tomers, and a desire to address climate renewable energy purchasing. In 2015, change in the interest of their bottom corporate buyers signed more than 3 line, these corporations have set forth gigawatts (GW) of renewable energy what they need from the marketplace contracts with suppliers across the in six Renewable Energy Buyers’ Prin- U.S.2 At least 350 megawatts (MW) of ciples, and they want to scale up their those contracts are with local, vertically 1 buying very quickly. More than 55 integrated utilities. iconic companies are signatories to the

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The utilities that are successful in signing In the fall of 2015, followed these deals have two things in common. a similar approach, using its Green They are bringing very senior level Source Rider to provide renewable attention to meeting these custom- energy to three customers, including a ers’ needs. deal with for a 61 MW solar farm. Their people are including their rates and power supply counterparts in the collab- oration, and this is leading to more creative solutions.

A WIDE RANGE OF MODELS The deals in 2015 included an agree- ment in October between data stor- age company Switch and NV Energy that enables Switch to receive solar energy using NV Energy’s Green Recently, Dominion Virginia Power Energy Rider. NV Energy is also provid- joined the ranks of these innovators. ing solar energy to Apple’s data center Working with the Commonwealth of via a 20 MW solar project near Reno. Virginia and Microsoft, Dominion Vir- Since October, both Switch and Apple ginia Power moved a 20 MW solar went back to buy more solar from NV project forward in March 2016, after Energy and the City of Las Vegas also state regulators had previously disal- contracted for a share of solar as part lowed cost recovery for it. Certain Vir- of these deals. By the end of Novem- ginia state agencies have the right to ber 2015, NV Energy had sought PUC contract for power outside the state’s approval for nearly 250 MW of renew- general power purchases and are buy- able power for corporate buyers under ing power from this solar project. In 3 its Green Energy Rider. connection with it, Microsoft will buy The Nevada deals were some of the first the project’s green attributes—RECs— to emerge from green tariffs—standard to match the Dominion power that utility offerings that bundle together serves its local data centers. Microsoft the energy from a renewable energy found the price of RECs competitive project and renewable energy certifi- with its internal cost of carbon, which it cates (RECs). wanted to offset; it values the option of

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bringing local renewables to the grid. for Renewable*Connect—a fixed-price, Dominion’s met two custom- long-term renewable energy ers’ needs without adversely impacting that will provide wind and solar energy its other customers. to customers with no up-front costs— Stretching beyond this unique deal, from Minnesota regulators. Xcel Ener- Dominion Virginia Power has used its gy’s Colorado affiliate followed up with access to the PJM wholesale market to a similar filing at the Colorado Pub- enable an entirely different arrange- lic Utilities Commission, introducing ment with another large data center that Solar*Connect. This approach replaces allows the customer to take on the full the energy portion of the customer’s price risk and benefit of the renewable standard retail bill with solar and wind energy. Through a special contract, the PPAs. While other customers’ energy utility is taking over energy manage- costs will rise and fall with natural gas ment of four existing renewable energy prices, Renewable*Connect customers power purchase agreements (PPAs), will pay the stable PPA price for five to including one with Virginia’s largest 10 years. solar farm to date—an 80 MW project in At least six other large investor-owned Accomack County. Dominion will set- utilities are currently designing similar tle the difference between PJM prices products for corporate buyers. and the renewable energy PPAs on the As utilities grapple with questions of customer’s bill, while delivering reli- new regulatory and business models in able, firmed power to the facilities. This the fast-changing electric power indus- approach allows the customer to bene- try, they will find allies in their corporate fit economically when their PPA obliga- customers, who value reliable, afford- tions are cheaper than PJM wholesale able—and sustainable—electricity. Utili- prices, but the customer also takes the ties just have to be agile enough to meet risk when PJM prices are lower than all three benchmarks—and quickly! the PPAs.

PROPOSALS EMERGING AROUND 1. http://www.wri.org/publication/corporate- THE COUNTRY renewable-energy-buyers-principles. 2. Business Renewables Center Deal Tracker, Utilities around the country are now http://www.businessrenewables.org/ crafting green tariffs that build on corporate-transactions. 3. For more information on the NV Energy the Buyers’ Principles. In November approach, see Jonathan Weisgall’s essay 2015, sought approval in this volume.

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Our businesses are “facing to keep and find customers who are demanding more options. Rocky Mountain Power's Subscriber Solar program gives our customers what most consider a better choice. “—CINDY CRANE

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Offering Customers More Energy Choices

CINDY CRANE President and CEO, Rocky Mountain Power

nergy companies like Rocky Moun- perhaps live in a building that precludes tain Power are regulated, but are them from having their own private or Enot really in the strict rooftop solar installation. sense of the term. While the electric power and related services we provide THE CHALLENGE are strictly regulated, increasingly our Utah is one of the sunniest states in the customers have other options to meet West. Representatives of private solar their energy needs. That means our installers are often seen in our neigh- businesses are facing competition to borhoods knocking on doors, as they keep and find customers. At the same pursue more customers. The number of time, customers are demanding more residential customers with private solar choices. Many who want to choose photovoltaic (PV) panels has grown their energy source have more options exponentially in Utah over the past five to choose rates and costs. years, from 380 customers in 2011 to 3,091 in 2015. Just between 2014 and At Rocky Mountain Power, we listen to 2015, the number of residential cus- our customers, and, as a result, we are tomers with private solar PV panels launching our Subscriber Solar program more than doubled! this year. Our customers will be able to subscribe to universal and cost-effective More and more, Utah customers solar power from a new 20-megawatt like the of generating their own solar farm that’s under energy, “greening” their personal lives, in central Utah—even if these custom- and lowering their power bills, even if it ers can’t afford their own solar system, takes years to recoup the cost of their don’t want to maintain solar panels, or private solar systems.

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THE SPARK: THE BLUE SKY PROGRAM The genesis of Rocky Mountain Power’s MENU OF OPTIONS Subscriber Solar program grew out of our Blue Sky program. For as little as $1.95 a month, Blue Sky allows custom- Time + kWh Blocks ers to voluntarily support solar projects 1 5 at local schools, nonprofit organiza- tions, and community installations. 10 15 Blue Sky is also used to support large clean energy projects by purchasing Renewable Energy . During the past 15 years, Blue Sky customers in the six states served by our parent com- pany, PacifiCorp, supported more than 5 billion kilowatt-hours of renewable THE SOLUTION: THE SUBSCRIBER SOLAR PROGRAM energy—enough energy to power more Our Subscriber Solar program gives than 500,000 homes for one year. our customers what most consider a Rocky Mountain Power’s survey of more better choice: get access to solar, but than 2,000 residential and Blue Sky cus- without the investment and long-term tomers found the following: payback period associated with install- 75 percent of residential custom- ing solar panels. This voluntary, afford- ers and 90 percent of Blue Sky able program offers customers the customers are likely to subscribe to ability to buy some or all of their energy universal solar energy. from efficient, large-scale solar. 50 percent of residential custom- This type of universal solar project is a ers and 65 percent of Blue Sky cus- tomers would choose a universal very cost-effective way to provide cus- subscription over a private rooftop tomers with a solar choice. Subscriber solar installation. Solar participants will be able to sub- Customers don’t want to just support scribe in 200-kilowatt-hour blocks up renewable energy; they also want to to their total usage. The 20-megawatt buy it for their own use. But they don’t solar farm will provide approximately necessarily want to install it. Another 20,000 blocks. independent study found that Utahans Both commercial and residential cus- want more clean energy but they don’t tomers can participate in this univer- want to pay too much more for it. sal solar program. Many customers

