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Transmission Summit West 2013

The document discusses the evolving landscape of utilities and electricity demand in the U.S., projecting minimal growth in electricity use and highlighting significant coal plant retirements due to regulatory pressures. It emphasizes innovation in technology, the impact of distributed energy resources, and trends in renewable energy, including wind and solar developments. The implications for utility business models are examined as increased reliance on decentralized generation forces utilities to adapt to changing customer demands and regulatory environments.

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The Changing Utility Landscape and its Implications for Transmission Transmission Summit West September 24, 2013 Copyright © 2013 by ScottMadden, Inc. All rights reserved.
Table of Contents Demand Growth and Implications Changes to the Generation Portfolio Technology Innovation Utility Business Model Implications for Utilities and for Transmission 1 Copyright © 2013 by ScottMadden, Inc. All rights reserved.
Electricity Use Trends and Forecast US Demand Growth 1950-2040  The Energy Information Administration (EIA) projects growth in electricity use in the United States to remain below 1% for the foreseeable future  All types of end-use demand declined, beginning in 2008  Industrial end-use saw the greatest decrease of all sectors in 2009  Residential saw an uptick in 2010 but has been declining since Electricity Sales by End-Use Sector, in Trillion KWHs  Commercial use has been the most stable but is still below pre-recession levels 110% 105%  Direct energy use has increased in the years 2009–2012, possibly at the expense of other types of demand 100% 95% 90% 85% 80% 2007 Residential 2 2008 2009 Commercial 2010 Industrial Source: EIA, Electric Power Monthly, April 2013 Copyright © 2013 by ScottMadden, Inc. All rights reserved. 2011 2012 Direct Use
In the Intermediate Term – Significant Coal Plant Retirements Will Occur Selected U.S. Coal Plant Retirement Forecasts (including 2012): 30 GWs to 100 GWs between 2015 and 2020 Analyst Projected Retirements Union of Concerned Scientists 59 GWs “ripe for retirement” in add’n to est. 41 GWs announced Brattle 59–77 GWs EIA 49 GWs by 2040 Sanford Bernstein 75 GWs by 2033 Reuters/Factbox 36 GWs by 2015 Barclays 24–29 GWs by 2015 (exclusive of 9 GWs retired in 2012) Black & Veatch 62 GWs by 2020 Standard & Poor’s 35–50 GWs by 2016 BMO Capital Markets Announced Coal-Fired Plant Retirements as of Jan. 2013 (Focus on WECC and ERCOT) 30 GWs by 2020 (exclusive of 9 GWs retired in 2012)  Significant coal retirements are underway: Environmental regulations are increasing pressure on coal-fired generators to invest in new air quality controls or to retire (before year-end 2015); this capacity will largely be offset by new gas-based generation 3 Sources: Industry news; SNL Financial; ScottMadden analysis Copyright © 2013 by ScottMadden, Inc. All rights reserved.
Coal Retirements in WECC Planned Coal Unit Retirements for WECC, 2013–2018 Unit Arapahoe ST 3 W N Clark ST 1 W N Clark ST 2 Port of Stockton District Ener CFG STG Ben French ST1 Neil Simpson ST5 Osage (WY) ST1 Osage (WY) ST2 Osage (WY) ST3 Reid Gardner ST1 Reid Gardner ST2 Reid Gardner ST3 Carbon ST1 Carbon ST2 Cherokee (CO) ST3 San Juan ST2 San Juan ST3 Valmont ST5 Cherokee (CO) ST4 Reid Gardner ST4 Kennecott Utah Copper ST1 Kennecott Utah Copper ST2 Kennecott Utah Copper ST3 4 State CO CO CO Operating Original Capacity In-service (MW) Year 44 1951 18 1955 25 1959 Date to be Retired 12/1/13 12/1/13 12/1/13 Age at Retirement Ultimate Parent 62 Xcel Energy Inc. 58 Black Hills Corp. 54 Black Hills Corp. CA SD WY WY WY WY NV NV NV UT UT CO NM NM CO CO NV 44 22 19 10 10 10 100 100 98 67 105 152 320 495 184 352 255 1987 1961 1969 1948 1949 1952 1965 1968 1976 1954 1957 1962 1973 1979 1964 1968 1983 2013 3/1/14 3/1/14 3/1/14 3/1/14 3/1/14 2014 2014 2014 1/1/15 1/1/15 2015 12/17/13 12/17/13 12/17/13 2017 2017 26 53 45 66 65 62 49 46 38 61 58 53 44 38 53 49 34 DTE Energy Co. Black Hills Corp. Black Hills Corp. Black Hills Corp. Black Hills Corp. Black Hills Corp. NV Energy Inc. NV Energy Inc. NV Energy Inc. Multi-owned Multi-owned Xcel Energy Inc. Multi-owned Multi-owned Xcel Energy Inc. Xcel Energy Inc. Multi-owned UT 50 1943 1/18/13 75 Rio Tinto UT 25 1943 1/18/13 75 Rio Tinto UT 25 1946 1/18/13 72 Rio Tinto Sources: SNL Financial; NERC 2012 Long Term Reliability Assessment Copyright © 2013 by ScottMadden, Inc. All rights reserved. Comments  Of the proposed retirements between 2013–2018, the majority are slated to occur in the MidAtlantic and parts of the Midwest and South  A total of 2530 MWs of coal is scheduled to be retired in WECC  Coal retirements are not the primary driver of new transmission needs in WECC
