The 51st State: Full text of Julia Hamm’s SPI speech

We just heard from Nat and Steve about all great things that have happened over the past year that give us reason to celebrate here at SPI. And in the coming year, we will continue to have successes that give us reason to celebrate. 

Let’s now step back to look at the big picture, a picture that shows us that solar is changing the overall business of energy, far out of proportion to its relative slice of today’s energy pie.

Solar is going mainstream. This change challenges the status quo.

It challenges the traditional hierarchy of energy sources, it challenges the regulatory framework, and it challenges the design and management of the grid.

At the same time, it reinforces an essential truth: As solar grows into a mature part of the energy base, it becomes more dependent upon a healthy grid. Solar needs a strong grid infrastructure for continued growth. This means grid operators need to accommodate and adapt to solar, and they have to remain around to do their important but evolving job.

Each key stakeholder group has a critical role to play in this transition:

•Utilities must adjust to the unique demands of solar.

•Regulators must change the way they allow utilities to conduct their business.

•And solar providers and customers must appreciate the importance and value of the grid as well as help to maintain its strength.

We all know how hard change can be, but as John F. Kennedy said, “Change is the law of life. And those who look only to the past or present are certain to miss the future.”

We are at the beginning of an evolutionary shift from a grid that is almost entirely built and run on central station power and one-way power flow, to a grid that is increasingly decentralized and diverse.

We only have to look across the Atlantic to Germany, and across the Pacific to Hawaii and Japan to what the future could hold for the continental U.S.

Last month SEPA took 30 utility and renewable energy executives to Germany for our annual Fact Finding Mission where we heard first hand how this transition evolved, and continues to evolve, in their country. We met with representatives from the German utilities, who openly shared that they had turned down the German government’s repeated invitation to be at the forefront of the transition back in the early 2000s.

At that time, the cost of renewables was high enough that the return on investment wasn’t good enough to compel them to say yes — a decision which they are regretting today. They recognize that they had focused only on immediate financial impacts and underestimated the long-term strategic and economic value.

And in Hawaii, the solar market exploded before all the energy players in the state could collaborate to adequately prepare the grid for a major influx of distributed generation. As a result, it has been necessary to put a halt on additional interconnections for a significant part of the state until grid upgrades, requiring substantial time and investment, can be made.

And in Japan, five of the country’s 10 major utilities have announced they will no longer accept new renewable energy for the time being until they can strengthen their grid.

All of this may sound like bad news, but here’s the good news: In the continental U.S,. we have the opportunity to learn from the experiences across the ocean and to do things differently.

I’m happy to report that this is already starting to happen, yet another reason to celebrate. We are getting ahead of the curve. There are important stories unfolding across the country to illustrate how U.S. utilities are already adapting to the change that solar is beginning to trigger.

For example, Sterling Municipal Light Department – the municipal utility in Sterling, Massachusett – listened when its largest commercial customer wanted to go solar. Sean Hamilton, Sterling’s general manager, saw an opportunity to partner on the proposed one MW project and create a win-win-win situation for the customer, the utility, and all customers rather than going the traditional route of net metering. In doing so, he was able to lower the ultimate cost of the delivered solar, and share that savings with all of his utility’s customers.

The project was so successful that it has led to additional solar projects, leading to more business for local solar developers. Today solar is the lowest cost source of electric power for the citizens of Sterling, MA and its municipal utility.

Let me say that again, today solar is the lowest cost source of electric power for the citizens of Sterling.

We don’t have to go far to see another example, moving down the East Coast a bit to New York. PSEG-LI is preparing to facilitate significant additions of renewables and to enhance power quality, grid reliability, and resilience across a vulnerable grid area in the South Fork of the island. These efforts have included the selection of over 21 MW of appropriately sited solar PV facilities to encourage locational capacity, and proposing to develop, own, and operate a 5 MW / 25 MWh battery storage system.

These efforts, in combination with a handful of other grid management approaches, could allow the utility to defer $294 million of transmission system investments through 2022. The efforts of PSEG-LI have emerged as a result of both the havoc caused to the grid by Superstorm Sandy in 2012, and New York’s Reforming the Energy Vision (or REV) initiative to reform the state’s energy industry and regulatory practices.