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can actually save money by switching Chwastyk, utility strategy manager for to the Subscriber Solar program. Oth- the Smart Electric Power Alliance, called ers will participate simply to support Subscriber Solar “an incredibly well- clean energy that’s generated in the thought-out universal solar program.” state, while reducing their use of non- renewable energy. THE FUTURE The solar farm is under construction, Another advantage of the program is and the program is expected to be its flexibility: Subscriber Solar custom- fully subscribed before it goes online ers, if they move, can take their solar in January 2017. We expect to develop with them and transfer their subscrip- additional universal solar projects to tion blocks to any area served by Rocky meet future demands of our custom- Mountain Power in Utah, so customers ers; our experience with Subscriber can stay on the program effortlessly Solar is laying the groundwork for these even when relocating. By contrast, cus- future programs. tomers who own their rooftop solar PV systems do not have this seamless flexi- Our customers are thinking ahead, and bility if they change residences. Rocky Mountain Power wants to be the first place customers think about when- THE COSTS ever energy questions cross their mind. The Subscriber Solar program is How can I help reduce my revenue-neutral; Rocky Mountain ? Power makes no profit from it. All pro- How can I protect myself from gram costs are paid by subscribers. price hikes? As a result of our 20-year contract with How can I participate? the solar farm developer, we lock in the energy portion of subscribers’ bills for Rocky Mountain Power has the answers. the same 20 years. Assuming the pro- We are happy to be actively engaging gram is 100-percent subscribed, which with our customers in developing even we fully expect, other customers are more innovative solutions for the future. not impacted by the program. Before launching the program, we took the necessary steps to meet with reg- ulators, renewable energy advocates, and consumer watchdog agencies to help shape a program that addresses our customer needs and desires, as well as one we could work with. Dan

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Traditional demand “response programs are missing an opportunity to delight customers, and can be transformed into something that works for all customers, all the time.

“ —CHRIS BLACK

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The Next Generation of Demand Management

CHRIS BLACK COO and Chief Technology Officer, Tendril

lectricity is an essential service. home—and that fulfill customers’ desires There’s no substitute for it, like to contribute to generation through dis- Ethe air we breathe. And like air, energy tributed energy resources (DERs)—not gets taken for granted. For more than only will improve customer satisfaction, a century now, energy providers have but will also open doors to more wide- delivered the power customers need spread use of effective DR initiatives. to run their homes. Customers expect the power to flow, no matter how much RE-ENVISIONING DEMAND MANAGEMENT they need. Electricity customers need Adopting a consumer-centric approach service that’s seamless, universal, to DR starts with re-imagining demand dependable, and simple. Traditional management at the retail level. Today, demand response (DR) programs are retail DR programs compensate cus- missing an opportunity to delight cus- tomers for the power they don’t use tomers, and can be transformed from to help reduce peak load. For exam- a potentially disruptive experience into ple, an energy provider will pay for the something that works for all customers, right to cut off air-conditioning (A/C) all the time. for a period of time during a heat wave. Embracing opportunities to delight cus- Behavioral demand response uses tomers is the key to an energy provid- social pressure and financial incentives er’s success, especially as outside solu- to encourage customers to voluntarily tions that cater to individual customer turn down their A/Cs when they need needs (like solar and storage) become cool air the most, among other uses. more available. The energy providers Similarly, time-of-use rates increase that approach demand management as the price customers pay for electricity a nuanced, automated during periods of high usage. between connected devices within the

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In my view, these efforts to manage continuously rather than using today’s demand may compensate custom- existing approach that sets a handful ers for inconvenience, but they don’t of pricing events each year based on delight customers. would never market conditions. The new retail DR ask customers not to watch movies on approach instead puts the focus on the Saturday nights to help them out with customer's desired outcomes—whether their network congestion issues, so why they revolve around cost, comfort, or should energy providers ask customers performance. In fact, it is hard to call to turn off their A/C during a heat wave, this new approach DR. This is next- especially when that A/C is essential to generation demand management. If health and well-being? done right, a home’s demand is shifted Here’s how energy providers can do out of peak, thus not contributing to the better with retail DR. They can migrate overall problem. to a model that turns demand manage- EMBRACING DISTRIBUTED ENERGY ment from a blunt object that rations RESOURCES customers’ energy, to a nimble tool that Better energy management doesn’t meets customers’ needs at the lowest stop with regulating demand on peak cost possible. With the right technol- days. Energy providers can also inte- ogy, the new model of DR can be sim- grate into their offerings the full range ple and virtually invisible to customers, of DERs that customers are using—solar most of whom do not want to learn panels, electric , smart appli- about kilowatt-hours or therms but ances, and batteries. Rather than being want to stay comfortable in a way that chaotic disruptions, these new devices is affordable. can act as additional to the grid, Deployed in conjunction with smart making energy cheaper, cleaner, and thermostats, this approach to DR more efficient. DERs become assets considers a multitude of data points, when energy providers have the tech- ranging from home characteristics to nology in place to monitor their gen- micro-weather patterns, to construct eration and use capacities in real time a virtual energy usage model of each and make continuous adjustments individual home. By making high- to connected appliances within the precision predictions and optimizing home to ensure the home’s balance the home cooling or heating system of power stays in the pre-determined based on the customer's desired com- optimal range. fort, algorithms and controls can run

26 INNOVATING WITH CUSTOMERS

Utility As Conductor

Energy providers will need the sophis- ticated ability to orchestrate all of these distributed resources, rather than using the blunt tools of the past. Energy pro- viders will delight their customers when they adopt the technology they need to manage DERs smoothly, to analyze the real-time fluctuations of demand within homes, and to transform DR into a resource that supports widespread use reductions without widespread dis- ruptions. They’ll build loyal customer bases that turn to them for all of their energy needs, knowing those needs will be met seamlessly, without depriv- ing customers of the resources they need to survive and thrive.

27 INNOVATING WITH CUSTOMERS Over the past year, “we have undertaken more than 30 public- private focused on establishing new renewable energy and microgrid projects. The innovative relationships we forged have established the know-how that will last for decades.

