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New York’s energy future: What do utilities want?

By: Robert Walton |

Utilities in New York are already working to transition the power grid to the vision established by state regulators. But judging by comments on the regulators’ Reforming the Energy Vision (REV) straw proposal, they remain wary of just where they fit into that vision of the future.

And they may have reason to be wary.

New York’s ambitious plan calls for a range of distributed energy resources (DER) to be run in a coordinated manner, utilizing demand response and interconnected microgrids that would — at least initially — be managed by incumbent utilities. But the state’s plan also allows for a future where grid management is opened up to competition and the utilities own distributed generation.

Power producers, energy marketers voice concerns

The REV proceeding will likely open up new opportunities for utilities, but some groups are deeply critical of giving them more control.

Allowing utilities to be competitive distributed energy resource (DER) providers is, according to the National Energy Marketers Association (NEMA), “antithetical to the REV vision.” NEMA called REV the perfect arena to “identify and correct the data availability, technology and utility pricing barriers” that have prevented energy service companies from creating more services.

“It is abundantly clear that the anti-competitive impacts of monopoly utility participation in competitive energy markets, be it for commodity supply or new energy-related value-added services as a DER provider, is poor public policy,” NEMA said.

The Independent Power Producers of New York (IPPNY), on the other hand, filed comments that disagreed with perhaps the main imperative of REV — rapid deployment of distributed resources. So far, the group said, the REV proceeding has yet to develop a methodology to determine whether the development of distributed resources is justified.

“The development of DER should not be incented for its own sake,” they said. That approach would “result in more penetration of DER than is warranted by the savings and may have unintended adverse impacts on existing facilities.”

IPPNY called for further study of the issue. Widespread adoption of distributed resources will depend on “clear and transparent evidence that the underlying benefits of proposed resources exceed their costs and the costs of any alternatives,” they concluded.

Exelon, the utility conglomerate that owns three electricity utilities, a retail electricity provider and a substantial generation portfolio, generally supports the idea of utilities owning distributed resources but advised caution. The commission should “not preclude competitive providers of these services from participating in this marketplace” to meet retail distribution and generation needs, the company said.

A sharp increase in distributed resources, without adequate system communication and control upgrades, “has the potential to create new inefficiencies,” Exelon cautioned. “For this reason, the State must undertake only a measured and deliberate roll out of REV outcomes and DER.”

The utility view: We’re already building the grid

Utilities are warily supportive of the REV vision, but want to solidify their roles in the changing marketplace, according to comments filed with New York regulators and reviewed by Utility Dive.

Public Service Enterprise Group’s Long Island utility stressed that “the distribution utility is best suited to serve as [the distribution system platform].”

“As a policy matter, the utility has familiarity with technical standards and reliability protocols, has an obligation to maintain and, when necessary, restore service, and has institutional experience in planning, managing, and operating the distribution system,” PSEG argued in comments. “Having the utility as the DSP and establishing the policies and processes to manage the expansion of markets and market players will minimize confusion, provide clarity on roles and responsibilities and avoid redundancy and the associated unnecessary cost burden.”

The utility has already proposed $200 million in programs that align with the staff’s straw proposal, it told the PSC. The company is working to increase its distributed energy resource asset base and build customer and market confidence in the expanded role of distributed resources, the utility said, adding that it has already begun building development of Distribution System Platform Provider (DSPP) capabilities into its renewable and efficiency programs.

New York utilities appear to see similar opportunities — and potential threats to their business — in microgrids.

Microgrids “may be appropriate” if properly planned, according to a group of utilities who filed jointly, but “when a microgrid serves more than one customer … and operates within the surrounding electric distribution infrastructure, utilities are in the best position to own and properly operate such distribution infrastructure when it involves systems within the utility franchise area.”

The group of utilities includes Central Hudson Gas and Electric, Consolidated Edison, New York State Electric & Gas, Niagara Mohawk Power, National Grid, Orange and Rockland Utilities, and Rochester Gas and Electric.

Each utility is making “ongoing investments” to aid the move to a distributed system platform, they said, but certain baseline investments will be necessary to support the distributed service provider. Those foundational areas fall into five categories: communication; grid automation; grid edge monitoring; distributed resource control and management; market operations and administration.

The utilities expect to work with staff at the Public Service Commission to determine what needs to be accomplished “to provide a sufficient level of standardization both to achieve interoperability and reduce transaction costs for third-party providers.”

As New York utilities prepare for transformative changes, the rest of the industry will be watching closely to see how it all shakes out.