Massachusetts could lead the nation in clean energy, but for one shortcoming

Massachusetts could be the most visionary and important clean energy leader in the country, but after only marginal advances during its most recent legislative session, continues to lack the long-term vision and plans that will transform the grid into a cleaner, more efficient, reliable, and affordable system.

Massachusetts’ success in energy efficiency was rooted in mandates and energy efficiency requirements for buildings and vehicle fleets. A similar, mandate-based model has ensured that the Commonwealth has made significant progress with distributed energy resource (DER) deployments and has established targets for energy storage, electric vehicles, and offshore wind. Renewables make up 13 percent of total energy usage in the Commonwealth, with decentralized renewable generation making up 9.2 percent of the nameplate capacity. Massachusetts has already exceeded its 2020 renewable portfolio standard (RPS) target and currently ranks third in the nation for cumulative, installed solar capacity, with 2,108 megawatts (MW) as of April 2018.

However, for a complete energy transition, leadership takes more than that. It requires building an ecosystem that supports infrastructure investment, innovative rates, DER valuation, and locational benefit analyses to enable the integration and optimization of these technologies.

As chronicled in one of Smart Electric Power Alliance’s (SEPA) recent reports, Massachusetts: A Great Clean Energy Story and the Next Chapter, the state prides itself in being among the top energy efficiency states in the country. Over the past few decades, this leadership has resulted in best practices on everything from building energy codes to building design, which have been emulated around the country.

However, the state has yet to convert this expertise in energy efficiency into a tangible vision and best practices for DER integration. Massachusetts showed early national leadership with the Green Communities Act of 2008 and the Energy Efficiency Resources Standard, revenue decoupling in 2008 to promote energy efficiency investments, solar net metering since 1982 and continual increases to the state RPS and technology capacity targets. However, leaders in the Commonwealth haven’t generated a singular and holistic vision, comparable to those in New York or California.

One area where a lack of a unified vision has slowed the energy transition is investments in advanced metering infrastructure (AMI). For the past three years, the Department of Public Utilities (DPU) has been considering proposals for AMI by the state’s investor-owned utilities. These plans were originally submitted in 2015 in response to the DPU’s 2014 grid modernization order. Utilities were required  to also address time-varying rates in their plans that signal to customers when it makes the most sense to use energy. But in May the DPU decided to table the approval of AMI, along with other customer-facing investments that the utilities proposed, arguing that the utilities needed to make a stronger case for undertaking these investments.

The DPU weighed the significant costs of full AMI deployment against the uncertain benefits from reduced demand, capacity savings, and customer participation in time-varying rates, and determined that, at present, the benefits would not justify the costs. The department found that the primary benefits of AMI would be derived from reduced peak usage as customers responded to pricing signals, which would require them to participate in time-varying rates.

An increasing number of customers have switched to competitive supply in the last few years. In the DPU’s May 2018 order, it stated that to maximize the benefits of AMI, it would need the certainty of wide adoption of dynamic pricing products from the competitive supply market.  However, evidence of wide adoption by the suppliers is lacking.

The DPU appeared to have concerns that responses submitted in 2015 were no longer relevant in 2018 because the technology and possible use cases had changed significantly since the original filing. Additionally, the investor-owned utilities within Massachusetts were split on whether AMI would have a positive benefit for the customer. Without a strong vision for how the data produced by AMI would be used, the DPU was handcuffed.

H. 4857 – An Act to advance clean energy

Multiple bills were proposed in the legislature this year, including some that called for a 100 percent renewable energy standard by 2047, removal of the state’s net metering caps, and increasing the state’s energy storage mandate to 2 gigawatts (GW) by 2025. However, the bill that passed through both chambers on July 30, 2018, H. 4857, makes a modest increase to the RPS from 25 percent to 35 percent by 2030, doubles the amount of offshore wind capacity, raises the energy storage target to 1,000 megawatt hours (MWh) by 2026 from 200 MWh by 2020 and removes the demand charge for distributed solar in Eversource’s service territory.

