Electric Utilities Prepare for a Grid Dominated by Renewable Energy
“We have to think about the system as a renewable-energy-based system complemented by other things.”
A growing number of electric industry leaders agree that it’s only a matter of time before renewable energy resources dominate their grid systems.
In California, it’s already a reality, said Steve Berberich, president and CEO of California Independent System Operator Corporation. On a typical day, CAISO will pull about 30,000 megawatts of energy production, with around 6,500 megawatts from solar, 5,000 megawatts from wind and another 5,000 from geothermal and other services on the system. In addition, California’s grid system has roughly 4,000 megawatts of behind-the-meter solar, which is growing at a rate of about 70 megawatts per month.
On any given day, California gets more than 30 percent of its electricity from renewable energy. On many days that amount climbs to 40 percent, and on some days renewables reach 50 percent, said Berberich.
“Now we have to think about the system as a renewable-energy-based system complemented by other things,” he said, speaking at the Edison Electric Institute’s annual convention this week in Chicago.
“The interesting thing about this, though, is that it’s rapid [change] and it’s something that we’ve learned to live with,” said Berberich. “We’re operating a system that’s going to be principally renewable-energy-based versus thermal-based.”
California has a state mandate to reach a 50-percent-renewable energy mix by 2030. Other states have similar goals: New York plans to get 50 percent of its electricity from renewables by 2030, Vermont plans to be 90 percent renewable by 2050, and Hawaii plans to be 100 percent renewable by 2045. Other state-level mandates will also drive renewable energy deployment. The Clean Power Plan, if upheld by the courts, stands to expand the market even further.
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In a recent KPMG survey of 150 senior energy industry executives, 67 percent of respondents cited the growth of renewable technologies as the most disruptive trend shaping the sector. More than 60 percent of respondents said they believe the U.S. will get half of its power from renewable energy by 2045 or sooner.
“Our monopoly days are coming to an end”
The industry shift to a renewable-energy-driven system was reflected at the recent Edison Electric Institute (EEI) convention. SunPower was a top sponsor, several panels were held on renewables and complementary grid-edge resources, and posters showcasing industry statistics on solar and other services were set up throughout the venue.
On Tuesday, EEI’s Institute for Electric Innovation released a book detailing some of the ways in which the electric industry is changing in the real world. Jonathan Weisgall, vice president of government relations at Berkshire Hathaway Energy, wrote a chapter on how one of his companies, NV Energy, accommodated a large customer’s demand to go 100 percent renewable. The data storage company Switch had filed an application with the Public Utilities Commission of Nevada to leave NV Energy’s service and obtain renewable energy from a third party. The utility jumped into action and found a way to meet Switch’s needs by tweaking Nevada’s regulatory framework.
A deal was struck for Switch to receive power from a new dedicated 100-megawatt PV system that will come on-line later this year, for which the company would pay a small premium per kilowatt-hour. The parties have since negotiated another agreement for 79 megawatts of solar power to facilitate Switch’s expansion plans.
“That was a real wakeup call,” said Weisgall, speaking at the EEI convention.
As customer preferences shift and renewable energy becomes more accessible, utilities will have to adapt — as recent events clearly show.
After months of discussions, MGM Resorts International, one of NV Energy’s largest customers, agreed to pay an $87 million exit fee to leave NV Energy’s service and buy its own electricity on the wholesale market. Reducing the gaming company’s environmental footprint “by decreasing the use of energy and aggressively pursuing renewable energy sources” was cited as a primary objective. The MGM case is proof that utilities need to up their game on renewables, because it’s what many customers want.
“Our monopoly days are coming to an end,” said Weisgall. “We are in a competitive market, and we have to recognize that as a utility.”
Rethinking the entire system
Utilities are undertaking major adjustments at the distribution level too. Pedro Pizarro, president of Southern California Edison and soon-to-be CEO, explained that SCE currently interconnects more than 5,000 rooftop solar customers per month. Using the traditional utility mindset and processes, hooking up the systems was taking SCE more than a month.
“Looking through the eyes of the customer, we realized that a month-plus was unacceptable,” he said. “So we went back and looked at our processes, and now we’re able to [interconnect] in a day and a half.”
Distributed renewables are also having an impact at the ISO level where they potentially help with system balancing, energy ramping and other services.
“It would be wrong for us to ignore the 4,000 megawatts of resources that exist on the [California] distribution system,” said CAISO’s Berberich. “And so working with the utilities on how that transmission-distribution interface works is going to be critical going forward.”
As conversations evolve, there is likely to be tension between state utility regulators and the Federal Energy Regulatory Commission, he added. Electricity rates will also have to change and the ability to start, stop and ramp will become a critical element of the thermal power fleet.
“You have to rethink the entire environment, and that’s what we’re doing,” Berberich said.
The challenges
While it’s already underway, this transition to a renewable energy dominant grid isn’t smooth or uniform.
For Berberich, balancing variable loads and ramping up generation to meet peak demand represent challenges. But what he really loses sleep over is surplus power. He said he isn’t worried about being able to keep the lights on for customers; he’s worried about the 13,000 megawatts of excess power that CAISO has to curtail at various times.
“Curtailing is throwing away zero-carbon, zero-marginal-cost power, and that becomes both an economic and political problem,” he said. Political pressures could “turn this a little bit,” he added, alluding to a possible shift in public opinion on renewables.
Currently, one of the most politically fraught issues in the energy sector is how to value distributed solar. Susan Tierney, an energy policy expert at Analysis Group, said she sees net energy metering for rooftop PV as one of the greatest challenges facing the electricity industry.
“Across the states, we started with policies designed to condition the markets and help get things going. Net metering is the poster child of that,” she said. “I think that’s a challenge, because there is now a presumption that this is the way we should continue to go in a lot of places. My personal view is we need to evolve from there, we need to get more surgical in terms of pricing, to target the value of renewables that address [the] imbalance problem and moving demand around as much as possible. So pricing and markets really have to fit, and policy has to evolve.”
There are also technical challenges, she said. As more distributed energy resources come on-line, there needs to be greater investment in grid infrastructure to accommodate them.
“That isn’t the intuitive response,” said Tierney. “People say we will avoid grid investment [with distributed energy resources], but the two have to go hand in hand.”
Reaching agreement among diverse players on these issues is complicated, but not impossible. In New York, for instance, a group of utilities and solar companies were able to jointly file a proposal on how to value distributed energy resources as part of the Reforming the Energy Vision initiative.