—DENNIS“ MCGINN 28 INNOVATING WITH CUSTOMERS

A North Star for Energy Resilience

DENNIS MCGINN Assistant Secretary of the Navy, Energy, Installations and Environment

n an earlier volume of this series, I The Department of the Navy has made contributed an article called “Choos- significant strides forward on this front. Iing to Lead on Energy,” which described Over the past year, we have under- the Department of the Navy’s efforts taken more than 30 public-private to partner with communities and with partnerships, focused on establishing private-sector stakeholders to focus new renewable energy and microgrid on the planning and development of projects, which will serve the needs of key energy infrastructure projects and Navy and Marine Corps installations capabilities. Projects like these create and of community partners. In total, mutual support and assurance between the Department of the Navy will have the Navy and its neighbors. played a key role in the development of Establishing resilient communities more than one gigawatt of new electric around Navy sites is not something we generating capacity, all renewable. will achieve overnight. Rather, I think of Our first online project toward the community-level energy resilience as a 1-gigawatt goal is located on MCB “North Star” for the Navy’s infrastruc- Camp Lejeune in North Carolina. The ture planning—including appropriate Navy partnered with Duke Energy Prog- partnerships and -driven sep- ress to develop a solar facility on base arations along installation boundaries. that sends power to the grid for com- Each step at installations, whether large munity consumption. The facility came or small, is undertaken with a shared online in December 2015 and is capable vision and set of standards designed to of producing 17 megawatts of direct improve energy resilience today and in current or 13 megawatts of alternating the future. current energy. This project increases

29 INNOVATING WITH CUSTOMERS

energy security for the base while state grants, third-party financing, and helping Duke Energy Progress to meet Navy energy resources that will achieve North Carolina’s Renewable Energy and a fully functioning, resilient installation Energy Efficiency Portfolio Standards. microgrid within two years. Another project at MCAS Yuma in Ari- With hard work and careful project zona further demonstrates the benefits management, our projects cited above, of partnerships between utilities and and many more, will come to fruition, to the military. The Marine Corps and Ari- the benefit of all. However, there is more zona Public Service (APS) are building a work to be done to attain the resilience 25-megawatt microgrid system on base that the Navy and Marine Corps and that will automatically provide power to our nearby communities seek. I see the the base during commercial outages. Navy’s progress over the past year as The system will increase reliability for an achievement in itself—but also as an other customers as well, in that APS important foundation for growth. That can utilize the generators during peri- foundation is not only comprised of ods of peak demand. This partnership —it is very much human creates the first base in the U.S. to have as well. Soon, the Navy Department’s 100-percent backup power. lands will host new physical infrastruc- Our partnerships also increase energy ture that generates electricity without resilience for installations and the com- requiring fuel. We are transforming munities supporting them. In coordina- our non-tactical vehicle fleet in order tion with the State of Connecticut and to incorporate zero-emission elec- Groton Utilities, the Navy has made tric vehicles and provide the required significant progress toward establish- charging infrastructure. Through these ing a microgrid to support the Atlan- efforts, the Navy is initiating a program tic submarine fleet at SUBASE New to rapidly transform its fleet configu- . The microgrid will provide ration and energy use not only to pre- enhanced resilience to mission critical serve, but to increase our capabilities. operations and support for community Our Navy and Marine Corps team of emergency services. Keeping the fam- professionals and our private-sector ilies of our Sailors safe during an out- partners have stretched themselves age allows them to focus on operating personally and professionally to make and maintaining vital national security renewable energy projects a reality. assets. The project will be developed The innovative relationships we have in a phased approach that leverages forged with utilities, developers, and

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the financial community during this energy voyage have established the know-how for creating a mutually bene- ficial platform that will last for decades. The initial establishment of organiza- tions, partnerships, and processes will prove even more valuable to future endeavors. Our horizon is broadening, and the course we are taking is clear and expanding.

A Clear Vision

As I wrote in my earlier essay, we expected that leading these changes would be challenging for the Depart- ment of the Navy and for all the stake- holders involved. I can say now with certainty that we were right. But this force is designed for meeting difficult challenges. We welcome more. We will continue to pursue our next initiatives with deliberate speed and a steady course. As long as we have a clear vision of the North Star, and a talented crew aboard, we will continue to move in the right direction, toward stronger com- munities and a stronger, more resilient Navy and Marine Corps.

31

CHAPTER 2 SMART STORAGE, SMART CITIES, SMARTER GRID

hree forces are emerging to point electric utility companies in a new direction: society is demanding a clean, economy driven by electric- Tity; storage is enabling greater use of renewable energy and efficiencies; and yester- day’s is evolving into an even smarter Grid of Things™ consistent with the emerging Internet of Everything. The essays in this chapter describe some of the lat- est and trends taking electric companies beyond their traditional roles. AES Corporation President and CEO Andrés Gluski and Vice President and Chief Technology Officer Chris Shelton say that simply including as an option in planning and procurement processes will speed its adoption. Storage can improve the reliability of renewable resources, enhance generation performance, ease transmission constraints, and integrate . Batteries can help achieve the clean power grid of the future. John Carrington, CEO and Director of Stem, describes how the value of storage is maximized when located on the customer side of the meter, where customers, energy companies, and grid operators all can extract and share its benefits. When paired with intelligent software, storage can be completely automated and invisible, flexibly responding to prices and grid conditions. Itron’s Russell Vanos sees a role for electric companies as key leaders in the smart cit- ies movement. Itron’s 2016 Resourcefulness Index found that consumers are looking to electric companies to lead the way toward a smart city revolution, using data and smart technologies to engage with cities to drive efficiencies, increase sustainability, and improve community life. Roger Woodworth, President of Avista Development, discusses the role of electric companies in delivering value in new and unexpected ways to the communities they serve. He sees the opportunity for them to do more than deliver electricity. He asks: How might electric companies provide new streams of value to communities—in improved water services, building operations, transportation modes, and more? Cit- ing Amazon’s transition into new diversified services, he encourages electric compa- nies to think big, and bigger still.

33 SMART STORAGE, SMART CITIES, SMARTER GRID

To speed greater “adoption of energy storage, our industry simply needs to include storage in planning and procurement processes and remove unnecessary barriers to its deployment. —ANDRÉS GLUSKI & CHRIS“ SHELTON

34 SMART STORAGE, SMART CITIES, SMARTER GRID

After a 100-Year Hiatus, Batteries Are Helping the Grid Again

ANDRÉS GLUSKI President and CEO, AES Corporation

CHRIS SHELTON Vice President and Chief Technology Officer, AES Corporation

attery storage: it’s back to the Today, battery-based energy storage is future. More than 120 years ago, again becoming vital to our power sys- Bbatteries were commonplace on the tem. Storage is needed for load balanc- power grid. Thanks to ’s ing and a great deal more. Batteries can vision, many central station power help achieve the reliable, affordable, plants and distribution networks uti- and clean power grid of the future, in lized battery systems in the 1890s. the U.S. and around the world.