H.4857 did establish a unique concept of the clean peak standard. The legislation requires that “not later than December 31, 2018 the [Department of Energy Resources] shall determine the current percentage of kilowatt-hours sales to end-use customers in the Commonwealth from existing clean peak resources during the seasonal peak load hours to establish a baseline minimum percentage of kilowatt-hours sales to end-use customers that shall be met with clean peak certificates beginning on January 1, 2019.” After January 1, 2019, every retail electric supplier shall provide a “minimum percentage of kilowatt-hours sales to end use customers from clean peak resources.”

Unfortunately, details related to the implementation of the clean peak standard are not well developed in the legislation. Instead, the Legislature granted broad authority to the Department of Energy Resources to create the rules to implement the program. Again, this is a chance for Massachusetts to lead the nation, but the lack of a unified vision may well hamper the final product.

H. 4857 embodies the Commonwealth’s continued commitment to advancing clean energy, increasing economic development and reducing greenhouse gas emissions. However, it is ultimately not that different from the measures and tools the state has already been using. It appears that H. 4857 is merely a continuation of the same types of investments that the state has been making for the past decade – so unless the  DPU specifies more comprehensive ways to meet these targets, why would the outcome be any different this time?

What else could Massachusetts do to take DERs to the next level?

The Massachusett DPU’s recent decision to not move forward with AMI or other customer-facing investments means that the state will continue to operate the DER investments with blinders on, unable to leverage these resources as grid assets or operate them to reduce traditional grid investments. While the DPU did approve the grid facing investments such as advanced sensing, supervisory control and data acquisition (SCADA), distribution management systems, load flow analytics, advanced communications and Volt VAR optimization. The lack of AMI investments, however, leaves out a key component for maximizing the benefits of DERs.

By keeping customers in the dark about their energy usage and not enabling them to have the tools to more effectively manage their energy, the DPU’s decision represents a significant lost opportunity for saving energy, money, reducing greenhouse gas emissions and empowering customers to be active participants in their energy management.

States like Illinois, New York and California have undertaken innovative measures that are expected to transform their grids more dramatically than can be said for the Commonwealth. Illinois, New York and California are striving to not only deploy or continue to deploy more DERs, but to also maximize these technologies’ full potential to to achieve system-wide benefits, improve grid management and empower customers with more ways to meet their energy needs. Illinois and New York currently have relatively low levels of DER deployments but this is expected to rapidly grow. Both states are working towards distribution platform models that will more efficiently transact and manage energy services while ensuring reliability. All three states have either proposed or already implemented alternative rate options, pilot projects, ways to treat DERs as capital expenditure and enhanced data sharing.

New York and California stand out for leading the U.S. in DER integration. Both states are undertaking measures to implement enhancements to hosting capacity analysis, streamline the interconnection process, assess the true value of DERs to the grid and the degree and methods by which DERs may replace traditional infrastructure. New York and California have also developed robust demonstration projects to explore technical solutions to potential grid-wide challenges.

Table 1: Massachusetts compared to peers

Source: Smart Electric Power Alliance, 2018.

In comparison to these states, Massachusetts – with its high DER deployment levels – has not pursued DER integration and optimization in the same multi-pronged approach of investing in infrastructure, implementing more innovative rate structures and having a clear regulatory focus on the integration and optimization of DERs.

The new legislation and AMI decision are tremendous opportunities for Massachusetts’ electric utilities to lead in providing a future vision and strategic energy planning direction, as other jurisdictions have done. For example, Xcel Energy – Colorado’s 2016 negotiations involving 26 intervenors and three regulatory dockets led to a Global Energy Settlement, ultimately covering dockets on rate reform, solar market expansion and renewable energy planning. New York Power Authority (NYPA) is leading the nation with its effort to be the first fully digital utility in the country. Southern California Edison has a vision that slashes California’s greenhouse gas emissions by 80 percent with clean energy, efficient buildings and 7 million electric vehicles.

With this type of leadership behind a unified vision, the ‘next chapter’ – described in the SEPA report – of the Commonwealth’s clean energy journey could lead to a very happy ending for all.