Wind Industry Trends  WECC experienced the largest annual capacity increase of the NERC regional entities • Of the 13,129 MW of wind added in the U.S. in 2012, 3,918 MW were added in WECC • Total WECC utility wind capacity as of 2012 was 18,327 MW  At the end of 2012 there were 125 GWs of wind capacity in the interconnection queues in the US Top 10 WECC Wind Projects by Capacity in Advanced Development or Construction Phase with Estimated Cost Power Plant Owner Name Mescalero Ridge Wind Project Caithness Energy LLC Portland Tucannon River Wind Farm (Lower Snake General River Phase II) Electric Co. Summit Ridge Wind Lotus Group Farm USA ArcLight Alta East Wind Capital Project Partners LLC New Estimated Estimated Capacity State Completion Construction (MW) Date Cost ($000) 800 NM - $1,760,000 267 WA 2015 $535,000 200 OR 01/2015 $440,220 153 CA - $336,600 Global Infrastructure Mgmt LLC 153 CA - $336,600 Alta Wind X ArcLight Capital Partners LLC 138 CA 01/2015 $303,600 Alta Wind X Global Infrastructure Mgmt LLC 138 CA 01/2015 $303,600 North Sky River Wind Energy Project  On a cumulative basis, Texas remained the leader among states, with 12,214 MWs installed at the end of 2012—more than twice as much as the next-highest state (California, with 5,542 MWs) Alta East Wind Project NextEra Energy 135 CA - $295,812 110 CA 2013 $242,000 104 OR - $300,000 Pacific Wind Echanis Project 5 Sources: WECC 2012 Power Supply Assessment, Wind Technologies Report, California ISO, SNL Copyright © 2013 by ScottMadden, Inc. All rights reserved. EDF Renewable Energy Columbia Energy Partners
Solar Industry Trends  In 2013, the U.S.’s cumulative installed solar capacity will surpass 10 GWs (utility scale + DG), with 4.4 GWs of PV and 912 MWs of concentrating solar power (CSP) installed so far in 2013  There were 38 individual utility scale PV projects totaling 452 MWs completed in Q2 2013. All ten of the largest projects completed were installed in either California or Arizona 6 Top 10 WECC Solar Projects by Capacity in Advanced Development or Construction Phase with Estimated Cost New Estimated Estimated Power Plant Owner Name Capacity State Completion Construction (MW) Date Cost ($000) Desert Sunlight NextEra 550 CA 2015 $2,300,000 Project Energy Sumitomo Desert Sunlight Corp. of 550 CA 2015 $2,300,000 Project America GE Energy Desert Sunlight Financial 550 CA 2015 $2,300,000 Project Svcs Palen Solar Electric Chevron Generating System Energy 500 CA 06/2016 $2,000,000 (CA Solar 10) Solutions Palen Solar Electric Caithness Generating System 500 CA 06/2016 $2,000,000 Energy LLC (CA Solar 10) Palen Solar Electric BrightSource Generating System 500 CA 06/2016 $2,000,000 Energy Inc. (CA Solar 10) Blythe Solar Power NextEra Project 485 CA 2018 $1,130,000 Energy (Photovoltaic) Sustainable Nevada 300 Solar Energy 300 NV 12/2014 $800,000 Project (Techren) Capital Nevada 300 Solar POSCO 300 NV 12/2014 $800,000 Project (Techren) Power First Solar Stateline Solar Development 300 CA 12/2016 $1,590,000 Project LLC Sources: EIA (latest data as of Aug. 2013), SEPA, GTM, SNL, Sustainable Business News, NY Times, ScottMadden analysis Copyright © 2013 by ScottMadden, Inc. All rights reserved.
Technology Innovation and Reduction of Load Automated Metering Infrastructure Improving Functionality:  Demand side management (DSM) , DR, and EE programs have been around for a long time  Emerging technologies are increasing the capability and reach of these programs  DSM and Energy Efficiency AMI enables direct control of customer devices during peak-load conditions and two-way communication about load reductions  DA is increasing the reliability and resiliency of the distribution grid  Markets and aggregation of DR are creating a new “supply” source  DR and EE programs can be used to reduce load and to defer expenditures on utility infrastructure 7 Copyright © 2013 by ScottMadden, Inc. All rights reserved.
