What’s Standing in the Way of a Carbon Free Future?

100% renewable! 100% clean! 100% carbon free! One or all by 2030, 2040, 2050! These are variations on goals and requirements that municipalities, corporations, utilities and states are setting to address and mitigate climate change. They are usually accompanied by programs and policies to promote renewables and clean energy through incentives, technical assistance, codes and standards. However, their efforts are running into perhaps an unexpected obstacle – the arcane world of utility regulation. These processes govern how utilities build out the electricity system needed to provide service to customers and integrate the increasing amounts of renewable and clean energy these same customers are adopting as technology options increase and costs decline. The pace and scope of regulatory processes are out of sync with the speed of technology change and adoption.

I know it well, having spent the last seven years advocating for clean energy businesses, the six years before that at a utility seeking to drive changes in the industry landscape and approximately 15 years before that as public utilities commission chair, commissioner and staff leading efforts to improve the efficiency of the system and expand customer choice.  The current regulatory framework does not facilitate, or even readily accommodate, the innovation and rapidly changing technologies that utilities and other market players will need to deploy to achieve a renewable/clean/carbon free energy future. I recently joined SEPA to tackle this head on.

So what is standing in the way of advancing a clean and carbon free energy future?  It’s certainly not lack of interest or effort. A number of states have launched a variety of informal collaboratives and formal regulatory proceedings – all helpful and designed to move the ball forward – but progress has been slow and occasionally derailed.  Why is this? Perhaps the fundamental issue is that we haven’t defined the right problem.

Earlier this year, SEPA launched the Renovate Initiative, whose mission is to spur the evolution of state regulatory processes and practices to enable innovation, with a focus on scalable deployment of new technologies and operating models, to meet customer needs and increasing expectations while continuing to provide clean, affordable, safe and reliable electric service.  At its core, the Renovate Initiative seeks to identify innovative solutions to the right problems.

To do this, SEPA has brought together regulators, policymakers, legislators, utilities, solutions providers, consumer and environmental advocates – representing the broad range of stakeholders involved in efforts to advance a clean and modern grid.  SEPA’s neutral, non-advocacy educational approach makes us uniquely suitable for convening this effort. Our goal is to develop a menu of solutions or promising practices that will bring about real change that benefits customers.

To start, the Renovate Task Force and Partners have identified four core problems hindering innovation that, if resolved, would make the regulatory framework more flexible, nimble and better suited to facilitate new advanced technologies:

• People and Knowledge: educating regulators and all stakeholders about the benefits and costs of new technologies and operating practices
• Managing Risk and Uncertainty: clarifying rules (through both regulation and legislation) to provide regulatory flexibility to approve utility investments in new and innovative technologies and operating practices to take advantage of clean energy opportunities (utility, non-utility and customer-owned)
• Managing Increased Rate of Change: making sure regulatory decisions are issued in a timely manner, aligned with new technology and practice advances
• Complexity of Objectives, Cross Coordination: balancing broad and sometimes competing objectives in determining the public interest (e.g., reasonable rates, customer choice environmental protection)

Real world events are providing an early indication that we are on the right track.  One example is recently enacted legislation in Nevada that would give the public utilities commission the authority to adopt regulations and approve alternative rate-making proposals from utilities.  Alternative rate-making mechanisms include: performance based rates (PBR), formula rates, multi-year rate plans, subscription pricing, earnings sharing, and decoupling.  The legislation also importantly gives the PUC discretion to consider other options. The legislation is sponsored by Renovate Task Force member and Nevada Senator Chris Brooks, and supported by another Task Force member, NV Energy parent company Berkshire Hathaway Energy, as well as the Nevada Resort Association, Nevada Conservation League, Solar Energy Industry Association and SunRun.

We will measure the success of the Renovate Initiative by the degree to which we see increased collaboration and innovation in the energy system, changed perspectives on the benefits of new technologies and decisions being made that lead to greater customer and societal benefit.  What does that mean in practice? It means regulators and stakeholders will adopt, adapt and implement new processes to find common ground and value through both formal regulatory proceedings and less formal collaborations.  Regulators will be better equipped to tackle the increasingly complex challenges they face so that utilities can move ahead with investments that meet new customer expectations for clean, affordable, reliable, safe, and resilient energy services as well as take advantage of products and services offered by competitive solutions providers.  And importantly, this menu of new solutions and promising practices can be used in a variety of contexts: states that are vertically integrated and those that are restructured; utilities that are investor-owned, cooperatives and municipals; rural and urban, large and small, and differing demographics and geographies.

Moving forward, SEPA is holding monthly calls with the Task Force and Partners to build on the initial solution suggestions and develop Promising Practices papers that highlight actions from state markets that are ahead of the curve in implementing or exploring new approaches.  We also have an ideation workshop scheduled in conjunction with the NARUC Summer Policy Summit this July in Indianapolis, where we will work together to surface new out-of-the-box ideas and develop implementation paths for solutions sets we have already identified.

If you’ll be in Indianapolis and would like to connect on Renovate, feel free to drop me a line at [email protected].  Be on the lookout for the Renovate Promising Practices papers to start rolling out around that time too.

For more information on the Renovate Initiative and to view the full list of partners and task force members, click here.