The document discusses pressures on utilities to change their business models due to factors like aging infrastructure, environmental regulations, flat electricity demand, and new technologies. It presents three potential roles utilities could take - focusing only on transmission and distribution, taking a moderate "orchestrator" role, or taking on a maximum role providing additional services. It also outlines three potential regulatory models and business opportunities utilities could pursue in supporting distributed generation through customer segmentation, integration services, and pricing models.

1. Utilities, Regulators & Distributed
Solar Generation: Rethinking Utility
Business Plans
October 9, 2013

2. America’s Power Plan
Utility and Regulatory Models
for the Modern Era
Vote Solar Webinar
October 9, 2013
Ronald L. Lehr

3. Thesis: Pressures on utilities to change
– Aging plant
• Brattle Group: $2 trillion investment over next
20 years
– Tougher environmental requirements
• Criteria pollutants
• Greenhouse gases
• Coal ash
• Water restrictions
– Flat to declining sales of electricity
Changing Business Models
AMERICA’S POWER PLAN
Transforming Utility Regulation

4. Thesis: Pressures on utilities to change
▫ New technologies
– Smarter grid
– Distributed generation: solar, CHP, micro turbines
– Electric vehicles
– Low cost wind—Xcel example
▫ Changing consumer requirements
– Disintermediation by third parties
▫ Weakened industry financial metrics
• Pressures leading to “restructuring 2.0?”
Changing Business Models
AMERICA’S POWER PLAN
Transforming Utility Regulation

5. What we’ve heard from utility CEOs:
• CEOs want a clearer, more consistent direction
from state energy policies
• Utilities have inadequate incentives for
innovation, firm level efficiency
• Commissions need a better understanding of the
utility business and its needs
• Utilities want certainty on climate policy
• Utilities want healthier working relationships with
commissioners and staff
Changing Business Models
AMERICA’S POWER PLAN
Transforming Utility Regulation

6. What we’ve heard from commissioners:
• A primary concern is with increasing utility rates
• Regulators are open to modifying the regulatory
model; looking for ideas
• Some commissioners are dissatisfied with the
adversarial process
• Many commissioners face severe barriers to
communications with stakeholders, and even
fellow commissioners
• Commissions have inadequate resources
Changing Business Models
AMERICA’S POWER PLAN
Transforming Utility Regulation

7. Three Possible Utility Roles
• Minimum: markets provide power and
services, utilities manage wires
• Moderate: “orchestrator” “smart integrator”
▫ Risk aware planning; regulated “make or
buy” decisions; consumer service packages
• Maximum: Nebraska, Moorland Commission
▫ Disaster recovery
▫ Climate adaptation
Changing Business Models
AMERICA’S POWER PLAN
Transforming Utility Regulation

8. Three Potential Regulatory Models
• The UK “RIIO” model
▫ Price cap built on RPI-X, with decoupling
▫ Output regulation
– Reliability, Environmental, Innovation, Price,
Efficiency, Social Responsibility
• The “Iowa Model”
▫ Seventeen years of constant rates, settlements,
diminished focus on earnings levels
• The “Grand Bargain”
▫ Comprehensive multi-year output-oriented deal
▫ Regulator led
Changing Business Models
AMERICA’S POWER PLAN
Transforming Utility Regulation

9. Utility Business Opportunities?
Functions supporting distributed generation
• customer segmentation
• information, planning
• integration
• quality assurance
• reliability
• damage recovery
• interconnection
• integration
Changing Business Models
AMERICA’S POWER PLAN
Transforming Utility Regulation

10. Utility value, costing and pricing
If utilities provide value to DG, then:
• What value propositions?
• To whom are values proposed?
• Can utilities market these values?
• What costs lead to prices?
• Are utility tariffs required?
• What profits can a utility expect?
Can a utility’s clean energy strategy become
its most profitable course of action?
Changing Business Models
AMERICA’S POWER PLAN
Transforming Utility Regulation

11. Thanks for inviting me.
I look forward to our discussion.
Ron Lehr
rllehr@msn.com
303 504 0940
AmericasPowerPlan.org
Changing Business Models
AMERICA’S POWER PLAN
Transforming Utility Regulation

12. New Business Models for the Distribution Edge
James Newcomb
October 8, 2013

13. Reinventing Fire Scenarios: Electricity Supply Mix
four potential futures for the u.s. electricity system
Maintain
Expands electricity
system like that of
today. Largely based
on business-as-usual
projections (BAU)
from EIA's 2010 AEO.
Migrate
Assumes lingering
threat of legislation
to reduce GHG
emissions drives
switch from coal
and gas to more
nuclear power and
new coal plants
equipped with CCS.
Renew
Examines a future in
which centralized
renewables like solar,
wind, geothermal,
biomass and small (plus
existing large) hydro
provide 80% of US 2050
electricity.
Transform
Examines 80%
renewable future in
which 50% originates
from distributed
sources.

14. Declining Solar PV Module Costs…
Best-in-class Chinese Module Manufacturing Cost: Q42013E-Q42017E
Source: PV Technology and Cost Outlook, 2013-2017, GTM, June 2013

15. …and Balance of System Costs
Solar PV Soft Costs in the United States
Residential Solar PV Prices and Costs:
Current State and Future Potential
$6.00
$5.21
$/Wdc
$4.00
Soft Costs
$3.34
$2.00
Inverter
Hardware
$0.62
Module
$-
Current
System Price
Soft Costs:
U.S. Q3 2012
Soft Costs:
Future State U.S. /
Germany 2012
Source: GTM/SEIA Q3 2012 Solar Market Insight Report Executive Summary; Goodrich et al. Residential, Commercial, and Utility Scale Photovoltaic System Prices in
the U.S.: Current Drivers and Cost-Reduction Opportunities. NREL. February, 2012; Ardani et al. Quantifying Non-Hardware Balance of System Costs for PV installations
in the U.S. NREL. December, 2012; Seel et al. Why are Residential PV Prices in Germany So Much Lower Than in the United States. Lawrence Berkeley National Labs.
February, 2013 (revised publication).

16. Three Opportunities…
• Shift from value chain to network of interconnected business
models
• Create a new platform for economic and operational integration
of distributed resources
• Reduce transactions costs and increase transparency to
increase shared value

17. …Three Challenges
• Managing large numbers of interactions among agents
• Responding to issues related to equity, fairness, and social
impacts
• Engaging customers in new ways

18. New Business Models:
Independent Distribution Network Operator
• Distribution wires company with performance-based incentives
for cost reliability, and resource integration, reliability, and cost
reduction
• Market and operational platforms support a transactive grid and
enable customer aggregation and virtual power plants
• DNO invests in distributed assets such as microgrids, control
systems, distributed storage
• Unregulated affiliates deliver competitive services

19. New Business Model:
Distributed Resource Manager
• Integrated utility provides a portfolio of distributed solutions
under performance-based regulatory incentives
• Integrated distribution system planning enables increased
transparency into distribution system costs and opportunities for
cost reduction
• Utility can provide incentives, contract for services, invest
directly, or serve as a financial intermediary to support
distributed resource investments

20. New Business Model: DER FinanceCo

22. Fort Collins’ electricity supply portfolio could shift significantly

23. Solar deployment relative to leaders

24. Assessing the costs: Fort Collins