Elevating Utility Business Model Reform at e^–Lab Accelerator 2019

The various forces—societal, financial, environmental, customer-driven—motivating the electricity system’s transition to a more decarbonized and distributed orientation continue to grow, marked by several key milestones in recent months. As a central actor in the energy ecosystem, electric utilities will continue to play a key role in how this inevitable evolution will unfold.

Alongside the obligation to deliver on their historical responsibilities of safety, reliability, and affordability, utilities now also must decarbonize their portfolios by managing very different physical assets than they have in the past, such as increasing amounts of renewable energy and distributed energy resources (DERs) like rooftop solar, energy storage, efficiency technologies, and growing fleets of electric vehicles. To build a modern grid suited to the next century’s needs, the utility business model needs to evolve and, in some circumstances, may need to transform. One example of this change is Hawaii’s clean energy transition, which aims to create a new regulatory compact between the energy industry and customers.

A centerpiece of RMI’s Electricity practice, the Electricity Innovation Lab (e^–Lab) Accelerator event, now in its sixth year, continues to support utilities to constructively and proactively engage with these forces. This year’s event, underway this week, is no different, with several teams collaborating intensely on high-impact and innovative utility collaborations.

e^–Lab’s Impact Over the Years

In the last two years, RMI’s Electricity practice has funneled insights from e^–Lab and through industry conversations to release four major reports on utility business model reform—Pathways for Innovation, Reimagining the Utility, Navigating Utility Business Model Reform, and Process for Purpose—aimed at offering strategies and tools for utilities, advocates, and regulatory commissions to support the evolution of electricity business models. Our staff has also directly supported reform efforts in several jurisdictions, including Hawaii, New York, North Carolina, Ohio, and Oregon.

Past Accelerator projects are a testament to the value of the event for advancing work on questions of utility business model reform. For example, a 2018 Accelerator team from Oregon participated to work on the Portland General Electric (PGE) Test Bed project. The PGE Test Bed team sought to test how to efficiently shift customer energy demand in their Oregon service territory and best match those needs with the output of renewable energy sources. By using smart grid technologies like demand response and battery storage, team champion Portland General Electric and its partners are working to make customer demand more flexible, lowering the grid’s peak demand needs, and allowing for that energy use to be served by more of the renewable energy that is available during low-demand hours.

Another proof point is San Diego Customer-Side Storage, a cross-functional team that prototyped a business model to incentivize customer use of energy storage. This collaboration at Accelerator 2015 helped to inform San Diego Gas & Electric’s proposed “Bring-Your-Own-Battery” tariff, which was followed by California’s passage of bill AB 2868, which calls for 500 megawatts (MW) of behind-the-meter storage for investor-owned utilities in the state.

Utility Business Model Reform Today

This growing body of experience—honed through years of e^–Lab convenings and across an expanding network of thought leaders and change agents—will help support the cross-sectoral engagements now underway at Accelerator 2019 and following the event.

Teams exploring new or evolved business model strategies at Accelerator 2019 include:

• Battery Storage Game Plan: This team, co-led by two member-owned cooperative electric utilities from Minnesota and Colorado, Connexus and United Power, aims to assess use cases for energy storage technologies, with an eye toward applicability for electric cooperatives. The team will prioritize near-term steps for utility and other stakeholder action, and consider policy implications and enablers that can help accelerate the adoption of storage projects that can lower costs and enable clean energy.
• Decarbonizing the Evening Peak: This team, championed by the Center for Sustainable Energy, is exploring new business models that can enable community choice aggregators (CCA) and utility distribution companies to jointly incentivize flexible, clean DERs that can rapidly achieve scale to effectively displace carbon-based resources used to supply the evening net load peak. Work at Accelerator will allow CCA, utility, third-party aggregator, and program administration parties to focus on resolving outstanding questions and provide more unified comments and recommendations to state agencies for program approval.
• Financial Tools Supporting Coal to Clean in Wisconsin: Wisconsin is seeking how to manage an equitable coal-to-clean transition that addresses its utilities’ desire for recovery of their coal plants’ undepreciated balances while minimizing cost impacts on ratepayers. The team, championed by Sierra Club, is exploring whether securitization (or other financial tools) may be a viable and broadly applicable solution.
• GridMod Squad: US utilities are requesting approval for large investments in the electric distribution system in order to adopt new technologies, improve interoperability and communications, support vehicle and building electrification, incorporate more DERs, and improve grid reliability and resilience. The GridMod Squad, championed by GridLab, will provide new tools for regulators and stakeholders so that they can design regulatory processes and make informed decisions that support their emissions, cost, and reliability goals.
• Promoting Texas Non-Wires Solutions: The team, championed by the Texas Advanced Energy Business Alliance, will address the opportunities and challenges specific to Texas with respect to non-wires solutions—portfolios of DERs like solar photovoltaics, energy storage, energy efficiency, and demand response—and identify policy solutions to address those opportunities and challenges.
• Solar and Storage for Disadvantaged Communities: This team, championed by Southern California Edison, will explore the development of a behind-the-meter solar plus storage program for low- and moderate-income households, both to generate savings for participating households as well as to create net benefits for all Southern California Edison customers from flexible load control.
• Duke Energy Clean Cities Initiative: Duke Energy is championing a team aimed at building productive partnerships between it and North Carolina communities in order to achieve carbon reduction goals in the timeframes set by each city.

The teams’ focus areas speak to the complexity of the changing landscape facing utilities across the country, and how they should best reorient their planning and operating strategies to accommodate the grid’s emerging nature. Their time at Accelerator and immersion in a growing network of committed professionals working at the leading edge of grid innovation should serve them well in constructing effective approaches to meet these new challenges and best serve their customers and communities.