CUB Policy Conference

EXCERPTS FROM SUSAN K. ACKERMAN’S KEYNOTE ADDRESS 

– October 23, 2015 • Portland, Oregon –

We all want to know where the power system is heading. But not too many of us really know where it’s going. I think Gerry Cauley of NERC captured it best: Where we’re going to end up, and when we’ll get there, is still unknown.

THE FUTURE OF UTILITIES AND REGULATION

Now, let me turn to the future of utilities and regulation. Increasingly, people seem to be assuming a certain future for the power sector, but it’s one that we regulators cannot afford to assume.

At least this regulator is not assuming that future.

The future assumed here is one where technology transforms our power system, including;

  • Where most (if not all) of our new supply is from small scale, distributed, and variable, renewable resources,
  • Where customers become power producers and contribute actively on the demand side of the system (enabled by technology)
  • Where values will be established for infinitesimally small “buy and sell” transactions on the distribution system and the grid, with technology automating it all for us.

And, we are all assuming that the system will continue to work.

This could be the future. Clearly, Oregon’s regulatory policies can accommodate that future, should it present itself,

But I admit I am a little skeptical.

It seems that we may be asking the wrong questions. We are asking: “How can we promote a customer enabled smart grid that takes full advantage of technology, renewable resources and distributed generation, and how do we remake the grid to enable this?”

Or, we’re asking: “How can we promote renewable energy for its own sake, and how do we remake the grid to accommodate it?”

I don’t think these are the right questions. The right question is: “How can we decarbonize the grid at an affordable cost and maintain the grid reliability a modern economy requires?”

WHAT DOES IT MEAN TO DECARBONIZE THE GRID WHILE KEEPING POWER SUPPLIES AFFORDABLE AND RELIABLE?

Here are the three things this question tells me.

First, there is no one size fits all. Every region is different, because we all start with our own resources and geography and cultures.

Hawaii and California have very real operational problems with high penetrations of variable solar DG resources, and they’re having these problems right now.

New York has experienced terrible and prolonged outages following a succession of big storms, and building large projects is very difficult and expensive in that land-constrained state. They’re probably looking for solutions to those reliability and cost issues. So, they may move faster. And, these three states are high-cost states that can cost-justify quite a bit of experimentation.

Oregon is a relatively small state from a population standpoint. We can’t afford to make big mistakes with our energy supplies.

So, your Oregon regulators will pay very close attention to facts and context and let the future develop as technology, economics, and customer preferences reveal themselves. Then, we’ll act accordingly.

Second, the questions of technology and decarbonization will have to address affordability and the needs of lower income customers. The customers I see (actual customers, not representatives, advocates, or product vendors) tell me they’re choosing between heating and eating. Or, they’re angry because there was an outage that severely affected their lives.

In Oregon, from 2009 to 2011, requests for energy bill assistance more than quadrupled from 10,000 to 50,000.

And, we’re a low-cost state.

I just don’t see inherent value to all consumers from a “plug and play,” distributed and transactive energy future.

As you all know, variable generation like wind and solar, and distributed variable generation, have system effects on the grid.

These system effects require additional capital investment and costs, and these costs will be borne by consumers. And that is true even if more wealthy customers can purchase these technologies for themselves apart from utility programs.

Any future we envision here must include the customers who can’t afford to plug and play.

Third, the vision must take into account the fact that we have an existing system that has worked well and is not going away.

Our electric grid is not a greenfield operation. It’s not the internet. We are not starting from scratch. We have to blend the old and the new, and that won’t happen overnight. Call me an evolutionary, not a revolutionary.

And, there may be better ways to decarbonize, too. On a dollars per ton of carbon removed basis, distributed-generation resources may not be as cost effective as carbonless central station resources. Even the U.N.’s International Panel on Climate Change assumes that deep decarbonization will require nuclear energy and traditional generation with carbon capture and sequestration.

All this is not to say that a distributed grid with a very high level of renewable resources and a technology-driven architecture will not happen. It may, but to an unknown extent.

There will certainly be places and situations where the distributed and renewable future will work best for consumers and the system. When those cases present themselves, I’m all in.

But our vision must be an accessible vision for all consumers, not just the early adopters. Not just those that can use personal capital to manage personal energy costs. The grid is a community investment, and it continues to need and deserve community support.

CONCLUSION

In my opinion, a reliable, affordable electric grid is one of the greatest public goods an advanced economy can provide for its citizens. It ranks right up there with national security and rule of law.

It has to serve everyone.

Now we need to decarbonize it.

Technology, distributed generation, renewable resources, and smart grid investments are all tools to help us decarbonize the power system while keeping it affordable and reliable. But these investments alone are not the goal.

They are means, not ends.

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