pathway to a 21st century electric utility · pathway to a 21st century electric utility...

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Pathway to a 21st Century Electric Utility

National Conference of State LegislatorsDecember 8, 2015

Full Report can downloaded from:

www.ceres.org

http://www.ceres.org


https://www.ceres.org/resources/reports/benchmarking-air-emissions-of-the-100-largest-electric-power-producers-in-the-unites-states-2015/view

Who We Are

Ceres is a non-profit organization advocating for sustainability

leadership. Our mission is to mobilize investors and business

to build a thriving, sustainable global economy

Company Network65 members in more than 20

sectors

Investor Network100+ members representing

$13 trillion AUM

The Ceres Coalition130+ organizations

Business for Innovative

Climate and Energy

Policy (BICEP)30+ members

Vision

• Enhanced reliability and resilience of the electric grid while retaining affordability

• An increase in cleaner energy to protect our environment and global strategic interests

• Optimized system energy loads and electric-system efficiency to enhance cost effectiveness and sustainability

• A focus on customer value, including new service choices and ease of adoption.

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Foundational Principles

• Financially viable utilities are essential to

fund and support an enhanced electric grid

• Policymakers must promote clear policy

goals as part of a comprehensive,

integrated jurisdictional energy policy or

21st Century Utility model

• Commitment to engaging and empowering

customers can help them make intelligent

energy choices, including third-party

engagement and access to necessary data

• Equitable tariff structures promote fairness

and policy goals

1. Engage the distribution utility to be at the center of integrating

resources and stakeholder collaboration to achieve customer and

policy objectives through accountability and incentives;

2. Shift regulatory oversight to focus on integrated distribution

system planning and development of transparent accountability

metrics;

3. Ensure that utility revenues will reflect incentives (or penalties)

earned for accountability of results and new energy management

services sourced through new resources, such as energy

management “app” store; and

4. Pursue cost-effective planning to identify the most efficient

technologies to be employed, and cap customer incentives based

on the most economical alternatives to achieve policy goals.

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Pathway to a 21st Century Electric Utility:

Key Differentiators


Disruptive Forces Challenge the Business Model

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Rising US Solar Capacity & Average

Price for a New Solar System

Sources: Bloomberg New Energy Finance & Solar Electric Power Association

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Sources: Goldman Sachs, Future of clean Energy, November 2015


Goldman Sachs on the Future of Clean Energy

• Between 2015 and 2020, solar and onshore wind will likely add more to the global energy supply than US shale oil production did from 2010 to 2015

• Between 2009 and 2014, more than $1 trillion was invested in solar and wind capacity globally, corresponding to a decrease in costs that is set to accelerate further over the next decade.

• In 2015 the world is expected to add > 100 GW of new solar PV and wind capacity (combined) for the first time ever.

• By 2025, the market for hybrid and electric vehicles could multiply tenfold to 25 million

• By 2020, 6 in 10 lightbulbs will be LEDs

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Corporate Commitments are Driving RE Demand

Source: Ceres, Power Forward 2.0

• 43% of the Fortune 500 companies have targets

in one of three categories: 1) greenhouse gas

reduction commitments, 2) energy efficiency, and

3) renewable energy

• The Fortune 100 continues lead with 60% of

companies setting clean energy goals

• These companies are conservatively saving $1.1 billion

annually through their emissions reduction and

renewable energy initiatives

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Corporate Commitments are Driving RE Demand

© 2015 Clean Edge, Inc. (www .cleanedge.com). This r eport, and the models and analysis contained her ein, are the property of Clean Edge and may not be reproduced, published, or summarized for distribution or incorporation into a r eport or other document without prior appr oval. 13GETTING TO 100

COMPANY GEOGRAPHIES COVERED DATE ACHIEVED

U.S., all data centers worldwide

2012 for data centers, 2014 for U.S. operations

U.S. 2013

U.S. 2010

All global energy use FY 2014

All U.S. stores, headquarters and distribution center, and business travel for North American employees

2008

Global 2014

U.S., Canada, and Europe 2013

U.S. 2007

U.S., Canada 2006

Source: Clean Edge research. Note: Clean Edge makes no claim to the logos in the above table. All trademarks are the property of the respective companies.