Technology Innovation and Customer Alternatives Distributed Energy Resources Enabling customer alternatives:  Facilitated by Smart Grid, net metering policies, and subsidies, more and more distributed energy resources are being deployed  There are approximately 71,000 MWs of CHP on the grid today  As of 2012, there were 3.5 GWs of net metered projects on the grid; 80% were in five states (Source: SEPA)  Microgrids are emerging as a viable option for commercial customers and are a substitute for generation, transmission, and distribution  Drivers for microgrid implementations include increased reliability, economics, and “green” alternatives  As storage technologies mature, they will enable more customer-side resources 8 Sources: EIA Form 860 data as of Jan. 2013 for Distributed Energy Resources chart; SEPA, EIA Copyright © 2013 by ScottMadden, Inc. All rights reserved. Microgrids
Microgrids: An Overview Definition: A group of interconnected loads and distributed energy resources within clearly defined electrical boundaries that acts as a single-controllable entity with respect to the main grid Description Industry Trends  A microgrid can connect and disconnect from the grid to enable it to operate in grid-connected or island mode. In island mode, the microgrid neither draws power from the main grid nor supplies power to it  Microgrid configurations are based on the number of end users, real estate parcels to be served, ownership of real estate parcels, and whether infrastructure crosses a public street  Consumer base has traditionally been university campuses, military bases, and municipalities for mission critical needs  According to Navigant Research, as of April 2013, North America has 1,459 MWs of microgrid capacity online and more than 1,122 MWs in the planned/under development or proposed phase  By 2020, capacity is projected to be 5,973 MWs  The institutional/campus segment is the largest sector for microgrids globally  Several drivers are contributing to the current interest in microgrids—reliability, RPS, grid security, and economics  Reliability has been the primary driver of demand, as it enables consumers to be selfsufficient during times of power disruption— storms highlight the issue  Smaller scale renewables can be utilized  Certain customers are attracted by economics  Fuel choices are increasing (e.g., natural gas, solar, biomass); however, economic viability varies by region  Studies show that microgrids are economically viable for commercial and industrial customers ranging in size from 4–40 MWs and universities ranging from 2–40 MWs  Example:  All 23 of the California State System campuses have some form of a microgrid; four plan to upgrade 9 Copyright © 2013 by ScottMadden, Inc. All rights reserved.
Distributed Generation State Ranking by Net Metered Customers, 2011 Net Metered Customers by Customer Class, 2007–2011 Net Metered Customers 250,000 200,000 Rank State Customers % of U.S. Total 1 California 115,921 52% 2 3-Year CAGR: 48% 5-Year CAGR: 46% New Jersey 12,959 6% 3 12,654 6% 4 Arizona 11,450 5% Commercial 100,000 Colorado Industrial 150,000 5 Hawaii 9,822 4% Residential 50,000 State Ranking by Net Metered Capacity, 2011 Capacity (MW) % of U.S. Total 1,192 44% 0 2007 2008 2009 2010 2011 Rank State 1 2 Observations  Net metered systems are examined to understand trends in distributed generation  Driven by strong deployment in a few states, the number of net metered customers continues to grow steadily  In 2011, the residential sector accounted for 90% of net metered customers and 39% of net metered capacity; commercial customers accounted for 9% of net metered customers and 44% of net metered capacity  California is a clear leader in net metered customers and capacity  In 2011, Arizona ranked first in the sale of excess energy, and Massachusetts ranked a surprising second California New Jersey 442 17% 3 Pennsylvania 146 5% 4 Colorado 137 5% 5 Massachusetts 79 3% State Ranking by Sale of Excess Energy, 2011 Rank State Sale of Excess Energy (MWh) Percent of U.S. Total Note: Net metering data represents systems with nameplate capacity of 2 MWs or less. Sources: EIA, ScottMadden analysis Copyright © 2013 by ScottMadden, Inc. All rights reserved. Arizona 118,983 47% 2 Massachusetts 58,394 23% 3 Nevada 15,350 6% 4 California 8,713 3% 5 10 1 Hawaii 7,402 3%
Implications for Utility Business Models Control is dispersed, many systems loosely tied Controlled centrally, one integrated system High Low Increasing change and complexity Traditional Vertically Integrated Utility Disaggregated Supply and Demand  Focus continues on central station generation, long-haul transmission  High penetration of distributed generation (combined heat & power and renewables)  Technology initiatives focus on improving the existing integrated system  Emergence of microgrids  Customers driving the “discussion”  May see reduced loads due to energy efficiency and distributed resources but customers remain  Utilities driving the “discussion” Drivers  High cost/kWh, favorable policies  Customer requirements (cost, reliability, “green-ness”)  Regulatory “enticements” (subsidies for certain resources, net metering) Not all utilities will face the same pressures in the same timeframe; they will focus on different types of infrastructure in the near term. 11 Copyright © 2013 by ScottMadden, Inc. All rights reserved.
