by Bob Shively, Enerdynamics President and Lead Instructor

Much discussion lately has focused on the future of the electric utility. Some believe that utilities won’t change much despite all the hype, while others fear a death spiral will result in the failure of utilities. And others envision a transition to new business models centered on network-only companies or robust energy services companies.

Everyone recognizes that regulated utilities can’t make preparations for the future without the support and consent of their state regulatory commissions. Lately in California and Hawaii, the commissions have formally shared their views of the future. This week and next on our blog we will explore the Hawaii Public Utilities Commission’s thoughts. In a later blog post we will look at thoughts from the California Public Utilities Commission.

In Hawaii, the Commission recently rejected the Hawaiian Electric Companies (HECO) Integrated Resource Planning (IRP) filing. In rejecting the filing, the PUC stated that the IRP appeared to be a series of unrelated capital projects without focus on moving toward a sustainable business model. To support its concerns, the PUC released a 30-page exhibit titled “Commissions Inclinations on the Future of Hawaii’s Electric Utilities: Aligning the Utility Business Model with Customer Interests and Public Policy Goals”[1].

In the Exhibit, the PUC notes that “Hawaii has already entered a new paradigm where the best path to lower electricity costs includes an aggressive pursuit of new clean energy sources.”  This is because renewable energy is now cheaper than the state’s existing fossil fuel-based supply.

The PUC goes on to say that the objectives of lower stable electric bills, expanded customer energy options, and reliable energy service in a rapidly changing system operating environment are essential principles for the future strategic business direction of the utilities. The PUC then provides guidance for future business strategy in three areas of generation, transmission and distribution, and regulation.  This article explores the first two.  Next week we will look at regulation.

Creating a 21^st Century Generation System

According to the Commission, HECO should:

• seek high penetrations of lower-cost new utility-scale renewable resources
• invest in required changes to allow integration of the maximum level of cost-effective renewable resources, possibly with “innovative shared-savings incentive mechanisms”
• pursue a balanced portfolio of new energy resources including wind, solar, biomass, hydro, geothermal and waste-to-energy, with geographic dispersion and a mix of utility scale and distributed resources
• invest in grid flexibility to support utility scale and distributed renewable resources including investments in increased flexibility of traditional generation, plus new tools such as storage, demand response, and load management techniques consistent with the Integrated Grid articulated by EPRI[2]
• develop strategies to ensure that all generation resources support system stability, whether owned by the utility, an Independent Power Producer (IPP), or a customer
• unbundle provision of ancillary services to allow all technologies including demand response, energy storage, and customer-owned generation to compete
• expeditiously look at changing the traditional generation fleet through retirements, efficiency improvements, and switching fuel to Liquefied Natural Gas (LNG)

Creating Modern Transmission and Distribution Grids

Steps HECO should take include:

• preparing to lead development of advanced grids that can interlink a bulk power system that has a high level of renewable generation with a profusion of DER (distributed energy resources)
• prepare for a growing role of non-utility energy service providers that can “intermediate the relationship between the utility and the customer” by aggregating distributed resources in controllable resources that replicate current conventional generation resources (“virtual power plants”)
• incorporate virtual power plants and integrated energy districts (essentially what is often called microgrids) into power system design and operations
• consider non-transmission projects as an alternative to new transmission
• take steps to effectively integrate new large-scale renewable projects such as locating them at existing power plant sites
• investigate interconnection of the various island grids
• develop Integrated Energy Districts (microgrids) that can become alternatives to transmission expansion
• adopt advanced distribution system technologies to allow high penetration of distributed generation and electric vehicles and to transition the system from one-way to bi-directional power flows
• develop an advanced metering infrastructure program
• develop a distributed generation interconnection plan that “identifies how customers will install, and the utilities will utilize as an integrated DER portfolio, advanced inverters, distributed energy storage, demand response, and electric vehicles.” This includes provision of ancillary services on the distribution system, two-way communication with customer resources, a non-export service option for owners of distributed generators, and utilization of distributed storage
• develop and maintain cyber-security requirements for new distribution technologies

So given what the Commission wants the Hawaiian electric grid to become, how do they intend to make it happen?  We will explore that next week in our discussion on regulation.

References:

[1] To obtain a copy, go to http://puc.hawaii.gov/wp-content/uploads/2014/04/Decision-and-Order-No.-32052.pdf

[2] See http://www.epri.com/Our-Work/Pages/Integrated-Grid.aspx