This chart shows a “duck curve” for City, and demonstrates the key role that batteries played in smoothing the peaks and valleys of electricity demand throughout the day and night in Edison’s time.1

Load Diagram of 33rd St. Station, Edison Illuminating Co., of , Sept. 30. 1893

35 SMART STORAGE, SMART CITIES, SMARTER GRID

A SECTOR IN TRANSFORMATION the massive adoption of solar energy in Electric companies have a reputation the state, exceeding targets set by their for being steady and unexciting enter- regulators for energy storage. prises, providing a service that is silent, Enhancing performance of tradi- invisible, and noticed only when it fails tional power generation. By adding to deliver the energy that’s so essen- batteries to the existing generation tial to our personal lives and the entire fleet, we can hold less generation in economy. But the electric power indus- reserve and produce more energy. try is moving into a dynamic period of Greater use of batteries can also facil- operating challenges and structural itate more efficient operation of ther- change, driven by in tech- mal units, reducing wear and tear and nology, markets, regula- costs in the long run. tion, and security needs. Batteries can These benefits have been realized in assist power system operations in this the northern of Chile, where transformation in a variety of ways: AES worked with the system operator Improving the reliability of renew- to improve power plant output by four ables. Renewables are critical to the percent using batteries while simulta- future of power generation. In the U.S., neously eliminating load-shedding and more than half of new capacity addi- reducing the overall system cost by tions came from renewables last year.2 more than $30 million per year. Globally, two-thirds of new power Easing transmission constraints and investments through 2040 are pro- integrating distributed generation. 3 jected to be wind and solar. Greater Our transmission system is only 50 renewable energy generation reduces percent utilized in the U.S. because the carbon intensity of our electric sys- of significant grid constraints during tem. But, renewables are highly vari- peak periods. Batteries can help match able; small disruptions from clouds energy production with the times and or wind bursts can create major chal- places where it is needed most, no lenges for the grid. Batteries can help matter where the energy is gener- balance supply and demand when ated. Better use of existing infrastruc- the sun isn’t shining and the wind isn’t ture reduces the need for near-term blowing. In fact, California utilities are investment in transmission upgrades. already choosing to use battery-based Batteries can also provide a variety of storage as a competitive complement ancillary services that grid operators to their generation services and elec- increasingly need in today’s more com- tric network investments to deal with plex power markets.

36 SMART STORAGE, SMART CITIES, SMARTER GRID

AES ENERGY STORAGE special incentives. We have seen this AES is the world leader in ion- with the Advancion fleet in PJM (one based energy storage. AES has now of the world’s largest wholesale power released its fourth-generation battery markets), a similar storage fleet in Chile, energy storage system, Advancion®, and, more recently, in California, where which is available globally through a competitive all-source procurement alliance partners such as Eaton and for capacity by Southern California Edi- Mitsubishi Corporation. Advancion son resulted in selection of more than combines eight years of designing, five times the amount of energy storage developing, and operating energy that was expected, including a 100 MW storage in one complete product that’s Advancion energy storage array. ready to serve for the long-term. There As more renewables are developed in are more than 384 megawatts (MW) the U.S. and globally, and as system of Advancion in operation, under con- operators seek the increased flexibil- struction, or in advanced development ity that batteries afford, it appears that in seven countries: the United States, Thomas Edison’s vision for an efficient , , Chile, battery-enabled power system will , the Philippines, and the Domini- be achieved many times over in the can Republic. 21st century.

A SIMPLE PATH TO THE GRID OF THE FUTURE 1. News, Vol. 30, p 358, To speed greater adoption of energy Nov. 2, 1893. 2. https://www.snl.com/InteractiveX/ storage, our industry simply needs Article.aspx?cdid=A-34950800-13103. to include storage in planning and 3. Bloomberg New Energy Finance, “2015 New Energy Outlook.” procurement processes and remove unnecessary barriers to its deployment. When utility systems are planned, when markets are designed, and— most important—when a procurement process is initiated, it makes sense to consider and include storage for the operational and economic advantages it offers. In procurement processes, AES and our storage customers have shown that energy storage is competitive without

37 SMART STORAGE, SMART CITIES, SMARTER GRID

Intelligent energy “storage has emerged as a critical between the traditional electric power system and a more dynamic power grid— clean, efficient, and distributed. “— JOHN CARRINGTON

38 SMART STORAGE, SMART CITIES, SMARTER GRID

Transforming Our Energy Future with Intelligent Batteries

JOHN CARRINGTON CEO and Director, Stem

than 130 years ago, on increased demand for electricity, and, Pearl Street in lower , most recently, a growing desire to shift MThomas Edison opened America’s first electricity sources away from traditional power plant. Edison’s Pearl Street Sta- generation sources to cleaner sources. tion—a central-station, Over the past few years, as this trans- system—was developed to provide formation has unfolded, intelligent safe, reliable lighting across a neigh- energy storage has emerged as a criti- borhood network, while offering elec- cal bridge between the traditional elec- tricity rates that were affordable for its tric power system, powered by central- 508 customers. ized generators and sized to Over time, technology providers, accommodate levels of demand only resource developers, and policymak- encountered a handful of times each ers made improvements to the energy year, and a more dynamic power grid— infrastructure, discovering that wider clean, efficient, and distributed—that networks could be better supported by can meet the needs of tomorrow. an system, and that larger unit sizes yielded more efficient, UNLOCKING THE VALUE OF THE GRID WITH CUSTOMER-SITED lower-cost generation. Higher- STORAGE lines increasingly linked smaller city or Power grid operations are governed area networks efficiently into a larger, by the physics of electricity. In each more reliable power grid. grid, supply must match demand as Still, in many ways, today’s intercon- precisely as possible, instantaneously, nected power grid looks shockingly at all times. The most popular forms similar to its early —despite a of renewable energy—solar and wind tripling of the U.S. population, a much- power—are variable resources that are

39 SMART STORAGE, SMART CITIES, SMARTER GRID

difficult to shape and control. Unlike Customer-sited storage can automati- conventional generation, they cannot cally time-shift consumption to manage easily follow load, ramping up or down costs, making customers more active to match the demand on the power and price-responsive grid participants. grid. This means that other resources For utilities, distributed storage assets must perform that function. serve the same purpose as a central- The variability associated with renew- ized generation . They can act as a able resources could be a cause for fast-responding resource that provides great concern. Managing this concern capacity as well as the ability to absorb requires skills energy when renewable generation and new tools to meet the challenge. exceeds demand. In order to manage Intelligent energy storage is a tool that multiple objectives, batteries must be can allow excess power to be easily paired with sophisticated software that absorbed for use during later periods of can automatically predict and quickly constrained supply, helping to maintain respond to changing prices and pat- balance on the power grid. In terns of demand. with a high penetration of renewables, such as California and Hawaii, this AUTOMATING CUSTOMER RESPONSE is critical. Historically, controlling costs on the But not all storage is created equal! demand side of the power grid has The value of energy storage is maxi- required active customer participa- mized when it is fully utilized, and one tion and behavior change. Demand way to increase utilization is by locat- response programs pay customers ing storage on the customer side of (both large and small) to reduce con- the meter, where customers, energy sumption when notified by the system companies, and grid operators can all operator. They have grown over the extract and share its greater benefits. past decade and voluntary participants

Automated Price Signal Response Energy Storage

40 SMART STORAGE, SMART CITIES, SMARTER GRID

enjoy the additional revenue, but partic- storage is demonstrating its power ipation can be burdensome, interfering to transform our energy future in with business operations and comfort. an unprecedented way, while main- Energy storage, on the other hand, can taining a strong and reliable grid. In shift demand with no change or dis- regions where energy companies, ruption in customers’ daily routines. grid operators, and policy makers It can be completely automated and have nurtured adoption of customer- invisible, flexibly responding to price sited storage, energy customers have and other power grid conditions. This responded in growing numbers. is especially critical in commercial and More than 1,000 customer-sited industrial facilities that cannot simply energy storage systems are in turn off , processes, or lights operation today, primarily in Cali- fornia, Hawaii, and New York.1 when fully engaged in commercial tasks. Thus, aggregated energy stor- According to Stem analysts, an estimated 30 percent of Fortune age can be a more reliable asset with a 500 companies have adopted or larger potential market than even con- are actively evaluating intelligent ventional demand response. energy storage technology. With the increased proliferation of According to GTM , renewables and the Internet of Things, more than 700 megawatts of from onsite generation to smart thermo- distributed energy storage will stats, customers expect more choices be deployed in the U.S. between 2014 and 2020 alone.2 and control than ever before. When paired with intelligent software, energy It is time for all industry stakeholders— storage allows customers to integrate policy makers, technology providers, their service, energy resources, and energy companies, and customers—to energy-using devices into one self- respond by supporting energy storage. optimizing platform that responds to It is a tool that will modernize the power price signals, cutting energy costs and grid, making it more efficient, while making these energy resources avail- controlling costs, empowering custom- able to the power grid when they are ers, and accelerating the transition to a most valuable. clean energy future.

