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reliable electricity at affordable rates. Consider Southern Consolidated Edison’s (SCE’s) dilemma in serving a rapidly growing portion of its South- ern California service territory with significant power generation being pulled offline due to the closure of the nearby San Onofre nuclear plant and other power units facing the state’s “once-through” ocean cooling policy going into effect in 2020. Operating in a transmission-constricted urban area but where load demand is expected to grow 300MW by 2022, SCE launched a program to maximize use of a gamut of “preferred resources” (energy effi- ciency, demand response, distributed generation, and energy storage) to help avoid this additional demand so as to defer or even completely ob- viate the need for new gas-fired gen- eration. This is still a pilot project— using a localized integrated grid proj- ect to test advanced automation, en- hanced communication networks, and grid management systems to enhance integration of preferred resources— and an evaluation is due at the end of the year. Routinely operating with 40% or more penetration of renewables on the grid from wind, geothermal, hy- dro, biomass, and solar—without the backup capabilities of an intercon- nected mainland grid—Hawaii Elec- tric faces particularly acute challenges managing renewable variability. It turned to AWS Truepower, a consul- tancy that combined 50 remote sen- sors to allow a consistent bird’s-eye view of wind and solar conditions across five islands, offering 15-minute wind and solar production look-ahead forecasts, which has aided real-time grid management. IBM is currently working with Detroit-based DTE Energy on a “cor- relation engine” that integrates hyper- localized weather forecasting models with a history of the actual damage to the utility’s distribution network from past storms, together with current asset quality. This correlation engine allows the utility to more accurately predict damage location, occurrence time, and outage severity of future weather events to optimize prepara- tion and crew placement for quicker repair and restoration work. More specifically, it yields 10-minute inter- val updates on specific features (wind gusts, storm intensity, precipitation rate, etc.) at a granularity of a single square kilometer. The Paradox of Progress— Shackles of an Outmoded Model An irony of the improvement that grid digitization enables—making it more reliable through more effi- cient management—is that it also leaves the system more vulnerable to cyberthreats. Similarly, broader energy efficien- cies achieved in the economy exacer- bate another vexing matter for the electric power industry: flat demand growth. Indeed there is now a pro- nounced and widening disconnect between electricity demand and eco- nomic growth, which some see as exponential, even though we remain more dependent on electricity than ever for vital functions even as we consume incrementally less. This in turn raises the prospect of the indus- try facing “stranded” assets—assets with fixed costs that the industry was long assured of recouping but that are no longer a sure thing. How to fairly allocate those fixed costs has devolved into trench warfare in state utility commissions around the country. Many see the need for an evolution of the regulatory paradigm as the only way out. “The grid is more valuable than it has ever been,” explained Casey Herman, who leads Pricewater- houseCoopers’s U.S. Power and Util- ities practice. “Pricing in the United States for utility services is generally on a per-unit-of-consumption basis, but more and more there is a recogni- tion that the value derived is no longer correlated to the number of kilowatts used. It’s more of a service business today and it will continue to evolve into more of a service-oriented busi- ness than a commodity-oriented busi- ness. I think that billing based on usage needs to evolve, but that re- quires a regulatory evolution, and that’s very difficult.” Indeed, the “litigious, glacial pace of contested regulatory rate reviews is a barrier to technology and business innovation and, ultimately, harms customers,” says a report from the Institute of Electric Innovation, which actively convenes informal discus- sions of stakeholders to get through this logjam. Herman, a 30-year industry vet- eran, said he envisions electricity bill- ing to move toward something like cable TV charges—that is, based on bundled services rather than volu- metric usage—that is paid for in a monthly fee. “I think that is a model that will potentially make sense over time with electricity,” he said. “The grid will be providing a service to the customer and maybe the least valu- able component of that service will be the volume of kilowatts taken, and maybe the most valuable service will be the ability of the customer to take as much as is needed whenever it’s needed.” ; Stier is a New York-based reporter, editor, and communications professional with more than 25 years of experience. He can be reached at email@example.com.
COVER STORY /
When it comes to utility services, the value
derived is less and less correlated to the
number of kilowatts used, experts say.