Where Will Utilities be Most Impacted? Contributing Factors ScottMadden believes that several factors will contribute to a region’s attractiveness for alternative supply sources:  Electricity rates  Net metering and interconnection policies  Prevalence of and policy toward solar and third-party providers  RPS carve outs for solar 12 Copyright © 2013 by ScottMadden, Inc. All rights reserved.
Contributing Factor: Average Retail Electricity Prices (2012) 2012 Average Retail Electricity Prices (Cents/KWh) DC 6.5 cents to 8 cents 8.01 cents to 9.5 cents 9.51 cents to 12 cents 12.01 cents to 14 cents 14.01 cents to 35 cents 13 Source: U.S. Chamber of Commerce, Institute for 21st Century Energy Copyright © 2013 by ScottMadden, Inc. All rights reserved.
Contributing Factor: Net Metering  43 jurisdictions have net metering rules, which allow the sale to the local distribution utility of excess distributed generation output State Grading of Net Metering Policy Encouraging Customer-Sited Generation (as of Late 2012)  The ability to monetize this extra power provides additional financial benefits to distributed generation  As shown, the MidAtlantic, California, and parts of the Mountain West have more distributed resource-friendly policies Relative Ranking* A B C D F Better NA Puerto Rico Note: *Relative rankings are based upon the following factors: system capacity (accommodates broader and larger DG capacities); higher total program limits (caps); lenient “rollover” provisions that allow more excess electricity (vs. consumption) to be rolled over to future months and credited then; less onerous-metering requirements; customer ownership of renewable energy credits (customer ownership is better); range of eligible technologies (broader is better); customer class eligibility (less restrictive is better); permissible aggregation (aggregation is better); community-shared renewables (shared is better); additional fees (safe harbor protecting against fees is better); types of utilities applicable (all types are better); third-party treatment (third-party PPA permission is better). Source: Interstate Renewable Energy Council, “Facing the Grid: Best Practices in State Net Metering Policies and Interconnection Procedures,” November 2012 14 Copyright © 2013 by ScottMadden, Inc. All rights reserved.
Prospects for Distributed Resources Map Score Better 0–2 3–5 6–8 9–11 12–14  Where jurisdictions are “better” on more factors (e.g., easier interconnection; third-party solar PPAs permitted; net metering; lower differential between utility-supplied power and installed solar PV), they scored higher on the map  The states that score highest are most likely to a significant influx of distributed resources 15 Sources: ScottMadden analysis; inputs from DSIRE, IREC, American Council for An Energy-Efficient Economy; U.S. Energy information Administration; and other sources Copyright © 2013 by ScottMadden, Inc. All rights reserved.
What Does This Mean? What Should Utilities Do? Area of Concern Implications For Consideration Strategy  The utility will face competition and possibly loss of revenue  What business(es) should we be in?  Is there an opportunity to become the “single point of contact” to the customer? Financial  Customers are using less electricity or selfsupplying  Does decoupling make sense?  How should we address net metering?  Is there a need for alternative rate structures? Real Time Operations  Operators will be challenged to see and operate new resources  How should visualization in operations be expanded?  In an RTO environment, who works with the alternative providers? In a non-RTO environment? System Planning  Traditional utilities plan for central station generation, long-haul transmission  How do our models account for non-traditional resources?  How should we address spatial and temporal questions? Stakeholder Management  Customers may have various new “energy providers”  How do we work with all our new and existing stakeholders?  What is our strategy? 19 Copyright © 2013 by ScottMadden, Inc. All rights reserved.
What Do These Changes Mean for Transmission? Its Complicated… System planning will become more complicated  Regional differences will become more acute  Transmission planning may need to consider the availability of different types of resources  Load forecasting may change or need to become more granular  Location and timing will matter more and more as the system is assessed Operation of the grid requires more sophisticated visualization and tools  Visualization of myriad resources will become important in areas of high penetration  Utilities, RTOs, and ISOs will need to consider these resources as they manage the real-time environment Transmission owners and operators will have to work with many more parties to manage the grid  The shifting business model has opened markets to new participants Transmission owners and operators are being pulled in two directions: integrate utility-scale renewables and accommodate distributed resources 17 Copyright © 2013 by ScottMadden, Inc. All rights reserved.
In Summary We are living in a world of:  Declining demand growth  A shift away from coal  A move toward renewables  Increasingly distributed resources We need to think hard about:  Meeting the reliability needs of the system with new participants and resources  Integrating both large and small scale resources to ensure reliability 18 Copyright © 2013 by ScottMadden, Inc. All rights reserved.
Cristin M. Lyons Partner ScottMadden, Inc. 2626 Glenwood Avenue Suite 480 Raleigh, NC 27608 cmlyons@scottmadden.com O: 919-781-4191 M: 919-247-1031 19 Copyright © 2013 by ScottMadden, Inc. All rights reserved.