PROPELLING THE ENERGY 1. GTM Research (2016). GTM Research INDUSTRY FORWARD CDEF Keynote: California and the Today, the electric power system and Distributed Energy Transformation. 2. GTM Research (2016). U.S. Energy Storage the business models that support Monitor: 2015 Year in Review Full Report. it are truly in flux. Intelligent energy

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A smart city uses data “and technology to help drive efficiencies, create sustainable initiatives and actions, and engage citizens to improve community life.

—RUSSELL“ VANOS

42 SMART STORAGE, SMART CITIES, SMARTER GRID

How Utilities Can Lead the Smart City Revolution

RUSSELL VANOS Vice President, Sales and Marketing, Global Software, Services and Smart Cities, Itron

s the global population contin- power grid, an active and intuitive ues to grow, the imperative to grid that responds to system changes manageA and sustain our vital energy and makes decisions in real-time at and water resources has never been the edges of the distribution network. stronger. Though electric utilities have This enhanced power grid will facilitate always been a key pillar of the economy, more efficient transactions with minimal the 2016 Itron Resourcefulness Index, transaction costs, will apply smart tech- a global benchmark for energy and nology to Internet of Things (IoT)-ready water resources management, found networks, and will allow electric utilities that consumers are now looking to util- to achieve efficiencies and reduced ities to lead the way toward the smart carbon emissions, while also providing city revolution. We agree. A smart city a platform to make communities more uses data and technology to help drive livable and smooth functioning. efficiencies, create sustainable initia- Electric utilities are a key driver to eco- tives and actions, and engage citizens nomic prosperity. Today, they have a to improve community life. unique opportunity to lead the smart To grasp this opportunity to lead and to city revolution. Consider the following grow, electric utilities must go beyond functions necessary for every smart city: today’s evolving smart grid—with its 1. Empower Sustainability. A smart improved grid sensors, smart meters, city is a sustainable city. By investing and improved utility-customer inter- in smart technologies, electric utilities actions. To help lead the smart city can play a key role in providing custom- movement, electric utilities need to ers detailed information about their be principal players in implementing energy and water usage, along with what we might call the next generation other programs to incent conservation.

43 SMART STORAGE, SMART CITIES, SMARTER GRID

2. Drive . Elec- citizens. An integrated approach with tric utilities can provide cities with a open communication and cross-sector competitive edge by driving city-wide collaboration is essential for a smart efficiencies and, according to IDC city to thrive. Demonstrating true col- research, support socio-economic ini- laboration, Spokane, Washington’s tiatives to reduce economic divides, Smart City Accelerator is run by a group grow domestic industries, and attract of partners that lead in their respective skilled workers.1 fields, including the local electric com- pany, Avista; Washington State Univer- 3. Deliver Safe and Reliable sity; and Itron. This initiative will create Resources. In many U.S. cities today, electric and water infrastructure is a living laboratory in the 770-acre Uni- more than 100 years old. By upgrading versity District to advance urban inno- infrastructure with smart grid technol- vation and emphasize the critical inter- ogies, electric utilities can better align actions among health, water, energy, supply with demand, improve service food, and . delivery and reliability, and support the 6. Prioritize Open Standards Net- use of clean energy sources. work Infrastructure. Investing in a smart grid network with open stan- 4. Adopt Industry Best Practices. While development of a strong vision dards can provide a foundation for a and roadmap is important, cities can smart city. Open standards provide the learn from other stakeholders that mechanism for effective two-way com- have pioneered the smart cities path. munications. With sensors and intelli- One example is Envision America, a gence embedded in every device, the program of Envision Charlotte, estab- network provides the backbone for all lished to share best practices and chal- city connections and the capability to lenge America’s cities to utilize smarter use real-time data to reduce energy resource conservation technology, and water waste. build cross-sector collaboration, and 7. Create an Open Pathway for Inno- commit to developing innovation to vation. By committing to an open net- improve of life. work, electric utilities open the door to innovation—new technologies and 5. Encourage Collaboration. A truly smart city involves not only multiple applications that can accelerate the departments within a city, but goes out- development of an ecosystem of IoT side its walls and convenes city leaders, apps, such as resource management, electric and water utilities, , building energy management, smart- businesses, technology partners, and street lighting, and solar monitoring.

44 SMART STORAGE, SMART CITIES, SMARTER GRID

8. Leverage the Power of Data. Data technology and software can help a city is instrumental to the success of a smart more quickly realize smart city benefits. city, whether to reduce water and In the South Pacific, Tonga Power Lim- energy losses or to enhance lighting ited (TPL) is installing smart grid tech- controls, building efficiencies, safety nology, which features open standards measures, or other applications. Smart and enables distributed , to devices, including sensors and smart help meet its goal of becoming a smart meters, provide real-time data that can island. TPL will use managed services be turned into actionable insights. For for overall system management and example, using energy, water, waste, maintenance of Itron’s cloud-based ser- and air quality data, Envision Charlotte, vices for data collection. the smart city initiative in Charlotte, N.C., is connecting people with infor- mation to drive sustainability goals and reduce waste in office buildings. Since 2011, the initiative has achieved a 16.4- percent reduction in energy usage, which is about $17 million in savings.

9. Engage Participation. Successful smart cities create the foundation to engage, inform, and empower citizens. Leveraging actionable insights from data and real-time reporting, utilities can engage with consumers around energy and water usage and conser- vation, not only helping them to make Utilities have a unique opportunity to decisions about their impact on energy, lead the smart city revolution through water, and waste, but also notifying the adoption of smart technologies them when to take quick action. and by engaging with cities in these 10 10. Lean on Partners and Experts. The key areas.2 pathway to developing and implement- ing a smart city is far more complex than 1. IDC FutureScape: Worldwide Smart City any one company or entity. For exam- 2016 Predictions, November 2015. 2. Visit www.itron.com/10tenets to learn more. ple, once an electric utility implements smart technology, investing in managed services to administer the back office

45 So, what’s next? “Anyone can stand in the defense of what is. But who’ll stand as champions for the potential of what can be? Utilities are an obvious candidate.

