Our energy delivery system, “the grid,” is a classic example of an industry dominated by inertia. Its basic design has not changed since its inception—power generation remains dominated by massive infrastructure like the St. Lawrence hydro complex or the Indian Point nuclear plant. While our computers and electronics are continually improving through developments in technology, sectors that are dependent on heavy infrastructure have been much slower to adapt to change. The grid has been structured this way for good reason: Large plants are far more efficient than individual diesel generators for each home, and multiple large plants connected to a robust grid meant supply could be incredibly reliable. But now we are asking our grid to be resilient in the face of events like Hurricane Sandy, and to allow consumers to produce their own energy when and where it makes sense.
New York’s Department of Public Service has taken a major step in changing the energy regulatory paradigm. Reforming the Energy Vision (REV) is a proposal targeted towards making distributed energy a substantially more marketable and utilized resource. It’s a plan that re-envisions the role of utility corporations.
REV proposes the creation of a Distributed System Platform Provider (DSPP) that will collect and manage distributed energy to the grid.
Rather than create a new separate entity, REV suggests that existing utility companies serve as the DSPP. There are significant implications for the distributed energy industry. On the one hand, the existing utilities already have the resources, knowledgeable staff, and distribution resources to facilitate the jump-start of a DSPP. But there is also legitimate concern that the concentrated power of utility companies may thwart independent innovation of grid technologies.
The new system would change the fundamental structure of the utility business model. Instead of utilities profiting solely from the selling of energy, REV suggests utilities will make more money through buying distributed energy and coordinating and selling this energy onto the grid for redistribution.
THE INTEGRATION OF MICROGRIDS
While microgrids are currently only tiny percentage of our distribution networks, the REV proposal pays special attention to them. Microgrids are an integral part of the plan due to their demand response potential to operate either alongside or independently of the traditional grid. This is especially critical as we anticipate more extreme weather events in future years.
A major barrier to microgrid implementation is the lack of clear policy structures. It remains unclear whether utilities or the microgrids themselves will own the energy they distribute. REV does not outline specific solutions, instead providing a framework to develop the necessary regulatory changes.
In January 2014 Governor Cuomo announced a $40 million program to create at least 10 community-scale microgrids across New York State, demonstrating his commitment to this issue. In addition, the Microgrid 2014 MVP Challenge was announced on June 26, 2014. This national competition is accepting applicants with operational microgrid strategies until August 29, 2014.
One thing remains clear: as the regulatory framework is modified, one of the most effective ways to insulate yourself from cost increases is to have very efficient operations in place for your buildings, manufacturing, etc. The less energy you use, the less exposure you will have to cost increases.