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Transmission Summit West 2013

  • 1.
    The Changing UtilityLandscape and its Implications for Transmission Transmission Summit West September 24, 2013 Copyright © 2013 by ScottMadden, Inc. All rights reserved.
  • 2.
    Table of Contents DemandGrowth and Implications Changes to the Generation Portfolio Technology Innovation Utility Business Model Implications for Utilities and for Transmission 1 Copyright © 2013 by ScottMadden, Inc. All rights reserved.
  • 3.
    Electricity Use Trendsand Forecast US Demand Growth 1950-2040  The Energy Information Administration (EIA) projects growth in electricity use in the United States to remain below 1% for the foreseeable future  All types of end-use demand declined, beginning in 2008  Industrial end-use saw the greatest decrease of all sectors in 2009  Residential saw an uptick in 2010 but has been declining since Electricity Sales by End-Use Sector, in Trillion KWHs  Commercial use has been the most stable but is still below pre-recession levels 110% 105%  Direct energy use has increased in the years 2009–2012, possibly at the expense of other types of demand 100% 95% 90% 85% 80% 2007 Residential 2 2008 2009 Commercial 2010 Industrial Source: EIA, Electric Power Monthly, April 2013 Copyright © 2013 by ScottMadden, Inc. All rights reserved. 2011 2012 Direct Use
  • 4.
    In the IntermediateTerm – Significant Coal Plant Retirements Will Occur Selected U.S. Coal Plant Retirement Forecasts (including 2012): 30 GWs to 100 GWs between 2015 and 2020 Analyst Projected Retirements Union of Concerned Scientists 59 GWs “ripe for retirement” in add’n to est. 41 GWs announced Brattle 59–77 GWs EIA 49 GWs by 2040 Sanford Bernstein 75 GWs by 2033 Reuters/Factbox 36 GWs by 2015 Barclays 24–29 GWs by 2015 (exclusive of 9 GWs retired in 2012) Black & Veatch 62 GWs by 2020 Standard & Poor’s 35–50 GWs by 2016 BMO Capital Markets Announced Coal-Fired Plant Retirements as of Jan. 2013 (Focus on WECC and ERCOT) 30 GWs by 2020 (exclusive of 9 GWs retired in 2012)  Significant coal retirements are underway: Environmental regulations are increasing pressure on coal-fired generators to invest in new air quality controls or to retire (before year-end 2015); this capacity will largely be offset by new gas-based generation 3 Sources: Industry news; SNL Financial; ScottMadden analysis Copyright © 2013 by ScottMadden, Inc. All rights reserved.
  • 5.
    Coal Retirements inWECC Planned Coal Unit Retirements for WECC, 2013–2018 Unit Arapahoe ST 3 W N Clark ST 1 W N Clark ST 2 Port of Stockton District Ener CFG STG Ben French ST1 Neil Simpson ST5 Osage (WY) ST1 Osage (WY) ST2 Osage (WY) ST3 Reid Gardner ST1 Reid Gardner ST2 Reid Gardner ST3 Carbon ST1 Carbon ST2 Cherokee (CO) ST3 San Juan ST2 San Juan ST3 Valmont ST5 Cherokee (CO) ST4 Reid Gardner ST4 Kennecott Utah Copper ST1 Kennecott Utah Copper ST2 Kennecott Utah Copper ST3 4 State CO CO CO Operating Original Capacity In-service (MW) Year 44 1951 18 1955 25 1959 Date to be Retired 12/1/13 12/1/13 12/1/13 Age at Retirement Ultimate Parent 62 Xcel Energy Inc. 58 Black Hills Corp. 54 Black Hills Corp. CA SD WY WY WY WY NV NV NV UT UT CO NM NM CO CO NV 44 22 19 10 10 10 100 100 98 67 105 152 320 495 184 352 255 1987 1961 1969 1948 1949 1952 1965 1968 1976 1954 1957 1962 1973 1979 1964 1968 1983 2013 3/1/14 3/1/14 3/1/14 3/1/14 3/1/14 2014 2014 2014 1/1/15 1/1/15 2015 12/17/13 12/17/13 12/17/13 2017 2017 26 53 45 66 65 62 49 46 38 61 58 53 44 38 53 49 34 DTE Energy Co. Black Hills Corp. Black Hills Corp. Black Hills Corp. Black Hills Corp. Black Hills Corp. NV Energy Inc. NV Energy Inc. NV Energy Inc. Multi-owned Multi-owned Xcel Energy Inc. Multi-owned Multi-owned Xcel Energy Inc. Xcel Energy Inc. Multi-owned UT 50 1943 1/18/13 75 Rio Tinto UT 25 1943 1/18/13 75 Rio Tinto UT 25 1946 1/18/13 72 Rio Tinto Sources: SNL Financial; NERC 2012 Long Term Reliability Assessment Copyright © 2013 by ScottMadden, Inc. All rights reserved. Comments  Of the proposed retirements between 2013–2018, the majority are slated to occur in the MidAtlantic and parts of the Midwest and South  A total of 2530 MWs of coal is scheduled to be retired in WECC  Coal retirements are not the primary driver of new transmission needs in WECC
  • 6.
