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Electrification and the role of the utility: A new front line in the U.S. energy transition

If you want to know what issues are top of mind for those  who regulate electric utilities across the United States, the Winter Policy Summit of the National Association of Regulatory Utility Commissioners, aka NARUC, provides some quick, but eye-opening insights.

Besides the commissioners, the event, held every February in Washington, D.C., draws a small army of industry stakeholders — utilities, technology developers, and various trade associations and advocates — seeking to educate and influence these key policy makers.

The issues that emerged — if not top of mind, then definitely top of the agenda — on the opening day of the conference were electrification and the evolving role of utilities. Electrification, in this context, is a new, expanded focus on using electricity for power traditionally produced by fossil fuels — for transportation, water and space heating, manufacturing and even agriculture.

While the immediate priority is transportation — in particular, electric vehicles (EVs) and charging equipment — what became clear at NARUC is that this broader definition of electrification is fast becoming a new front line in the energy sector transition underway across the country.

EVs are only the first and most visible stage of a much bigger shift. We are on the cusp of a new era of electrification that could transform our society as thoroughly and dramatically as the build-out of the U.S. electric system did in the 20th century.

And now, as then, the role of utilities will be a central question.

Electrification presents a huge opportunity for the energy industry, according to Arshad Mansoor, Executive Vice President for Research and Development at the Electric Power Research Institute (EPRI). At present, electricity accounts for just under 20 percent of all the power used in the U.S. — to light our homes, grow our food, drive our cars and trucks; charge our cell phones, and operate our data centers, factories and office buildings.

“Efficient” or “beneficial” electrification — terms now being used by various advocates — could be the sweet spot between the economy, technology and the environment. In his presentation at the conference, Mansoor spun out visions of electrified agriculture that would bring indoor farms to city centers — and slash both water and pesticide use by 90 percent. All kinds of manufacturing processes could be electrified, he said. For example, the drying process for paper, now mostly done with steam, could instead be done with infrared radiation.

In April, EPRI will be rolling out a national assessment on the potential costs and benefits of expanded electrification, he said. The goal of the study is not to drive any specific policies or business models, he said, but to provide a solid foundation of research and data to allow individual customers and jurisdictions to make informed decisions.

Efficient electrification has to make sense, he said.

 

Interconnect, integrate, optimize

The role of the utility in the U.S. electric power sector transition — including electrification — is evolving along a continuum, said Rachel Gold, Manager for Electricity and Building Practices at the Rocky Mountain Institute. Speaking in a session on new utility business models — serendipitously scheduled between the two workshops on electrification — Gold set up two “straw men” at either end. The expanded utility model would incrementally adjust existing business structures to changing technology and customer demand, while the transformed platform operator would maintain the distribution system as a neutral interface for energy services.

Rachel Gold of Rocky Mountain Institute talks utility evolution at the NARUC Winter Summit. (Photo by K Kaufmann)

Neither model will exactly fit the differing forms and pace of transition now occurring across the country, she said. Rather, a range of hybrids is more likely, with individual jurisdictions determining what structures best optimize value for customers and the grid.

Gold was one of three speakers at the session, each of whom had written papers on the future of the utility for the Smart Electric Power Alliance’s (SEPA) 51st State Initiative, a project aimed at generating new visions, tools and thought leadership on the transition. While this session was not specifically about electrification, the crossover of resonance and subtext with the two electrification panels was hard to miss.

Speaking for Southern Co., Bruce Edelston, the utility’s Vice President for Energy Policy, argued strongly for the expanded utility model, amplifying on a 51st State white paper that made a case for utility ownership of EV charging equipment.

“The purpose of regulation is to protect competition, not competitors,” he said. “The customer is the focus — businesses competing for customers in a competitive market. . . . Telling utilities they can’t compete in certain markets (is) removing competitors just to protect other third parties.”

David O’Brien, Director of Strategies and Operations at Navigant Consulting, echoed Gold’s focus on the optimization of value, as well as social benefits through what he called the intelligent integration of distributed energy resources (iDER). His 51st State paper envisioned an “Energy Cloud” of diverse, distributed solutions, energy technologies and stakeholders.

“That’s a lot of what we are moving toward — interconnect, integrate, optimize . . . in real time,” he said. “Pricing is based on location and timing for when a resource is available, and managed to optimize (value).”

Where all three speakers found some common ground was on the key role that synergies and partnerships between utilities and technology developers would play in any future scenario of energy sector transformation. More to the point, both Edelston and O’Brien spoke of the blurring of lines and distinctions, between the customer and utility sides of the meter, and utility and third party roles.

“In front or behind the meter, that division is going away,” Edelston said. “The meter is a measuring device; it can be put anywhere. The key is saving customers energy and money.”

The complexity of operating a distributed grid will be “the new normal for utilities,” O’Brien said. “We must rethink the regulatory model to allow innovation and incentivize desired outcomes. Who is in that space — utilities, third parties? Do we need to distinguish?”

RMI and SEPA hosted a Facebook Live discussion on Exploring the Evolution of Utility Roles.

 

Smart electrification

The complexities and nuances of these issues are already being worked out on the ground as utilities and technology developers test new programs and strategies. Great River Energy, an electric cooperative in Minnesota, has become the poster utility for smart electrification with its electric water heaters.

Speaking at NARUC, Gary Connett, Director of Member Services, explained how the co-op has created a network of thousands of electric water heaters that it can charge at night — using cheap wind power — and then aggregate during the day to shape and shave loads.

The co-op is currently working with a developer to create a community storage project, with interactive water heaters, as part of a new housing development, he said.

Yes, Connett said, utilities’ focus on electrification could be seen as self-serving, but “it doesn’t have to be like that. We can sell more electricity and remove carbon from the atmosphere. Great River wants to, as best as possible, manage or juggle all the variables. If we can get better at this, we can offer members better value. That’s not so bad.”

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