Hello Local Energy, Bye Old Power Industry, Say New York Regulators with Key Vote

local energy

Thomas Edison’s first light bulb. Credit: Zaphod

New York, where the power industry began over a century ago, might be where it ends too. At least the power industry as we know it today.

The state’s electric regulators made that clear February 26 when they took a key vote creating an electricity marketplace that elevates new, local energy over big central power plants and long transmission lines.

The New York Public Service Commission approved the framework for its  Reforming the Energy Vision, or REV, a dramatic reworking of roles in the electricity business. Customers, innovators and competitive companies gain new stature, while utilities act as a more subservient platform for the new offerings.

The decision opens the door wide for disruptive energy technologies, such as microgrids, energy efficiency, solar, electric vehicles, energy storage and demand response.

Audrey Zibelman, the PSC chair who is widely credited for the new direction, described REV as a way to make the grid “more nimble, flexible and accommodating” for the new technologies.

She expects the new paradigm to increase system efficiency, lower costs, reduce emissions, increase system reliability and make the grid less vulnerable to attack.

New York is one of the first states to create such sweeping regulation, which lets consumers, businesses and communities gain control over their energy supply. As a result, the proceeding has attracted national attention over the last year as the commission formulated the plan.

About 300 local and national players weighed in and the commission received more than 1,000 written comments, most supporting the industry shift.

“It’s been overwhelming seeing the engagement,” Zibelman said, during Thursday’s commission meeting.

The Framework

The new distributed energy marketplace will operate on what New York calls a distributed system platform (DSP). This is both a “market maker and system coordinator,” according to the commission’s written decision.

The DSP plays a role somewhat akin to an independent system operator for wholesale markets. The DSP will plan, balance markets, oversee auctions and offer price transparency.

By way of example, the commission said products that use the platform might include microgrids, community solar, storage, fixed commodity pricing, demand response, energy efficiency programs and contracts for distributed energy maintenance and operations.

The DSP also will provide, or sell, a set of products and services of its own for those that use the platform. The products might include transaction or usage fees, platform access, analytic services, interconnection services, pricing and billing, metering information services and data sharing and maintenance, operation, and financing.

Why the Big Changes

A whole host of industry shifts led New York to create REV. Among them was the realization that the grid cannot efficiently meet today’s demand.

Because of economic changes and increased use of air conditioning, costly system peaks keep occurring. The state typically needs only about 18,000 MW. But to meet system peaks just a few hours a year, it must maintain 26,000 MW of capacity, Zibelman said.

By just operating more efficiently and reducing peak demand, the system could spare customers $1.5 to $2 billion per year, she said.

Further, the state’s power grid is aging, and it will cost a tremendous amount of money for New York to rebuild — about $30 billion over the next decade, almost double the investment of the last decade.

At the same time demand is slowing, meaning electricity sales are down. This creates a smaller base from which the electric industry can collect money for the new infrastructure. The bottom line is that rates will go up, if the state simply continues with business as usual.

local energy

Audrey Zibelman, NY PSC chair

“If we can manage the demand, manage the peak, we can avoid that investment,” Zibelman said.

Praise and Concerns

The REV concept has received widespread praise from companies promoting disruptive energy tech, energy entrepreneurs, investors, environmentalists and other stakeholders.

“There is so much potential, it is extraordinary,” said Mike Gordon, CEO of Joule Assets, which offers financing for energy efficiency and demand response. “The opportunity for private companies, for towns and villages, for government entities, it is just so rich. And the opportunity for consumers is so powerful.”

Kit Kennedy, director of the energy & transportation program at the Natural Resources Defense Council, described REV asa bold step toward creating a cleaner and more efficient electric grid in New York state.”

“The decision paves the way to ramp up clean energy and energy efficiency, put more clean vehicles on the road, and make our electric grid more reliable than ever. On top of that, it will help lower energy bills for consumers, especially for low-income New Yorkers who need it most,” Kennedy said.

A key worry, however, has been that even as New York makes these changes, utilities will use their market clout to squash the many new competitors expected to emerge.

Anticipating this issue, the state set up rules to keep utility dominance in check. REV places limits on utility market plays. To own or develop distributed energy resources, a utility must prove that its investment:

  • Meets needs that the competitive market has been unable to fill
  • Includes energy storage integrated into the utility distribution system
  • Helps low or moderate income residential customers to benefit from distributed energy where markets cannot do so, or
  • Serves demonstration purposes

Joule Assets’ Gordon said he believes the competitive market will ramp up quickly, taking away the need for utilities to provide even these services.

local energyWhat’s Next

The REV changes aren’t going to happen overnight, but will occur over several steps likely to take years.