—ROGER WOODWORTH“

46 SMART STORAGE, SMART CITIES, SMARTER GRID

Utilities as Champions, Again

ROGER WOODWORTH Vice President, Avista Corp. and President, Avista Development

eliable. Safe. Affordable. Who In the face of such trends, the U.S. could argue with such standards electric power industry is on a foresee- Rfor the delivery of electricity? By and able path to invest billions of dollars large, electric utilities have champi- to modernize aging utility infrastruc- oned and kept this promise for more ture, enable the system to integrate than a century. The industry has per- and optimize distributed energy, and formed so well, in fact, that some see deliver new, sophisticated services. operation of electric infrastructure as The result of this investment will cer- utilities’ only relevant role today. But tainly be a smarter, more resilient grid— beyond infrastructure, utilities are part one that’s even more reliable, safe, and of the very fabric of each community affordable. But this begs a question: “Is they serve and are well-positioned to that all?” enable their customers to achieve so What if utilities layered new technolo- much more. And not just with energy. gies into the electric system to do more The rapid advance of technologies and than deliver electricity and optimize the digitization of information funda- control of the grid in smarter ways? mentally change what’s possible—even How might utilities add to what they with something as conventional as plan to do anyway to deliver value in the power grid. Proof of such change new, unexpected ways and, in so doing, abounds in the many new market strengthen their relevance to the com- entrants that are combining sensing, munities they serve? analytic, and communication technol- ogies with alternative business mod- THE MOST EMPOWERING els to offer customers new options for Imagine utilities as champions for energy and related services. Indeed, improving the . This role much more is possible. dates to a time when electricity was

47 SMART STORAGE, SMART CITIES, SMARTER GRID

new, a technology unlike anything and other resources to improve the before. Utilities enabled the hot in built environment and serve society in your shower, the cold in your , and new ways? lights at the flip of a switch. To this day, whether you live in a small house or the White House, electricity relieves the burden of work; powers ; enables ; and connects consumers in ways never before possi- ble. Little wonder then that electrifica- tion was voted the greatest engineer- ing achievement of the 20th century by the National Academy of Engineering. Electricity truly is the most empow- ering invention, and yet… . Recently, in response to this declaration, a sea- soned utility executive’s impulsive Expanding the Grid's Role retort was, “No, it’s the Internet!” He quickly recanted, of course, because A MODEL TO MIMIC without electricity there is no Internet. As the above story of the executive Even those closest to the complexities suggests, whether utilities expand and of delivering this highly valued service strengthen their role and relevance can lose sight of power’s pervasive depends first on the mindset of lead- influence on every aspect of our per- ers. Champions of anything must first sonal and professional lives. understand and embrace the higher So, what’s next? Anyone can stand in purpose they serve. Then, a combina- defense of what is. But who’ll stand as tion of wisdom and innocence helps champions for the potential of what can open eyes to see fresh opportunities. be? Utilities are an obvious candidate. Finally, the courage to act and adapt They are already trusted operators of a separates value-builders from the pack. ubiquitous system that empowers soci- As a point of reference, consider ety. So, in addition to a cleaner, more the transitional experience of Ama- resilient electric system, how might util- zon. In simple terms, new technology ities leverage their assets, capabilities enabled an alternative model for the

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distribution of —the real kind, willing to step-up: don’t be hidebound printed on paper. Once built, the same by past success. Embrace enabling distribution system could then be lev- technology. Integrate the new to opti- eraged for delivery of other products of mize the whole. Leverage what is into all kinds, driving a new wave of growth. what can be. Along the way, Amazon faced the poten- THE SMARTER CITIES OPTION tial disruption of e-books as an alter- Utilities must continue to honor the native to print. By integrating e-books promise of reliable, safe, and affordable into the delivery system—coupled with electricity. As the grid is modernized, another new , the new technology will enable a smarter, Kindle—Amazon again expanded its more resilient electric system. But more role and relevance to consumers. Of is possible. With technology, the ability course, all of this Internet-enabled dis- to sense anything, anywhere, at any tribution requires a system of computer time is on the rise, as is the capacity to servers so robust that excess capacity store and to analyze digitized data. could be shared, even with competi- tors. That led to Amazon Web Services. How might utilities—as trusted purvey- ors of electricity—combine and inte- Reflect for a moment on Amazon’s grate these new capabilities into new experience. What if Mr. Bezos had streams of value in service to commu- defined Amazon as strictly a distrib- nities? What role might electric utilities utor of printed books and printed play toward improving water services, books only? What if e-books were kept building operations, transportation apart from, rather than made a part of, modes, and more? the distribution system? What if he’d refused to leverage Amazon’s assets The time to experiment with such in to new, diversified services? What if options is now, while the bulk of mod- he’d fought to protect only that which ernizing investments lies ahead. Along he’d first created rather than stand as the way, we’re certain to discover new a champion for something more, some- value that utilities can deliver—as cura- thing greater? To the good fortune of tors of prosperity. As champions, again. many, he did none of these things. Amazon’s transitions offer potent les- sons for utilities paying attention and

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CHAPTER 3 ENERGY FUTURE

he future can be a hazardous place, so we best not forget Yogi Berra’s admo- nition, “You’ve got to be careful if you don’t know where you’re going, because Tyou might not get there.” The authors of the essays in this chapter have their feet on terra firma and a good sense of what lies ahead. But, ultimately, the path to the future is never quite clear. Ralph Izzo, Chairman, President and CEO of PSEG, reflects on a call he fielded in the aftermath of Superstorm Sandy with President Obama. The President wanted to know when Newark Airport would be operational again and when the northern New Jersey refineries would be back online. PSEG’s 2.2 million electric- ity customers all had similar questions. Electricity powers nearly everything we do, so reliability and resilience are vital. Our society and our economy are more dependent than ever on electricity, and customers want safe, reliable, clean—and affordable—energy. Energy efficiency, our most cost-effective resource, is critical to the future. But, the future also means we will need more collaboration with technology firms, Izzo says, to innovate and bring customers the services they want. In the future, he believes, we will value the power grid even more. It’s the best battery on Earth! Arizona Corporation Commissioner Bob Stump cleverly peers into the future through the lyrics of a Gershwin song, “Our love is here to stay.” Central station power plants and the power grid are here to stay, he says, as is a new partner—distributed energy resources. Stump observes that electric companies and distributed generation advocates often act like an unhappy couple, attached for life, with quirky co-dependencies. For example: renewable energy has price stability, which natural gas lacks. But a steady and stable supply of natural gas can moderate the variability of renew- ables. In the end, Stump notes, all of us in the energy arena are in this together, and together we will “go a long, long way” if we simply recognize it. Robert Marritz, Editor and Publisher of Electricity Daily and ElectricityPolicy.com, concedes that the electric power industry is navigating rough seas and a profound transition. But, he believes that electric companies are also facing four great oppor- tunities, which he describes.

