New York State has embarked on an ambitious agenda to reform its energy infrastructure with a series of initiatives that are being watched around the country – and the world.

E2’s New York chapter has front-row seats to this transformation.

On Thursday, Sept. 25, as part of Climate Week, E2 will host a breakfast gathering featuring Richard Kauffman, chairman of energy and finance for the state of New York and chair of the New York State Energy Research and Development Authority.  E2 members who would like to attend should please contact Ying Li.

The cornerstone of the state’s ambitious plan is a called “Reforming the Energy Vision”.  It is intended to improve system-wide efficiency, reliability and resiliency while adding distributed energy resources, increasing customer involvement in energy management and –ultimately – reducing  carbon emissions.

An updated Department of Public Service Straw Proposal was released on August 22 and is open for comments until Sept. 22.  E2 members who wish to participate with us in developing comments should please contact New York Chapter directors Judith Albert or Ron Kamen.

The state has set up a parallel Clean Energy Fund proceeding to improve the effectiveness of the state’s clean energy programs (currently $925 million annually) and to transition away from surcharge funded incentive programs to a market based approach.  

These initiatives complement the establishment of the NY Green Bank and NY-Sun Initiative earlier in 2014.  
 
Changing the Utility Model

The traditional regulatory model tasked utilities with providing “safe and reliable electricity, at reasonable rates.”  But changes in technology, combined with aging infrastructure, extreme weather events, system security and resiliency needs are leading to dramatic changes in how electricity is produced, managed and consumed.   At the same time, the growth of renewable energy, advances in storage and expansion of energy efficiency are threatening the revenue base of utilities (see Barclay's downgrades electric utility bonds). 

New York’s Public Service Commission launched the “reforming the energy vision (REV)” proceedings to put “an incentive structure in place that not only makes utilities indifferent to revenue losses from efficiency (as revenue decoupling does) but provides affirmative motivation”. The PSC “intends to change the regulatory model so that …incentives are not confined to a narrow silo of meeting certain single metric targets, but are integrally bound to the utilities’ business model.’”
 
Focus on Distributed Energy

The central vision of REV is to increase the use and coordination of distributed energy resources in the New York electricity market.   REV takes a broad view of distributed energy:  it includes distributed generation (wind, solar), energy storage, energy efficiency and demand response management. 

The Department of Public Service (DSP) proposes that existing electric utilities assume responsibility for integrating distributed energy resources into the electric grid and become “Distributed System Platforms”. This will, in turn, require investment in information, communications and monitoring/metering technologies that allow for an “intelligent” network that can manage two-way flow between the utilities, customers and third party service providers. After four months of proceedings that included working groups and stakeholder comments, the DSP concluded that “…integration of distributed energy resources as contemplated by REV is both technically feasible and offers numerous benefits in comparison to a “business as usual” future’”.
 
Benefits

REV marks a major step forward in the incorporation of distributed energy into the grid. It calls on the utilities to consider distributed energy at all points in the utility service chain: planning, grid operations, market operations and distribution.  It transforms customers and third party service providers into active participants in the management of energy demand and supply. From a systems perspective, the transition aims to permit deferral or avoidance of transmission and distribution infrastructure, increase system efficiency through load management, reduce line losses, and improve fuel diversity (and thereby, reduce price volatility).  From a societal perspective, it should accelerate reduction of carbon emissions and increase the value of energy efficiency and distributed generation.  Reduced emission of carbon and other pollutants, and less “down-time” due to storm outages, can only serve to improve public health and business productivity.

REV hangs a big “Open for Business” sign on New York’s front door.  Venerable NY firms like General Electric are investing in next generation power electronics, and Kodak’s labs are being used as a battery and energy storage technology test and commercialization center. In a recent development following NY Sun and the REV proceeding, SolarCity announced that they will be creating 1,000 jobs in Buffalo with a high-tech solar manufacturing facility.  Every two years, this new plant will produce 2,000 Megawatts of solar power cells – the same energy capacity as the Indian Point nuclear power station.
 
­Challenges

The REV process raises a number of vexing issues. How to make sure that the new model truly encourages the innovation and investment by third parties upon which it depends? How to fairly value the contribution of distributed resources to the grid and encourage deployment through market signals? How to ensure that the state meets its renewables, energy efficiency and emissions reductions targets, when responsibility for implementation is delegated to the utilities? When and how to allow utility ownership/operation of distributed resources, given the market power advantages enjoyed by these regulated entities? 
 
Transition

The experience of deregulation in California, New York and other states argues for thoughtful planning and implementation. New York’s own move to a deregulated electricity market in the 1990s had the unfortunate consequence of dismantling highly successful demand side management programs, setting back energy efficiency in the state by almost a decade. 

The Department of Public Services has recommended a three stage approach:  immediate “no regrets” actions; transitional steps; and preparation for full implementation. While the basic policy guidelines for REV are expected to be released in the first quarter of 2015, this will be a multi-year transition. 

– Judith Albert is an E2 New York Chapter Director. Contact her at jda@judithalbert.com.