Gridlock and the grid

by David Sweet

Given that gridlock in the US Congress and on the energy policy scene in Washington seems to be a semi-permanent state, a great deal of the activity has been shifted to the states that are not as politically tied in knots.

The energy supply problems experienced in the Northeast of the US require immediate action to make sure that the electric grid is more resilient in the event another weather event akin to Hurricane Sandy should strike the region, and cannot wait for the gridlock in Washington to be resolved. Thus, much of the work on policies and programmes that can provide a solution has shifted to these states.

That is why the most recent meeting of the National Association of Regulatory Utility Commissioners (NARUC) was of great interest to policy makers, as well as those seeking creative solutions and actions to the energy policy gridlock.

NARUC brings together energy regulators from around the US, as well as representatives from international regulatory bodies for a dialogue on the issues of the day. The Summer Meeting included a great deal of discussion of subjects relevant to the decentralized energy community, such as microgrids, integration of renewable energy resources and distributed generation.

Of particular interest was a discussion on the ‘Implications of Distributed Energy Resources on Regulatory Policies’ that addressed a report from the Critical Consumer Issues Forum (CCIF), a group that brings together state regulators, consumer advocates and utilities. As the cost of solar PV has dropped precipitously and rooftop installations have soared, this has given rise to a number of concerns about the impact on the utility business model, especially where these distributed resources are allowed to be ‘net metered’ with the grid. While distributed generation offers a number of system and customer benefits, such as providing a cleaner source of power generation and a more diversified portfolio of generation assets that can provide greater system reliability and security, many utilities view this as a competitive threat. The CCIF report identified 21 principles in the areas of financial and regulatory issues; market development and deployment issues; consumer issues; and safety, reliability and system planning issues. One of the financial and regulatory principles states:

DER incentives should be based on clear policy objectives and periodically reevaluated based on market conditions. Once the underlying policy objectives are met or as the technologies become cost-competitive or cost-prohibitive, such incentives should be modified or discontinued.

The report further clarifies that incentives include ‘any net metering arrangement that provides benefits exceeding the underlying value of the energy received from that DER’.

Interestingly, just days before the NARUC session, Fitch, which provides credit ratings and analyses of utilities, sounded the warning bells over net metering in a report that states that the destabilization of the power markets in Spain from feed-in tariffs and net metering incentives is a “cautionary tale” for the US.

So with existing incentives for distributed generation under fire from regulators, consumer advocates, utilities and rating agencies, the future of net metering is uncertain, even though these policies are proven solutions to creating a more diverse and robust energy delivery system that can respond to storms and other events. CHP systems are typically either ineligible for net metering or severely restricted in how they may participate. If we want to be ready for the next Hurricane Sandy, the states would be wiser to consider how to expand incentives so that all distributed resources can participate, rather than engage in a dialogue on their demise.

David Sweet
Executive Director, WADE

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