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With our eyes on the “future, we believe energy companies need to go beyond reliability by providing greater resiliency, produce electricity in concert with the environment, and offer tools and innovations to customers. “—RALPH IZZO

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A Clean, Efficient, Affordable, and Resilient Energy Future

RALPH IZZO Chairman, President and CEO, PSEG

n October 28, 2012, I was stand- New Jersey again be able to produce O ing in PSEG’s control room with so people could drive? our operations team watching as a big We also received calls from many cus- storm moved up the East Coast. We tomers. One was from a heart surgeon, were grateful that the U.S. forecasting who asked: “I have two open heart sur- service that tracks weather said we geries scheduled for today. Can you would miss the worst of the storm. But get us back?” Somehow, we did. the European computer model didn’t Two million of our New Jersey custom- agree. It said we would get slammed, ers discovered that 10 days without and indeed we did. New Jersey was hit electricity are 10 days without comput- with the most destructive storm in its ers, lights, TVs, hot water, hairdryers— : Superstorm Sandy. Devasta- even cell phones and IPads, once their tion was widespread—massive flooding batteries died. and tens of thousands of downed trees everywhere. Ninety percent of our cus- Their feelings at that time were perhaps tomers were without electricity. The best summed up in an email from a par- storm impacted everyone. ent. She wrote, “I know you have a lot of customers to restore. But if you don’t The next day, Edison Electric Institute get my electricity back on today, I am President Tom Kuhn facilitated a con- sending my teenager to live with you!” versation with energy company CEOs and the President of the United States. The moral of the story is simple: From The President asked a lot of questions, the President of the United States to including: When would we have New- that heart surgeon to that parent—our ark Airport back online? When would society is more dependent than ever the industry in northern on electricity.

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For our customers, reliability is no lon- Clearly, these customer expectations— ger enough. They want resiliency and for greater resiliency and greater envi- expect that we will get their power back ronmental protection—come with a on quickly when it is lost, even if due to price tag. a major storm. And they want the sys- But when do people even think about tem to be better prepared for those electricity? When they don’t have it. storms so they don’t lose power in the Supplying an essential service that first place. your customers take for granted is a Customers also want clean energy. For challenge, whether it’s a business, or the last roughly 40 years, this nation has that surgeon, or that stay-at-home par- implemented stronger environmental ent. How do you get people to pay for protection, and this will continue well something when they only recognize its into the future. value when it’s gone? Especially since Sandy, people are The solution requires innovative increasingly aware of and concerned thinking about how energy compa- about the environment. They know nies are regulated and how all of us something different is happening with use technology. the weather. And, whether they believe The vision I have for our company is in climate change or not, they want for our customers to use less electric- to breathe cleaner air and want us to ity and natural gas to achieve the same reduce emissions. level of comfort or economic output. There are a variety of ways to reduce Energy efficiency can be a critical part emissions: Carbon-free nuclear gener- of the solution. After all, the cheapest ation produces about 20 percent of our and cleanest kilowatt is the one you nation’s electricity. Renewables clearly don’t use. This is where we need to have a growing role. At PSEG, we’ve get policy makers to think first. And, invested more than $1 billion in solar on indeed, in many states across the U.S., our network, and our customers have many policy makers have taken steps spent millions more on private rooftop to support energy efficiency, which solar systems. We recently completed is attracting more investment but has our 28th grid-connected solar facility enormous untapped potential. and the eighth to be built on a or The second area is technology. Energy brownfield site, feeding clean energy companies need to partner with tech- to all of our New Jersey customers. nology companies and innovators to

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develop and apply technology that can amount of energy they are consuming. help customers use energy more effi- I see no reason why our industry should ciently, while also making sure that it’s now do the opposite of what the rest of more cost-effective, clean, and reliable. the economy is doing. It’s the only way to keep bills affordable while delivering cleaner and more resil- Efficient Clean ient energy. This does not mean, as some might suggest, that customers should become islands unto themselves. Most everyone wants the service we provide because it’s there at their fingertips and they don’t even have to think about it. It seems magical, but it’s real. That’s why Affordable Resilient the network is important.

There must be recognition of the value The electric power industry has a proud of networks. Increasingly, we may past. With our eyes on the future, we choose not to own our cars; we car believe energy companies need to: share via Lyft and Uber. We don’t nec- Go beyond reliability—by providing essarily need to own a bicycle; we can greater resiliency. share one via Citi Bike. And, we don’t Produce electricity in ways that even need to own a second home. We are increasingly in concert with can borrow one through Airbnb. the environment. Increasingly, what we are seeing today Offer universal access not just to is people recognizing the value of net- natural gas and electricity, but to works. And what is one of the most tools and innovations that allow amazing shared networks? The energy customers to lower their bills. grid. Even owners of the most decentral- And accomplish all of the ized resources, such as private solar on above while working to keep the rooftop, recognize the value of the electricity affordable. energy grid to export their occasional It’s no small challenge. But if we get it oversupply and to make sure they are right, we have the opportunity to create connected 24/7, when their own private a robust energy sustainability model solar may not be producing exactly the for our nation’s future.

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All of us in the energy “arena are in this together—trying to secure an affordable, reliable, and sustainable energy future—and we’ll go 'a long, long way’ if we recognize this key fact. “ —BOB STUMP

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What’s Here to Stay?

BOB STUMP Commissioner, Arizona Corporation Commission

he other day, as I was going about devices, greater customer empower- my business, a jazz standard ment—these also appear here to stay. Tpopped into my head. The song was Yet few predicted the shale revolu- George and Ira Gershwin’s “Our Love tion, the death of , flat demand for is Here to Stay.” You may remember electricity, widespread penetration of the lyrics: renewables, and so on. Trying to pro- vide a snapshot of the future is a daunt- The radio and the telephone, And the movies that we know ing task, but I will do my best, with a May just be passing fancies nod to the Gershwins. And in time may go But oh my dear Our love is here to stay Together we’re going a long, long way.

Believe it or not, the song sheds light on today’s energy dramas, which have become as intense as any telenovela or Puccini opera. When pondering our energy future, Electric DG + it’s critical to consider what is, or isn’t, Utilities Advocates a passing fancy, and what is “here to stay.” It is safe to say that central station First. The shale revolution has inar- power plants, and the grid, are here to guably been one of the most import- stay—even though some wish that they ant energy events of our lives. Solar, “in time may go.” wind, and natural gas constitute most Distributed resources are also here to of the new build in the U.S. today. Mar- stay. Sweeping environmental regula- ket forces, together with state renew- tions, lower clean energy costs, smart able portfolio standards, are all driving

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decarbonization. With coal on death solar photovoltaic (PV) watch, and little or no new nuclear in sector drove down PV costs dramati- the U.S., natural gas will likely replace cally, and now is installing solar an enormous amount of today’s base- at a record pace. In 2014, China added load power. Indeed, worldwide, over more solar and wind than and the next decade, more natural gas the United States combined. will likely be installed than any other Fifth. It often feels as though electric . utilities and distributed generation Second. It’s important to achieve effi- advocates are subjects in an arranged ciencies from old technologies, such as marriage in which one party or the extending the lives of nuclear plants. other is suing for divorce. Yet they rec- Upgrading an old plant brings benefits, ognize, in their heart-of-hearts, that but data analytics to maximize its out- they’re attached for life and must learn put can bring even greater benefits. to live together. Other forms of technol- ogy are also co-dependent. For exam- Third. Resource diversity matters. Thankfully, the nation has gone from ple, renewable energy has price stabil- one diverse mix to another over the ity, which natural gas usually lacks. Gas, past 10 years: From about 50 percent in turn, helps solve renewables’ inter- coal; 19 percent natural gas; 19 per- mittency issues. cent nuclear; and 9 percent hydro and Will the natural gas and electric indus- other renewables to about 33 percent tries work more closely to align their coal; 33 percent natural gas; 20 per- interests, as legacy assets retire and cent nuclear; and 14 percent hydro and renewable energy resources continue other renewables. As such, it appears to grow? How will the interrelationship that the U.S. is not abandoning the between central station and distributed tried-and-true for the next hot thing. resources play out? Energy efficiency, energy-management systems, electric Fourth. Arguably, no other nation affects our energy future more than vehicles—innovation is everywhere, and China. Going forward, new capacity in everything is interconnected. Decen- China will include hydro, renewables, tralized and centralized, disruptive and nuclear at the expense of coal. Chi- and traditional technologies, markets na’s economic slowdown has reduced here and abroad—none is isolated from demand for oil, contributing mightily to the other. the historic collapse in its price. China’s