TABLE 1: SELECT COMPANIES THAT HAVE ACHIEVED 100% RENEWABLE ELECTRICITY (FOR SELECT GEOGRAPHIES/OPERATIONS)

A growing number of large global corporations, both in the United States and

abroad, have made commitments for all or portions of their operations to be

powered by 100% renewable energy. And the trend is accelerating.

There are a number of reasons that a company may choose to go 100% renew-

able. Customer satisfaction, for one. As the public increasingly demands environ-

mentally friendly goods and services, businesses are making public commitments

to “ green” their operations – sourcing renewable energy, meeting recycling goals,

conserving virgin forestland. A second reason for using renewable energy is to

help reach mandated RE goals. As more jurisdictions set binding RE targets, it

makes sense that companies doing business in those places would change their

operations in response.

But perhaps the biggest reason for sourcing renewable energy is that it is simply

good business. Early efforts toward 100% RE, such as those of Whole Foods and

The North Face in the previous decade, were largely driven by corporate social

responsibility goals – with targets often met by the purchase of RECs. Now, rms

are nding that rapid cost declines are making direct deployment and procurement

of renewables an increasingly attractive nancial proposition.

Traditional and virtual power purchase agreements (PPAs) for wind power – and

increasingly, large-scale solar as well – can allow companies to lock in low electric-

ity prices for decades at a time, with little to no up-front investment. This creates

CORPORATE INITIATIVES DRIVING THE 100% RENEWABLES TREND

© 2015 Clean Edge, Inc. (www .cleanedge.com). This r eport, and the models and analysis contained her ein, are the property of Clean Edge and may not be reproduced, published, or summarized for distribution or incorporation into a r eport or other document without prior appr oval. 14GETTING TO 100

COMPANY GEOGRAPHIES COVERED

TARGET DATE

INTERIM DATE

MOST RECENT REPORTED %

Global Long-term; Not Specified

50% by end of 2018

21% (2014)

Global 2020 N/A N/A

Global Long-term; Not specified.

N/A 37% (2014)

Global 2020 N/A 59% (2014)

Global 2040 Reduce fossil fuel energy use by 25% by 2015

N/A

Global 2025 N/A N/A

All data centers Long-term; Not Specified

N/A 43% (2015)


N/A N/A


Produce or procure 7 bill ion kWh of renewable electricity globally by 2020

26% (2014)

Source: Clean Edge research. Note: Clean Edge makes no claim to the logos in the above table. All trademarks are the property of the respective companies.

TABLE 2: SELECT COMPANIES SEEKING 100% RENEWABLE ELECTRICITY

cost certainty, which businesses love. And they have a myriad of ways to procure

renewable power, including PPAs and onsite renewables such as rooftop solar ar-

rays, in addition to RECs. The movement away from unbundled RECs (which allow

a company to receive the bene ts of renewable energy without actually receiving

the energy itself) is in part due to concerns over additionality: unbundled RECs

by themselves do not provide much impetus for further growth in renewables.

By using onsite renewables or PPA-purchased off-site generation (and retaining

the RECs generated by this power), businesses can also take direct credit for the

environmental bene ts that renewable energy offers. These and other sourcing

strategies – and the challenges that accompany them – will be examined in greater

detail in the 100% Renewables Toolkit section on page 17.

While it is admittedly still early days for the 100% RE movement, the list of rms

that have pledged to get 100% of their energy from renewable sources is growing.

Data centers, for instance, require massive amounts of energy, so it makes sense

that many of the world’s largest and most prominent technology companies, like

Apple, Facebook, Google, Intel, and Salesforce, have all targeted (or even partially

achieved) the 100% RE goal (and made huge investments in renewable energy). But

it isn’t just tech rms: The list of companies with 100% RE commitments includes

Whole Foods, Nestle, Walmart, Kohl’s, IKEA, and Starbucks, among many others.