And as we move farther down the East Coast, we make a stop in Georgia, a state that does not require its utilities to meet a renewable energy standard. With abundant electricity from traditional sources such as coal and nuclear, solar in Georgia seemed a long way off as recently as two years ago. But in a bold move, the utility is diversifying its generation portfolio now that wind and solar costs have declined. Georgia Power is on track to add more than 1400 MW of new renewable resources by 2016, and along the way will generate approximately one and a half billion dollars of solar investment in Georgia.

Just last week, Georgia Power reported that the average bid in their latest solar procurement round was less than 6.5 cents, far below their avoided cost, with many bids coming in below that average.

Can you believe that I just provided 3 examples of really exciting stuff happening in solar that are all from the East Coast? What a difference a few years can make!

But of course, this week we’re also celebrating the fact that SPI is back in the West, where the U.S. solar market first took hold. And we all know that there is really exciting stuff continuing to happen in the West as well.

For example, right here in Nevada, NV Energy – now owned by Warren Buffett’s Berkshire Hathaway Energy – is responding to a bipartisan plan signed into law last year by the Governor to take 812 MW of coal generation off-line over the next six years. NV Energy’s plans include replacing the coal with a combination of gas and 550 MW of renewable energy that includes at least 215 MW of solar.

As these examples demonstrate, utilities are clearly gaining momentum in solar. New programs and projects are announced or launched every week. It can be hard to keep up. That’s why SEPA has invested in the creation of its Utility Solar Database to keep everyone abreast of what’s happening with utilities and solar across the nation.

Access to the Utility Solar Database is one of the many valuable products and services provided to SEPA members. If your company isn’t already a member, please stop by our booth this week for a demo of the database and to learn about the benefits of membership.

And now that we’ve returned from our commercial break, let’s get back to business…

Even with all the utility progress that’s being made, it won’t be enough without even greater change.

Our market structures, regulatory frameworks and rates are designed for a 20th century system. Our attention today is consumed by conflicts between solar and utility interests about who wins and who loses as we grow solar under these old rules and markets.

What if it were different? What if we could start all over again…start with a clean slate….change all of the things that today are impeding progress on greater integration of solar?

In the past at SPI, I have asked you to imagine ‘Tomorrow Power & Light’, a fictional utility in the year 2030 that gets 30% of its electricity from solar.

Today, I’m going to ask you to consider a new place where Tomorrow Power & Light’s service territory is located: the 51st State. In the 51st State, there is no pre-defined electricity or solar market. At the state level there are no market designs, no policies, no subsidies for any type of energy resource. There is a suite of electricity resources available, including solar. There is a grid to deliver power and balance the system. And there are the customers.

If we could start all over again in a new 51st State, how would you design the electricity market? How would you make sure that rapid distributed solar growth occurs, while ensuring continued delivery of affordable, reliable and safe electricity service to all customers?

SEPA invites you to help shape the 51st State, a hypothetical test-bed that offers a new way to think about solar – but just as importantly, a new way to think about a resilient and reliable grid that powers the lights in this room and the phones in our pockets.

SEPA’s 51st State initiative is being launched this week. It is a national thought leadership platform where anyone can share their ideas about how to build a solar market while maintaining the functions of the grid. This is your opportunity to get your vision and ideas into the national spotlight.

By envisioning a solar future outside of the current paradigm using the intelligence of the very people in this room, we believe that together we can find ways to make more effective progress in the crucial next few years.

So track us down at the SEPA booth, #4915, to talk to us about the 51st State. Ask for me, Bob Gibson, John Sterling or Mike Taylor. If none of us are there, someone on our team can tell you when one of us is scheduled to be at the booth.

And importantly, go to www.sepa51.org to sign up to receive notifications about the initiative launch and progress. If you haven’t already, you should shortly be receiving an email from SEPA with a link to the site.

We will start soliciting your ideas for the 51st State beginning in November. But let’s start the conversation here at SPI. How would you build the future?