NRRI’s “Future Drivers and Trends Affecting Energy Development in Ontario: Lessons Learned from the U.S.” (Mowat Energy Research Report #137)


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Mowat Centre’s Energy Hub (Mowat) contracted with the National Regulatory Research
Institute (NRRI) for a study and report on emerging trends facing the energy sector in the United
States, with a particular focus on distributed energy resources (DER) and their potential role in
the electric utility of the future. This research focused on four different major portfolios and
three future scenarios. The four portfolios are:
(i) The New Energy Consumer;
(ii) Meeting Energy Demand Behind the Meter;
(iii) Grid Modernization and the Utility of the Future; and,
(iv) The Future of Centralized Supply.
The three future scenarios, focusing on the year 2050, are:
(a) “Business As Usual” characterized by only the minimal necessary steps to begin the
process of integrating distributed energy resources;
(b) “Focus on Short-Term Cost-Effectiveness” where the role of DER would be limited to
fully cost-effective technologies; and,
(c) “Focus on Innovation” modeled as a fully realized, flexible, decentralized energy
system, offering a range of options to customers.
As this research shows, a new literature on DER capabilities is just beginning to address
all of the industry changes needed to capitalize on all of the values that DER can produce and
deliver to customers and to the system as a whole. The essence of emerging research is that the
combination of technically and economically available DER is more than capable of producing
and delivering essential grid services cost-effectively, compared to the otherwise-required central
station power and transmission alternatives, at least in particular grid locations in practically
every utility service territory. Some early examples are showing great promise, but extensive
work remains before a full transition to a DER-optimized grid might become a practical reality.
Looking at the future for energy consumers, this review shows a major bifurcation
between active and passive customers. Active customers are already imposing new demands on
utilities, and are demonstrating growing diversity of wants and needs, creating new challenges
for utilities and regulators. One possibility is that the future will bring much greater unbundling
of services and rates, with customers selecting choices from a broad menu of options, some
provided by utilities and others by competitive suppliers. That future will be very different from
the long-standing kind of one-size-fits-all utility offerings that basically differentiated only
between residential, commercial, and industrial customers offering few if any choices beyond
basic service at standard prices. This creates many new challenges for utilities and their
regulators, as discussed in Section 2 of this report.
The opportunities for meeting customer demand behind the meter are expanding rapidly
as new technologies are starting to change the utility industry: The lines between the utility and
customer sides of the meter are already starting to blur. Technological progress in these areas is
already substantial and rapid. Every week brings new announcements about progress towards
(iv)
higher efficiency and clean energy production and use, and each new trade show is full of
examples of manufactured goods of all kinds that continue to do more and more with less and
less material and energy inputs. In the not-too-distant future, zero-energy buildings could
become the norm and smart appliances could be capable of interacting with the grid of the future
in a dozen new ways, providing combinations of grid services and cost savings for their owners
and operators. Solar photovoltaic (PV) systems, in particular, are already poised to disrupt the
century-old electric utility industry model, as it is becoming fully cost-effective for larger
number of customers to produce at least some of their own energy. In one plausible future, costeffective
DER might prove capable of overwhelming central station power supplies and
transmission, so that much if not all new utility investment will take place on the distribution
system, gradually supplanting the previous centralized infrastructure. Behind the meter
challenges are reviewed in Section 3 of this report.
Utility grid modernization components generally include sensors and controls for the
utility system, combined with sensing and monitoring capabilities and advanced communications
systems, designed to help optimize operations and control of all major infrastructure components
–generation, transmission, and distribution. The primary missions for grid modernization for
utility companies include:
 increasing the efficiency of utility operations;
 increasing system reliability and resilience;
 reducing fossil fuel use and emissions; and,
 improving utility planning.
The major components utilities are beginning to incorporate into the electricity grid, in order to
achieve those missions, include:
 transmission system enhancements;
 distribution system enhancements, including distributed automation and distribution
management systems;
 advanced capabilities for integrating distributed resources;
 advanced meter infrastructure (AMI);
 system-wide communications and information integration; and,
 mechanisms for helping to shape consumer demands to produce system benefits.
Some of the most important challenges with grid modernization that are facing utilities
and utility regulators include:
 managing the growing quantities of data that flows from AMI and other grid sensing,
monitoring, and controlling technologies;
 determining which smart grid activities are best suited for implementation by monopoly
utility companies and which by competitive product and service providers;
 addressing how integrated resource planning can evolve to incorporate novel DER
applications;
 learning about all of the behavioral aspects of customer responses to rate designs,
education, and energy use information; and,
(v)
 addressing how all of those challenges might best be addressed for small utilities, that
will be hard-pressed to develop and implement in-house the required suites of new
capabilities.
These issues are discussed in Section 4 of this report.
Looking to the future, there are many uncertainties and unknowns about central-station
resources. This report briefly reviews current prospects for central station thermal power plants
fueled by nuclear, natural gas or oil, concentrating solar power, coal, and biomass, and
alternative technologies for hydroelectric and hydrokinetic power, wind power, and solar PV.
The report identifies a need for detailed scenario planning that involves all relevant stakeholders
and communities in decision making about future utility infrastructure. That discussion is
presented in Section 5 of this report.
The report, on the whole, finds that perhaps the best that can be said about U.S. policies
towards DER in mid-2016 is that this policy arena is looking like a major work in progress.
Several states are actively engaged in proceedings to explore what changes might be necessary
for utilities to fully accept cost-effective DER. Demand response and dynamic pricing are
making serious inroads in some jurisdictions. Energy storage is starting to find profitable niches
in some areas. And, researchers are developing protocols for enabling microgrids, non-wires
alternatives, and eventually perhaps transactive-energy. However, there is nothing yet in the
U.S. like a coherent single vision of the utility of the future.
For the future, the NRRI research team suggests that Ontario might usefully focus its
attention on undertaking all no-regrets policies. Fundamentally, that means using market forces
as much as practical with limited taxpayer or ratepayer incentives, to achieve all cost-effective
DER. A touchpoint would be to try to identify all the actions that make sense irrespective of
likely changes in fuel prices, global energy markets, future environmental regulations, and the
like. If guided by sufficiently robust, broadly-inclusive community integrated resource planning
modeling, many DER technologies will prove to be fully cost-effective already, and in the
coming decades more are sure to become available. Ontario could easily play a leadership role
in understanding and applying DER technology. A conscious move towards implementing all
cost-effective DER could lead to positive economic growth for Ontario. Ontario, with its large
industrial base and several world-class research universities, could easily become a vitally
important center of best practices for sustainable energy development

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