    Wind Industry Trends  WECCexperienced the largest annual capacity increase of the NERC regional entities • Of the 13,129 MW of wind added in the U.S. in 2012, 3,918 MW were added in WECC • Total WECC utility wind capacity as of 2012 was 18,327 MW  At the end of 2012 there were 125 GWs of wind capacity in the interconnection queues in the US Top 10 WECC Wind Projects by Capacity in Advanced Development or Construction Phase with Estimated Cost Power Plant Owner Name Mescalero Ridge Wind Project Caithness Energy LLC Portland Tucannon River Wind Farm (Lower Snake General River Phase II) Electric Co. Summit Ridge Wind Lotus Group Farm USA ArcLight Alta East Wind Capital Project Partners LLC New Estimated Estimated Capacity State Completion Construction (MW) Date Cost ($000) 800 NM - $1,760,000 267 WA 2015 $535,000 200 OR 01/2015 $440,220 153 CA - $336,600 Global Infrastructure Mgmt LLC 153 CA - $336,600 Alta Wind X ArcLight Capital Partners LLC 138 CA 01/2015 $303,600 Alta Wind X Global Infrastructure Mgmt LLC 138 CA 01/2015 $303,600 North Sky River Wind Energy Project  On a cumulative basis, Texas remained the leader among states, with 12,214 MWs installed at the end of 2012—more than twice as much as the next-highest state (California, with 5,542 MWs) Alta East Wind Project NextEra Energy 135 CA - $295,812 110 CA 2013 $242,000 104 OR - $300,000 Pacific Wind Echanis Project 5 Sources: WECC 2012 Power Supply Assessment, Wind Technologies Report, California ISO, SNL Copyright © 2013 by ScottMadden, Inc. All rights reserved. EDF Renewable Energy Columbia Energy Partners
  • 7.
    Solar Industry Trends  In2013, the U.S.’s cumulative installed solar capacity will surpass 10 GWs (utility scale + DG), with 4.4 GWs of PV and 912 MWs of concentrating solar power (CSP) installed so far in 2013  There were 38 individual utility scale PV projects totaling 452 MWs completed in Q2 2013. All ten of the largest projects completed were installed in either California or Arizona 6 Top 10 WECC Solar Projects by Capacity in Advanced Development or Construction Phase with Estimated Cost New Estimated Estimated Power Plant Owner Name Capacity State Completion Construction (MW) Date Cost ($000) Desert Sunlight NextEra 550 CA 2015 $2,300,000 Project Energy Sumitomo Desert Sunlight Corp. of 550 CA 2015 $2,300,000 Project America GE Energy Desert Sunlight Financial 550 CA 2015 $2,300,000 Project Svcs Palen Solar Electric Chevron Generating System Energy 500 CA 06/2016 $2,000,000 (CA Solar 10) Solutions Palen Solar Electric Caithness Generating System 500 CA 06/2016 $2,000,000 Energy LLC (CA Solar 10) Palen Solar Electric BrightSource Generating System 500 CA 06/2016 $2,000,000 Energy Inc. (CA Solar 10) Blythe Solar Power NextEra Project 485 CA 2018 $1,130,000 Energy (Photovoltaic) Sustainable Nevada 300 Solar Energy 300 NV 12/2014 $800,000 Project (Techren) Capital Nevada 300 Solar POSCO 300 NV 12/2014 $800,000 Project (Techren) Power First Solar Stateline Solar Development 300 CA 12/2016 $1,590,000 Project LLC Sources: EIA (latest data as of Aug. 2013), SEPA, GTM, SNL, Sustainable Business News, NY Times, ScottMadden analysis Copyright © 2013 by ScottMadden, Inc. All rights reserved.
  • 8.
    Technology Innovation andReduction of Load Automated Metering Infrastructure Improving Functionality:  Demand side management (DSM) , DR, and EE programs have been around for a long time  Emerging technologies are increasing the capability and reach of these programs  DSM and Energy Efficiency AMI enables direct control of customer devices during peak-load conditions and two-way communication about load reductions  DA is increasing the reliability and resiliency of the distribution grid  Markets and aggregation of DR are creating a new “supply” source  DR and EE programs can be used to reduce load and to defer expenditures on utility infrastructure 7 Copyright © 2013 by ScottMadden, Inc. All rights reserved.
  • 9.
