Turning California’s Big Ship toward the New Decentralized Electric Grid

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California seems poised to be a leader as the US electricity industry transforms from the old-style utility model to a decentralized electric grid. But what will it really take to turn this big ship — the world’s seventh largest economy — toward the coming energy paradigm?

A working group of executives from both old and new school energy companies provide a glimpse into the magnitude of the undertaking in a position paper released today by the Advanced Energy Economy Institute.

Coupling the words ‘electric grid’ and ‘revolution’ is nothing new. But previously, the revolution focused on greening the grid — especially in California. That continues today but with the added twist of incorporating technology that democratizes electricity production — the you-as-a-power-plant phenomenon.

“In short, the information age has arrived in the energy sector and customers have an increasingly important role to play,” says the paper, “Toward a 21st Century Electricity System for California.”

The paper offers not so much a prescription as an inventory of regulatory and policy options that must be considered to create a decentralized electric grid. These include models for operations, pricing, and revenue to provide a platform for new technologies, products, and services for customers.

“While California’s agencies have several positive initiatives addressing the 21st Century vision, this report emphasizes the need to even more rapidly evolve the state’s regulatory framework to one that integrates historical silos and more nimbly gives customers access to the latest technologies and services,” said Ted Ko, director of policy at Stem, an energy storage company.

The utility — and what it will become — is at the core of these discussions. The paper lays out two possible new entities that could displace today’s utility model: 1) A New York-style distributed system platform (DSP) and 2) An independent distributed system provider (IDSO)

In the DSP model, utilities plan and oversee the distribution grid, which is served by a range of independent market players. Although the utility maintains the grid, it becomes indifferent to which resources win in the market. So economic incentives and rules would need to be set up accordingly. The model also includes organizational ‘firewalls,’ a functional separation of the planning and the asset owner roles within the distribution utility, to keep utilities from giving their own assets and proposals an edge in the market.

In contrast, the IDSO model separates the utility around two distinct functions. It acts as 1) an asset owner of distribution grid infrastructure and 2) the grid planner and operator. In some ways it mimics how the California Independent System Operator oversees the wholesale power markets. The IDSO would handle central planning, animate the market, and establish the platform for decentralized energy. To maintain electric grid reliability, the IDSO would choose whether it would be best to build more wires or add generation or energy efficiency, and then determine who would undertake the work.

Utilities and a range of independent energy businesses worked on the paper. They include the California’s ISO, Southern California Edison, Pacific Gas and Electric, Bosch, BRIDGE Energy Group, Chargepoint, EnergySavvy, EnerNOC, Enphase Energy, FirstFuel Software, General Electric, Gridco Systems, Itron, Navigant Consulting, Siemens, Simple Energy, SolarCity, Stem, SunEdison, and SunPower.

In addition, 11 other member companies of Advanced Energy Economy, a national business association, with which the AEE Institute is affiliated, also endorsed the position paper: Ambri, Bergey Windpower, Brightenergy, Clean Fuel Partners, Landis+Gyr, Next Step Living, Opower, Regatta Solutions, RES Americas, Smart Wires, and Vestas.

“California is the nation’s leader in climate policy and energy innovation,” said Graham Richard, CEO of Advanced Energy Economy, a national business association. “Now, California has a chance to lead the way in organizing the electric power system to make way for technology innovation and greater customer choice.”

The paper is available for free download here.

Steve Chadima, AEE senior vice president, along with members of the utility-industry working group will present an overview of the position paper and participate in a panel discussion at the CPUC’s Thought Leaders Series at 2 p.m., Thursday, August 13.

Tell us your thoughts on California’s electric grid revolution by commenting below or on our LinkedIn Group, Energy Efficiency Markets.

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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.

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