With the REV framework now in place, the New York commission will move onto what it calls Track II in the REV proceeding. Track II will focus on the financial nitty-gritty: changes in how utilities are paid for their services — now that they will operate differently. The key is to avoid what is referred to as the “utility death spiral,” the financial degradation of a utility as it loses conventional customers.

Zibelmansaid that REV spares utility financial harm because it gives them a new role managing the distributed platform.  And bulk power — large central power plants — do not go away; their role is simply no longer as dominant. Management and exchange will be needed between the two sides of the system: wholesale power and distributed energy. So utilities also will act as interface with the state’s grid operator, the New York ISO.

As a next step, utilities must solicit and develop demonstration projects that fit the REV framework. Projects are due to the commission by July 15.

By May 15 utilities  must identify potential non-wire alternatives for their systems.

And by December 15, they must file DSP implementation plans that include interconnection improvements.

Track the disruptive energy market in New York and other states by signing up for the Energy Efficiency Markets Newsletter. It’s free.

Sign up for our newsletter and get the latest microgrid news and analysis.
Subscription Type



Elisa Wood About Elisa Wood

Elisa Wood is the chief editor of MicrogridKnowledge.com. She has been writing about energy for more than two decades for top industry publications. Her work also has been picked up by CNN, the New York Times, Reuters, the Wall Street Journal Online and the Washington Post.

Comments

  1. We could have only 10 years left to keep Earth habitable. Due to inertia, warming will inevitably reach 1.5 degrees C. In 10 years we apparently must replace fossil fuels sufficiently to stay below 2 degrees C.

    The irony is that new science can replace fossil fuels far faster than is now believed. See: aesopinstitute.org

    AESOP’s Fuel-Free 24/7 solar engines will help. Five Fuel-Free engines have been invented. More prototypes must be completed to move them into production.

    These breakthrough engines use Atmospheric Heat, a huge, untapped reservoir of solar energy. See: SECOND LAW SURPRISES, under MORE on the same site, which provides evidence suggesting we can harness clean, cost-competitive, energy in an unsuspected manner.

    A patented earlier engine proved the science, but was not commercially viable. A converted gasoline engine provides Proof-of-Concept that Atmospheric Heat, as suggested by Nikola Tesla in 1900, can replace fuel – and is the ideal way to utilize solar energy 24/7. Details to reproduce this experiment begin on page 10 under NO FUEL PISTON ENGINES on that website.

    AESOP’s Fuel-Free engines have the potential to change the planetary energy landscape. They can turn future hybrid and electric cars into power plants, able to sell power to the grid when suitably parked.

    “In science one tries to tell people, in such a way as to be understood by everyone, something that no one ever knew before.” Paul Dirac Nobel Prize physics

    Rapid development and commercialization will reduce the need for oil.

  2. Elliot Taubman says:

    In 1979 as Assistant Attorney General for Energy and Utilities, under Attorney General Abrams, I supervised a proposal to the state Energy Office, to revamp load forecasting and rate setting to promote energy efficiency and renewable energy yet provide equity to low income people. At the time there was no independent market players so we had to follow the rule of Professor Alfred Kahn and have regulation mimic the market. At the time, we met hostility from upstate political forces and utilities. The market has changed and it appears the NY regulators and even Con Ed have changed with the times. The only caution is to remember what Fred Kahn said: “If you deregulate in one area, you will have to regulate in another .” if the price signals form the new REV do not deal with economic and environmental reality it may not work.

  3. Monali Khandagle says:

    Reforming energy vision or REV, New York Public Commissions newly approved framework, is the best way forward in dealing with building power infrastructure for the future. Incorporating innovative solutions for a optimal energy supply, such as, micro grids, improved energy efficiency as well as energy storage and demand response, solar, electric vehicles will be the way forward.
    It’s a solution that will improve infrastructure security, reliability, while reducing the investment needed for costly upgrades to aging infrastructure, thus reducing rate increases for customers. It’s a step in the right direction for energy needs of the future.