    Technology Innovation and CustomerAlternatives Distributed Energy Resources Enabling customer alternatives:  Facilitated by Smart Grid, net metering policies, and subsidies, more and more distributed energy resources are being deployed  There are approximately 71,000 MWs of CHP on the grid today  As of 2012, there were 3.5 GWs of net metered projects on the grid; 80% were in five states (Source: SEPA)  Microgrids are emerging as a viable option for commercial customers and are a substitute for generation, transmission, and distribution  Drivers for microgrid implementations include increased reliability, economics, and “green” alternatives  As storage technologies mature, they will enable more customer-side resources 8 Sources: EIA Form 860 data as of Jan. 2013 for Distributed Energy Resources chart; SEPA, EIA Copyright © 2013 by ScottMadden, Inc. All rights reserved. Microgrids
  • 10.
    Microgrids: An Overview Definition:A group of interconnected loads and distributed energy resources within clearly defined electrical boundaries that acts as a single-controllable entity with respect to the main grid Description Industry Trends  A microgrid can connect and disconnect from the grid to enable it to operate in grid-connected or island mode. In island mode, the microgrid neither draws power from the main grid nor supplies power to it  Microgrid configurations are based on the number of end users, real estate parcels to be served, ownership of real estate parcels, and whether infrastructure crosses a public street  Consumer base has traditionally been university campuses, military bases, and municipalities for mission critical needs  According to Navigant Research, as of April 2013, North America has 1,459 MWs of microgrid capacity online and more than 1,122 MWs in the planned/under development or proposed phase  By 2020, capacity is projected to be 5,973 MWs  The institutional/campus segment is the largest sector for microgrids globally  Several drivers are contributing to the current interest in microgrids—reliability, RPS, grid security, and economics  Reliability has been the primary driver of demand, as it enables consumers to be selfsufficient during times of power disruption— storms highlight the issue  Smaller scale renewables can be utilized  Certain customers are attracted by economics  Fuel choices are increasing (e.g., natural gas, solar, biomass); however, economic viability varies by region  Studies show that microgrids are economically viable for commercial and industrial customers ranging in size from 4–40 MWs and universities ranging from 2–40 MWs  Example:  All 23 of the California State System campuses have some form of a microgrid; four plan to upgrade 9 Copyright © 2013 by ScottMadden, Inc. All rights reserved.
  • 11.
    Distributed Generation State Rankingby Net Metered Customers, 2011 Net Metered Customers by Customer Class, 2007–2011 Net Metered Customers 250,000 200,000 Rank State Customers % of U.S. Total 1 California 115,921 52% 2 3-Year CAGR: 48% 5-Year CAGR: 46% New Jersey 12,959 6% 3 12,654 6% 4 Arizona 11,450 5% Commercial 100,000 Colorado Industrial 150,000 5 Hawaii 9,822 4% Residential 50,000 State Ranking by Net Metered Capacity, 2011 Capacity (MW) % of U.S. Total 1,192 44% 0 2007 2008 2009 2010 2011 Rank State 1 2 Observations  Net metered systems are examined to understand trends in distributed generation  Driven by strong deployment in a few states, the number of net metered customers continues to grow steadily  In 2011, the residential sector accounted for 90% of net metered customers and 39% of net metered capacity; commercial customers accounted for 9% of net metered customers and 44% of net metered capacity  California is a clear leader in net metered customers and capacity  In 2011, Arizona ranked first in the sale of excess energy, and Massachusetts ranked a surprising second California New Jersey 442 17% 3 Pennsylvania 146 5% 4 Colorado 137 5% 5 Massachusetts 79 3% State Ranking by Sale of Excess Energy, 2011 Rank State Sale of Excess Energy (MWh) Percent of U.S. Total Note: Net metering data represents systems with nameplate capacity of 2 MWs or less. Sources: EIA, ScottMadden analysis Copyright © 2013 by ScottMadden, Inc. All rights reserved. Arizona 118,983 47% 2 Massachusetts 58,394 23% 3 Nevada 15,350 6% 4 California 8,713 3% 5 10 1 Hawaii 7,402 3%
  • 12.
    Implications for UtilityBusiness Models Control is dispersed, many systems loosely tied Controlled centrally, one integrated system High Low Increasing change and complexity Traditional Vertically Integrated Utility Disaggregated Supply and Demand  Focus continues on central station generation, long-haul transmission  High penetration of distributed generation (combined heat & power and renewables)  Technology initiatives focus on improving the existing integrated system  Emergence of microgrids  Customers driving the “discussion”  May see reduced loads due to energy efficiency and distributed resources but customers remain  Utilities driving the “discussion” Drivers  High cost/kWh, favorable policies  Customer requirements (cost, reliability, “green-ness”)  Regulatory “enticements” (subsidies for certain resources, net metering) Not all utilities will face the same pressures in the same timeframe; they will focus on different types of infrastructure in the near term. 11 Copyright © 2013 by ScottMadden, Inc. All rights reserved.
  • 13.
