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Why you should read the DOE’s Quadrennial Energy Review

One does not, as a rule, expect sentences in U.S. government reports to jump out and hit you between the eyes with their simplicity of expression and acuity of insight. So I was quietly stunned to find one in the Department of Energy’s recently released Quadrennial Energy Review (QER), page 7-13.

“Only when the depth of grid and consumer interdependencies are understood equally by each group can the 21st-century electricity system be fully realized.”

Coverage of the QER — most of which has been in the energy industry media — focused on its admittedly unnerving sections on grid cybersecurity. Here, in stark detail, the report lays out the connections between the grid’s technological complexities and growing vulnerabilities, and the very real threat of a cyberattack disrupting our national defense, economic prosperity and daily lives.

But the report’s analysis and recommendations on cybersecurity and resilience are only part of its actual stated purpose, which is to provide a high-level exploration of the ongoing transformation of the U.S. energy sector. The above-quoted sentence is one of several pithy observations that capture, in highly accessible terms, the evolving roles and relations of utilities, customers, technology providers and policy makers as they navigate the transition’s many opportunities and challenges.

The big picture: The QER’s vision of the overlapping goals and priorities of U.S. energy sector transformation. (Source: U.S. Department of Energy)

More important, reading the QER will make you care about this process and its outcome. For general and knowledgeable readers alike, it validates that the energy transition is more complex than the reductive, adversarial narrative of utilities versus solar that continues to be a primary focus for mainstream media. It also provides balanced discussions of core issues — such as the ongoing need for baseload power even as renewables require that such resources be more flexible. Finally, it points to a range of undercovered stories that reporters and their editors are missing.

Value, visibility and a systems approach to DERs

If one had to summarize the QER in a single word, it would be “balanced” — no doubt the result of the Department of Energy’s extensive efforts to get input from a range of industry stakeholders.

It approaches solar as the front end of an ever-increasing number of distributed energy resources (DERs) — including storage, smart home devices, electric vehicles, and demand response — now creating two-way flows of power and information on the grid.

With many DERs installed on the customer side of the meter, the report recognizes that valuation and visibility of these resources are essential to realizing their full value for grid modernization and efficiency. Here is where the interdependencies of grid and customers must be fully recognized.

The challenge for policy makers, the report says in another of its concise, astute sentences, is to find “innovative ways  to value the costs and benefits of DER to the grid and improve market mechanisms that align investments, behavior and operations.”

“Currently, many valuation efforts focus on the contributions of specific energy technologies, but to be fully effective, valuation must be done in a system context, and estimating the value of an individual technology outside the system context is suboptimal,” the report says.

The QER is also clear on the central role of rate design in creating price signals to promote the kinds of technology adoption and behavior change that will be required to achieve long-term system change. Its discussion of net metering acknowledges the broad use and benefits of retail rate compensation as an incentive for solar market growth, while also noting its limitations in promoting the wider use of DERs for grid-support services.

“Net metering only compensates for energy services without provisions for payments for grid services such as volt/var (volt-ampere reactive) support and other ancillary services. New compensation arrangements could incent customers to provide these services, but without new payment arrangements customers are disincentivized to provide grid services that may reduce the amount of energy exported to the grid.”

The report’s approach to data visibility and access issues is similarly thoughtful. Visibility of DERs on the customer side of the meter is framed in terms of basic operational efficiency — what cannot be seen cannot be managed to provide benefits to both customers and the grid.

“Optimization of behind-the-meter assets will require the design of coordination, communication, and control frameworks that can manage the dispatch of these devices in a way that is both economical and secure, while maintaining system reliability…

“Grid operators and power dispatchers need better visualization of behind-the-meter resources for capacity planning and grid operations. Grid operators also need to understand the degree to which they can rely on customer-sited assets’ power production to offset capacity requirements.”

At the same time, the report acknowledges the sensitivity of the privacy issues involved here, and the need for business and regulatory solutions that can encompass different levels of utility-customer engagement and interaction. Interestingly, the market research firm Parks Associates has just released a study showing that 51 percent of U.S. households with broadband access would be willing to share data from a smart thermostat or water heater for a discount on their electric bill.

Quick hits

Another reason many reporters may have narrowed their coverage of the QER to cybersecurity is that the report is so comprehensive that brief summaries of any of the topics must implicitly shortchange the research and thought that went into them.

However, given limitations of time and space, I’m going to try.

— Perhaps the most shocking statistic in the report is its estimate that more than 500,000 homes across U.S. territories and Native American lands do not have electricity. That figure includes more than 14 percent of all homes on native reservations. A related issue is the lack of broadband access in rural and isolated communities, which limits their access to the Internet of Things and the resulting two-way flows of power, communication and information that are essential for grid modernization.

Among the report’s 76 recommendations are calls for a full commitment to electrification of native communities, and financing and other assistance for small, rural utilities to set up broadband services in their regions.

— Miscellaneous electrical loads — aka, MELs — are one of the report’s quirkier topics. MELs are all the new digital and other devices consumers are now plugging in at home and work, which don’t fit into existing utility load profiles such as heating, refrigeration, lighting and air conditioning. MEL-related energy consumption is on the increase, even as overall building energy use is decreasing. Lack of energy efficiency and other standards for these devices is creating problems for the utilities and grid operators that have to forecast how much power they will need.

The report recommends improved data collection, technology development, product testing, labeling, and minimum standards programs to better factor MELs into resource planning.

— Besides its cybersecurity recommendations, the QER’s most far-reaching idea centers on an expanded role for federal energy loans in grid modernization and transmission planning. “Some of the benefits of grid modernization are realized over time, as the electricity system itself is changed by technology and market innovations,” the report says. “Additional funding resources would bridge the gap between investment costs and realization of benefits and would enable utilities to invest in grid modernization. A relatively low-cost permanent Federal financing system could be established by setting up a revolving loan fund with one-time seed capital.”

Such loans could be available to state agencies, regional power pools or other public-private entities involved in multi-jurisdictional transmission projects.

A related recommendation calls for improved permitting processes for cross-border transmission projects with both Canada and Mexico. These kind of projects could allow for higher levels of renewable energy on the grid, through both imports and exports, which in turn would provide greater grid stability.

The broad view in these three brief summaries gives you some idea of the QER’s range and potential impact. Its comprehensive, balanced approach to all issues should be a cornerstone for industry stakeholders, whether or not you agree with specific ideas or recommendations.

The most important thing is to simply start reading.