Many of these rms are members of an increasing number of non-governmental

organizations that have sprung up to help them achieve their goals, such as the

Rocky Mountain Institute’s Business Renewables Center; the Corporate Renewable

Energy Buyer’s Principles, founded by WWF and World Resources Institute (WRI);

and RE100, which is led by The Climate Group and CDP. The business community

is starting to get the message: 100% RE is not just the right thing to do, but it’s

becoming the pro table thing to do as well.

Source: Clean Edge, Getting to 100


Utilities Are Valued Above 15-year Averages

and Comparable to S&P 500

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Credit Rating Agency Actions

Suggest Improving Credit Quality

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Unsubsidized Levelized Cost of Energy Comparison—

September 2017

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Mandatory Fee Proposals Timing Map

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• Do not promote efficiency of energy resource demand

and capital investment;

• Reduce customer control over energy costs;

• Have a negative impact on low- or fixed-income

customers; and

• Impact all customers when a subset of customers adopt

DERs and potentially exit the system altogether,

• if high fixed charges are approved, the bill for utility services

increases and thus encourages customer grid exit

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Pathway to a 21st Century Electric Utility: Rate Design: Problems with Fixed Charges

State policymakers pursue legislation to outline the model for a 21st Century

Utility, to include:

• providing objectives and transitional targets;

• refining building standards;

• accountability metrics;

• reform of the regulatory oversight approach; and

• outlining distribution utilities participation.

Regulatory reform is enacted to support efficient resource deployment and

accountability:

• multiyear integrated T&D system planning process;

• transparent and sustainable accountability metrics to be set;

• transparent and sustainable incentives (and penalties) for accountability;

• multiyear rate proceedings; and

• structure of utility revenue potential for integrating new customer services.

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The Pathway Proposed

Tariff structures are refined to support price signals and financial viability

requirements, including:

• inclining block rates;

• bidirectional meters installed for all DER customers;

• transition to highest economic value renewable rate;

• demand response to be bid into capacity planning to encourage load

resource optimization; and

• time-of-use rates to be implemented to manage peaks and enhance

system optimization.

Utilities are empowered and accountable for managing the transition, and are:

• held accountable for controllable results;

• encouraged to lead the integration of new technologies and given incentives;

• responsible for educating customers; and

• the potential owners of renewables, new technologies, or DERs.

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The Pathway Proposed

Benefits to Customers

• high level of recognized trust in utility providers;

• access to customer and electric system information;

• increased quality control oversight;

• enhanced information analytics;

• lowest system-wide cost of deploying optimal located investments with

scale technologies.

Benefits to Policymakers

• acceleration of defined policy objectives through properly structured

incentives and accountability;

• ability to enhance accountability via regulatory oversight of utilities; and

• opportunity to mitigate the level of utility rate increases required by

allowing utilities to earn additional revenues related to facilitating,

integrating or owning new services, including behind-the-meter assets.

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Engaging Utilities to Drive a 21st Century Model

Benefits to Competitive Marketplace Service Providers

• endorsement of best-in-class providers and technologies;

• increased adoption of new value-add technologies; and

• Reduce customer acquisition costs and thus enhance profitability

(through reduced cost and increased volumes).

Benefits to Utilities

• enhanced customer service by increasing interactions with customers;

• optimized investment and reduce costs and risks;

• enhanced regional economic growth;

• enhanced citizenship profile;

• potential to earn incentives for achieving accountability goals; and

• ability to earn additional revenues from participation and thus offset rate-

increase needs and earn incremental returns for investors.

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Engaging Utilities to Drive a 21st Century Model


Energy Management Applications Store

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Responses to Evolving Electric Utility Models

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The Pathway

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• State policymakers pursue legislation to outline the model for a 21st

Century Utility;

• Regulatory reform to support efficient resource deployment and

accountability;

• Tariff structures refined to support price signals and financial viability

requirements;

• Utilities empowered and accountable for managing the Transition.

Thank You!

Dan BakalDirector, Electric Power Program

Ceres

[email protected]

617-247-0700 ext. 113



mailto:[email protected]

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