    Where Will Utilitiesbe Most Impacted? Contributing Factors ScottMadden believes that several factors will contribute to a region’s attractiveness for alternative supply sources:  Electricity rates  Net metering and interconnection policies  Prevalence of and policy toward solar and third-party providers  RPS carve outs for solar 12 Copyright © 2013 by ScottMadden, Inc. All rights reserved.
  • 14.
    Contributing Factor: Average RetailElectricity Prices (2012) 2012 Average Retail Electricity Prices (Cents/KWh) DC 6.5 cents to 8 cents 8.01 cents to 9.5 cents 9.51 cents to 12 cents 12.01 cents to 14 cents 14.01 cents to 35 cents 13 Source: U.S. Chamber of Commerce, Institute for 21st Century Energy Copyright © 2013 by ScottMadden, Inc. All rights reserved.
  • 15.
    Contributing Factor: Net Metering 43 jurisdictions have net metering rules, which allow the sale to the local distribution utility of excess distributed generation output State Grading of Net Metering Policy Encouraging Customer-Sited Generation (as of Late 2012)  The ability to monetize this extra power provides additional financial benefits to distributed generation  As shown, the MidAtlantic, California, and parts of the Mountain West have more distributed resource-friendly policies Relative Ranking* A B C D F Better NA Puerto Rico Note: *Relative rankings are based upon the following factors: system capacity (accommodates broader and larger DG capacities); higher total program limits (caps); lenient “rollover” provisions that allow more excess electricity (vs. consumption) to be rolled over to future months and credited then; less onerous-metering requirements; customer ownership of renewable energy credits (customer ownership is better); range of eligible technologies (broader is better); customer class eligibility (less restrictive is better); permissible aggregation (aggregation is better); community-shared renewables (shared is better); additional fees (safe harbor protecting against fees is better); types of utilities applicable (all types are better); third-party treatment (third-party PPA permission is better). Source: Interstate Renewable Energy Council, “Facing the Grid: Best Practices in State Net Metering Policies and Interconnection Procedures,” November 2012 14 Copyright © 2013 by ScottMadden, Inc. All rights reserved.
  • 16.
    Prospects for DistributedResources Map Score Better 0–2 3–5 6–8 9–11 12–14  Where jurisdictions are “better” on more factors (e.g., easier interconnection; third-party solar PPAs permitted; net metering; lower differential between utility-supplied power and installed solar PV), they scored higher on the map  The states that score highest are most likely to a significant influx of distributed resources 15 Sources: ScottMadden analysis; inputs from DSIRE, IREC, American Council for An Energy-Efficient Economy; U.S. Energy information Administration; and other sources Copyright © 2013 by ScottMadden, Inc. All rights reserved.
  • 17.
    What Does ThisMean? What Should Utilities Do? Area of Concern Implications For Consideration Strategy  The utility will face competition and possibly loss of revenue  What business(es) should we be in?  Is there an opportunity to become the “single point of contact” to the customer? Financial  Customers are using less electricity or selfsupplying  Does decoupling make sense?  How should we address net metering?  Is there a need for alternative rate structures? Real Time Operations  Operators will be challenged to see and operate new resources  How should visualization in operations be expanded?  In an RTO environment, who works with the alternative providers? In a non-RTO environment? System Planning  Traditional utilities plan for central station generation, long-haul transmission  How do our models account for non-traditional resources?  How should we address spatial and temporal questions? Stakeholder Management  Customers may have various new “energy providers”  How do we work with all our new and existing stakeholders?  What is our strategy? 19 Copyright © 2013 by ScottMadden, Inc. All rights reserved.
  • 18.
    What Do TheseChanges Mean for Transmission? Its Complicated… System planning will become more complicated  Regional differences will become more acute  Transmission planning may need to consider the availability of different types of resources  Load forecasting may change or need to become more granular  Location and timing will matter more and more as the system is assessed Operation of the grid requires more sophisticated visualization and tools  Visualization of myriad resources will become important in areas of high penetration  Utilities, RTOs, and ISOs will need to consider these resources as they manage the real-time environment Transmission owners and operators will have to work with many more parties to manage the grid  The shifting business model has opened markets to new participants Transmission owners and operators are being pulled in two directions: integrate utility-scale renewables and accommodate distributed resources 17 Copyright © 2013 by ScottMadden, Inc. All rights reserved.
  • 19.
    In Summary We areliving in a world of:  Declining demand growth  A shift away from coal  A move toward renewables  Increasingly distributed resources We need to think hard about:  Meeting the reliability needs of the system with new participants and resources  Integrating both large and small scale resources to ensure reliability 18 Copyright © 2013 by ScottMadden, Inc. All rights reserved.
  • 20.
    Cristin M. Lyons Partner ScottMadden,Inc. 2626 Glenwood Avenue Suite 480 Raleigh, NC 27608 cmlyons@scottmadden.com O: 919-781-4191 M: 919-247-1031 19 Copyright © 2013 by ScottMadden, Inc. All rights reserved.