Trackbacks

  1. […] represents the first community aggregation in New York. The plan is part of the state’s larger Reforming the Energy Vision (REV) policy effort, designed to create a market platform for distributed energy […]

  2. […] 06/03/15 – New York, where the power industry began over a century ago, might be where it ends too. At least the power industry as we know it today. Read More […]

  3. […] most notably in the electric power-hungry Northeast. New York is leading the charge with its Reforming the Energy Vision, an evolving policy designed to elevate the use of distributed energy in electric markets. In New […]

  4. […] positive and precedent-setting. The initiative, called ‘Reforming the Energy Vision’ or REV, will mean big changes for how communities, particularly low-income communities, interact with both […]

  5. […] they become market players, possibly along the lines of changes put forward by New York in its Reforming the Energy Vision (REV). Basically, utilities and regulators embrace local energy and treat it as a grid asset, not a […]

  6. […] Joshua  Sturtevant, Van Hilderbrand and Jeffrey Karp, of Sullivan & Worcester, explain why it’s important that New York policymakers take into account the cost of grid cybersecurity as part of REV. […]

  7. […] York is tackling the devilish details that will determine if Reforming the Energy Vision (REV) lives up to its promise of creating a market platform for microgrids and local […]

  8. […] New York offers a good example. Reforming the Energy Vision is one of the biggest innovations in US energy policy in a long time. Known as REV, it gives local energy a boost through a new market exchange. The REV proposal is getting praise from within the electric industry for a lot reasons, which I won’t go into here, but you can read about in this story. […]

  9. […] decisions elsewhere. In many ways, it is the first out of the gate in forming a new grid, with its Reforming the Energy Vision policy. So the ruling was clearly a win for competitive distributed energy […]

  10. […] states, New York is doing the heavy lifting in making local energy a phenomenon through its Reforming the Energy Vision, which creates the structure to decentralize the power […]

  11. […] states, New York is doing the heavy lifting in making local energy a phenomenon through its Reforming the Energy Vision, which creates the structure to decentralize the power […]

  12. […]  The bill also calls for a central distributed grid operator along the lines of New York’s distributed system platform provider. Angus’ bill would set overall parameters, but leave it up to the states to work out […]

  13. […] Service Commission is encouraging market participants to provide input on utility rules for its Reforming the Energy Vision (REV), an evolving policy aimed at creating a market that encourages distributed […]

  14. […] by Superstorm Sandy, the program is part of the state’s drive to put local energy on equal footing with conventional central power plants through the state’s Reforming the Energy […]

  15. […] by Superstorm Sandy, the program is part of the state’s drive to put local energy on equal footing with conventional central power plants through the state’s Reforming the Energy […]

  16. […] Microgrid Project is one result of a coordinated, statewide effort to transform the power system. New York needs to invest $30 billion over the next decade just to maintain its current power system, which is both energy and capital inefficient. Currently, New York has some of the most expensive […]

  17. […] Microgrid Project is one result of a coordinated, statewide effort to transform the power system. New York needs to invest $30 billion over the next decade just to maintain its current power system, which is both energy and capital inefficient. Currently, New York has some of the most expensive […]

  18. […] Microgrid Project is one result of a coordinated, statewide effort to transform the power system. New York needs to invest $30 billion over the next decade just to maintain its current power system , which is both energy and capital inefficient. Currently, New York has some of the most expensive […]

  19. […] York is offering a glimmer of what’s to come with its Reforming the Energy Vision (REV) — the creation of a market-based distributed grid — and its accompanying NY Prize, a […]

  20. […] is the latest move in New York’s Reforming the Energy Vision, a policy under development that puts the state at the forefront nationally in creating a […]

  21. […] “What do we need to do to make it very easy for consumers to transact? And what do we have to do to make it very easy for distribution energy resource providers to find consumers?” said Audrey Zibelman, who chairs the New York Public Service Commission and is a chief architect of REV. […]

  22. […] Microgrid Project is one result of a coordinated, statewide effort to transform the power system. New York needs to invest $30 billion over the next decade just to maintain its current power system, which is both energy and capital inefficient. Currently, New York has some of the most expensive […]

  23. […] REV is a regulatory remaking of electricity markets being watched carefully by other states as a possible model to manage the growing decentralized grid. The sweeping industry restructuring would give new status on the grid to local energy and likely heighten microgrid development. […]

  24. […] REV is a regulatory remaking of electricity markets being watched carefully by other states as a possible model to manage the growing decentralized grid. The sweeping industry restructuring would give new status on the grid to local energy and likely heighten microgrid development. […]

  25. […] renewables requirement and integrating this puzzle piece into the still evolving, new frontier of REV.  The kind of decentralized electric grid envisioned under REV has not yet been tried elsewhere in […]

  26. […] Hello Local Energy, Bye Old Power Industry, Say New York Regulators with Key Vote […]

  27. […] Hello Local Energy, Bye Old Power Industry, Say New York Regulators with Key Vote […]

  28. […] as California’s mandate that utilities secure 1.3 GW of energy storage by 2020 and New York’s Reforming the Energy Vision. Some utilities also are pushing energy storage, including Hawaiian Electric Co. (HECO), which […]

  29. […] is widely viewed as a force behind REV, New York’s industry-changing move to form a distributed electric grid, one that fosters markets […]

Leave a Comment

*