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Together, as the Gershwins say, solar investing too heavily in less efficient and energy storage can indeed “go a means of production? Will customer- long, long way.” But will the water and produced power come to seem over- energy sectors work together more rated, if it means higher energy costs closely, as they should? and lower reductions in CO2? The utility must redefine its mission as It’s been said that in terms of relation- it interacts with consumers and third- ships, we have a choice in life—to be party providers. How will it adapt to lonely, or to be irritated until death do a customer-driven model? Allegedly, we part. All of us in the energy arena the average customer spends just a are in this together—trying to secure an few minutes a year pondering his elec- affordable, reliable, and sustainable tric utility. Will new customer choices energy future—and we’ll go “a long, change this? long way” if we recognize this key fact. Will we regulators develop rates that We may irritate more than love one support grid upgrades and allow seam- another as we travel the ahead, less integration of new technologies but the brighter energy future we all without impairing reliability? What will seek will be well worth it. the utility’s core services be? Will it be a power grid manager and aggrega- tor? As more points of entry proliferate, with more points of entry for hackers and evildoers, mustn’t utilities pursue more sophisticated data analytics and cybersecurity? Will the utility remain a vital anchor in an increasingly dis- persed system?

Sixth. When it comes to packing the biggest punch against carbon diox- ide (CO2) reductions and keeping costs down, many argue that big beats small. A greater emphasis on customer empowerment can lead to inefficien- cies. Can customers feel empowered via distributed resources without our

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The electric utility’s “role as the power grid manager, operator, and planner to coordinate and integrate resources into the grid has never been clearer.

“—ROBERT MARRITZ

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Electricity Today and Tomorrow: Clean, Consumer-Oriented, Collaborative

ROBERT MARRITZ Editor and Publisher, Electricity Daily and ElectricityPolicy.com

he electric power industry today whether we go 100-percent renewable, faces the greatest collection of or just move toward that goal. The Topportunities it has seen in more than energy that electric utilities provide is 50 years, perhaps since the advent of increasingly clean. Thomas Edison’s in America depends on the power grid. lower New York, where it all began. The grid is an amazing technology that Yes, the problems electric utility com- efficiently delivers reliable and safe panies face are immense and chal- energy so customers always get the lenging: meeting competitive threats; power they need. It is the cheapest, satisfying hard-nosed analysts and rest- best battery there is. less shareholders; pleasing customers A huge growth opportunity exists who take electricity for granted; and for electric utility companies, as the navigating a complex and largely out- transportation and buildings sectors dated regulatory system that breeds its move toward clean energy. Both sec- own pressures. tors are carbon-intensive and would But consider these four opportunities. benefit from greater . The move toward electric transportation, America and the world are commit- in particular, could significantly reduce ted to a clean energy future—some- carbon emissions. thing the electric power industry can, in part, provide. It matters little

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Technology is opening channels to Buyers Alliance to support the dozens customers and communities that of companies that want to invest in electric utility companies should be clean energy. Some utilities are already part of. As Avista Corp.’s Roger Wood- active in this area and others can be too worth told attendees at the Institute if they are nimble and customer-centric. for Electric Innovation’s (IEI’s) Power- Many smaller customers also want to ing the People event in March 2016, go solar, and they want choices too. there is growing interest in smart cities. In states where allows, util- Communities worldwide are wrestling ities can offer their smaller customers with how they can function better—for an easy option to access solar, as a transportation, safety, water, power, Utah company is doing. Cindy Crane, and education. “How might utilities President and CEO of Rocky Mountain combine and integrate new [digital and Power said her company is sponsoring distributed grid] capabilities into new a novel approach—a form of community streams of value in service to communi- solar they call Subscriber Solar—that ties?” he asked. Shouldn’t utilities have makes solar available to customers who a seat at the smart cities’ table? want its benefits but prefer to avoid the With new energy choices increasingly investment and other issues associated available, utilities are engaging with with installing private rooftop solar customers to help meet their objec- panels themselves. tives. Meeting customer needs is what utilities do, which is why companies like Dominion Virginia Power, Duke Energy, and NV Energy, among others, are helping large corporate custom- ers like Apple, Google, and Microsoft meet their clean energy and sustain- ability goals. The utilities take pains to assure that the arrangement is not only revenue neutral for its other cus- tomers, but possibly beneficial. The World Resources Institute, World Wild- life Fund, and Rocky Mountain Institute recently formed a Renewable Energy Collaborative Future

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Collaboration with technology com- panies and close relationships with customers will be key for utilities in the future. As NorthWestern Energy CEO Bob Rowe noted at IEI’s Powering the People event in March, “We’re good at projects, we’re good at networks, we’re good at the community level work- ing with people. But we’re not going to have the magic application,” so it behooves energy and technology com- panies to work together. And, in fact, many are doing just that. It’s certain that clean energy and dis- tributed resources are here to stay, and that technological innovation will be driving industry change. While there will be growing numbers of participants active in the energy space, the electric utility’s role as the power grid man- ager, operator, and planner to coordi- nate and integrate resources, large and small and ever more complex, into the grid has never been clearer. The four opportunities noted at the beginning of this essay should be open- ing enough for the alert, nimble, and cus- tomer-centric electric utility company.

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About the Institute for Electric Innovation The Institute for Electric Innovation focuses on advancing the adoption and appli- cation of new technologies that will strengthen and transform the power grid. IEI’s members are the investor-owned electric companies that represent about 70 percent of the U.S. electric power industry. The membership is committed to an affordable, reliable, secure, and clean energy future. IEI promotes the sharing of information, , and experiences among regu- lators, policy makers, technology companies, thought leaders, and the electric power industry. IEI also identifies policies that support the business case for the adoption of cost-effective technologies. IEI is governed by a Management Committee of electric industry Chief Executive Officers. In addition, IEI has a Strategy Committee made up of senior electric industry executives and a select group of technology companies on its Technol- ogy Partner Roundtable.

About the Edison Foundation The Edison Foundation is a 501(c)(3) charitable dedicated to bringing the benefits of electricity to families, businesses, and industries worldwide. Further- ing Thomas Alva Edison's spirit of invention, the Foundation works to encourage a greater understanding of the production, delivery, and use of electric power to fos- ter economic progress; to ensure a safe and clean environment; and to improve the quality of life for all people. The Edison Foundation provides knowledge, insight, and leadership to achieve its goals through research, conferences, grants, and other outreach activities.

Institute for Electric Innovation 701 Pennsylvania Avenue, N.W. | Washington, D.C. 20004-2696 202.508.5440 | Visit us at: www.edisonfoundation.net