New York’s Department of Public Service (DPS) issued a straw
proposal on April 24, 2014, detailing regulators’ recommendations for
comprehensive electric industry reforms. The report, Reforming
the Energy Vision (REV), described a number of measures that
the state is considering, including the creation of Distributed System Platform
Providers (DSPPs) to manage a distribution grid that will be expected to
integrate increasing levels of distributed energy resources (DERs)—discussed in
a
previous post. The REV guidance
also addresses the flip side of that issue, which is identifying opportunities
to enhance customer engagement in the modern electric grid.
Customer participation is integral to the successful
operation of New York’s model for the integrated grid of the future, both from
a generation and a demand-side perspective. This post will address some of the
DPS proposals to promote customer engagement outlined in the REV guidance.
Barriers to Customer
Engagement
The REV identified
six categories of barriers to the deployment of DERs, including 1) barriers to
demand response; 2) barriers to distributed generation; 3) customer awareness;
4) access to data; 5) economic considerations; and 6) customer behavior
patterns.
1.
Barriers
to Demand Response
With regards to demand response (DR)—which allows certain
loads to be curtailed during periods of peak demand—DPS found that
customer-side incentives, bidding requirements, and customer aversion towards
the risks inherent in adopting unfamiliar technologies were limiting factors in
customer adoption of DR resources. The REV
identified several other customer concerns that inhibit more widespread DR
deployment, including the noncompliance penalty, the level of curtailment
payments, short notice, an unclear value proposition for the customer, and a
lack of information or understanding.
To overcome those obstacles, the REV suggested a review of the rates paid to DR resources to better
reflect the value those resources provide to the grid. The guidance also
recommended that DPS consider the implementation of a variable rate structure
to better reflect the actual cost of power. DPS also notes that advancements in
automated building systems have addressed some of those concerns.
2.
Barriers
to Distributed Generation
The REV highlights
a number of barriers to distributed generation (DG) deployment in New York,
including 1) the fact that DG is not economically competitive with traditional
utility service; 2) the onerous interconnection standards that potential DG
customers face; 3) standby tariffs that unfavorably impact the customer value
proposition; 4) a failure to account for all the benefits of DG to the grid; 5)
the difficulty of obtaining financing for DG projects; 6) the responsibility of
owning and maintaining equipment; 7) potential emissions restriction for
combined heat and power resources; and 8) local code restrictions relating to
some DG technologies.
3.
Customer
Awareness
A lack of customer awareness regarding the potential value
of DER is another obstacle identified by the DPS. The REV concluded that energy services providers typically targeted
industrial and large commercial customers, resulting in limited opportunities
for residential and small commercial customers to pursue demand-side management
options. The report also identified customer confusion and lack of information
as impacting potential customer engagement in DER development.
4.
Access
to Data
Data access is important to the modern integrated
distribution system to the extent that it allows electricity customers to
manage their usage. The distribution model advanced by the DPS relies on the
ability of customers to have access to their energy use data, understand the
value of the data, and take advantage of goods and services that allow them to
extract value from that data. Calling for an expansion of the availability of
customer electricity usage, DPS was careful to note that such need for data access
should be balanced against privacy protections, critical infrastructure
information, trade secret protections and confidentiality requirements.
5.
Economic
Considerations
Non-price economic factors represent another barrier to the
widespread deployment of DERs. The high capital outlay, long payback period,
and difficulty finding financing for DER projects make development unattractive
for customers for whom those resources would otherwise be cost-effective. Those
considerations are particularly limiting for low-income customers.
6.
Customer
Behavior Patterns
Assuming that DERs are capable of presenting favorable
economics, customers will only begin to adopt those technologies to the extent
that they are easy to understand and use. DPS notes that programs designed to
incentivize DERs should avoid requiring customers to make affirmative decisions
to participate.
Opportunities to
Facilitate Customer Engagement
Without going into many specifics, the REV also identified
opportunities to promote DER deployment, including customer outreach regarding
the benefits of DERs, regulations that encourage innovative business models, and
the development of community resources. DPS also identified additional
strategies to promote DER by resolving issues relating to data access, enabling
DER technologies and removing financing barriers.
The guidance document additionally identified the potential
for customer aggregation as an opportunity for DER development. DPS envisions
that energy services companies (ESCOs) could play the role of aggregators,
interfacing with both the DER-customers and the DSPPs. Those ESCOs would
calculate the value of DER and compensate DER-customers for the services and
product that they provide, while simultaneously marketing those products and
services to the DSPPs.
In order to play the role envisioned by the DPS, ESCOs would
need to move beyond their role as aggregators and develop new products and
services to suit a new portfolio of varied customer requirements. Those
products and services would range from traditional electricity service to
demand management programs, dynamic pricing programs and ancillary services.
The REV noted that many industrial
customers are already taking advantage of a similar array of products and
services.
DPS also addressed barriers to the role of ESCOs as proposed
by REV, including the cost of
acquiring new customers, current utility billing systems, access to customer
energy usage information, access to distribution system constraints, and issues
relating to servicing customers with small loads. To encourage the development
of ESCOs as envisioned by the REV,
DPS suggested that it would consider precluding utilities from offering energy
commodity, instead requiring all customers to receive their energy services
from an ESCO. DPS also noted that it would have to work to develop standards to
ensure the reliability of the distribution system as ESCOs proliferate.
Conclusion
The REV reforms
relating to customer engagement represent a significant departure from the
passive electricity consumer model. While customers may continue to receive
traditional bundled electricity service under the proposed reforms, they would
also have access to an array of products and services that would encourage them
to take advantage of distributed generation and demand-side management
opportunities. Increased customer participation in the electricity system is an
important component of the REV integrated
grid model, and the success of the proposal will depend on the specific reforms
that New York’s DPS ultimately promulgates.
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