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    'Fairness' at center of utility innovation plan


    September 27, 2022 - Anonymous

     

      A wide-ranging proposal to nudge electric utilities toward investing more in research and development with a minimal financial burden on utility customers has been proposed by electric utility researchers and green energy advocates. At the heart of it all is a desire to encourage innovation that's fair to everyone involved.

      The proposal is laid out in a 122-page report issued this past April and titled "The Role of Innovation in the Electric Utility Sector." The report was funded by the U.S. Dept, of Energy's Grid Modernization Laboratory Consortium under the authority of the Lawrence Berkeley National Laboratory.

      The authors of the report are Kevin Lee of BlueGreen Alliance, Adam Cooper, Lisa Wood, and Mike Shuster of the Institute for Electric Innovation, Anne Hoskins, Christopher M. Worley, and Keyle Horton of Sunrun, and Kristin Barbato, Barbara Kates-Garnick, and Max McCafferty of Build Edison. The project manager and technical editor is Lisa Schwartz of Lawrence Berkeley National Laboratory.

      Several of the authors represent various "green" interests. For example, the BlueGreen Alliance, the organization for which Kevin Lee is the state energy policy director, seeks to bring labor unions and environmental organizations together to build "a clean, thriving, and equitable economy." Keyle Horton of Sunrun, a residential solar and battery storage company, has recently done research on "decarbonization" and carbon pricing policies.

      The report lays out the perspectives of consumers, labor, utilities, third-party service providers, and cleantechnology consultants on the question of innovation among electric utilities - how to motivate utilities to pursue innovation, who should pay for it, and how fairly the benefits of innovation might be expected to be distributed.

      According to the report, "Creating an environment that promotes innovation will be essential if the future power system is to do an adequate job of providing service that is safe and secure, clean and sustainable, affordable and equitable, and reliable and resilient."

      The authors see utility regulation not as a barrier to innovation but rather as an instrument that, properly used, can motivate electric utilities to invest more in research and development to speed innovation that's "socially beneficial."

      They're skeptical of relying on pure market forces to reveal what's best for customers. Electric companies, they write, tend to be reactive, putting their R&D resources where regulators and corporate customers say they should. But sometimes there are "solutions that customers didn't even know they wanted, such as the smartphone," they say. The customer isn't always right, in their view, and sometimes it takes an expert to tell the customer what he or she really wants.

      Among the priorities of the report's authors is the avoidance of "undue cost shifting" - placing the burden of paying for innovations on people who don't directly benefit from them. Currently, the cost of innovations in the electric utility industry - solar and wind power being the primary examples - have been recovered "by socializing them across all customers," according to the report. More creative ways need to be found to get people to pay for what they benefit from.

      Another priority of the report is something the authors call "energy equity." This means ensuring that the benefits of innovation extend not only to presumably advantaged segments of the customer base but also to "vulnerable or disadvantaged customers."

      The list of beneficiaries of "energy equity" would include "moderateincome customers, communities of color, fixed-income elderly customers, those who have been subject to historical injustices, customers in geographically defined environmental justice areas, and more," according to the report. The benefits and costs of energy innovation "will need to be allocated across customers equitably, perhaps requiring new practices to do so," the authors say.

      Mention "trends and innovations" in the context of electric utilities and many will think of smart meters, remote monitoring of substations, the use of drones to inspect power lines, and analyzing meter output with artificial intelligence. In this report, though, "trends and innovations" refers to such things as increasingly "carbon-free" power generation, expanding the use of time-varying rates, and, in the regulatory process, giving a voice to the formerly voiceless.

      One of the top electric utility trends the authors foresee over the next two decades is a greater role to be played by distributed energy resources, or DERs. These are physical and virtual assets usually situated close to the load and behind the meter - things such as solar installations, energy-storage media, and demand management systems.

      The authors say that in the future, funding for DERs might come from wholesale market revenues, cap-and-trade mechanisms, tax incentives, and carbon taxes. Efforts will need to be made to avoid "unreasonable cost shifting," they say. Advanced distribution management systems, they add, "will allow for more dynamic control and operation of DERs."

      As should be clear by now, fairness is very much at the heart of this report. The authors emphasize that while innovation offers potential benefits to customers, it may introduce new risks, as elements are introduced for which assurances of fairness, or "equity," have not yet been established. For this reason, they say, "consumer advocates' roles will need to evolve over time to ensure that significant innovations are promoted and adopted in ways that benefit all customers."

      A PDF of the full report may be downloaded at<https://emp.lbl.gov/publica tions/role-innovation-electric-util'ty>. - Kevin Jones EA

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