A Stakeholder Approach to Grid Modernization Policy
- Written by Ben Davis, Justin Brant and Jonathan Raab
The Massachusetts Department of Public Utilities developed an inclusive approach to planning grid modernization that emphasizes desired outcomes rather than specific technological solutions. Within that framework, expected consumer benefits from certain upgrades such as AMI were found to be different in Massachusetts than in some other states, while innovations like dynamic pricing entailed some special complexities. The end result of the process has been to galvanize an engaged group of experts, interested parties, businesses and regulators that are poised to usher in a smarter grid.
Many in the energy industry characterize the present moment as being on the cusp of dramatic change–developments that can usher in a new era of greater reliability, customer choice, deployment of renewable energy and distributed generation, and rapid innovation in “game changer” technologies from storage to electric vehicles. Modernizing the electric grid, including advanced metering, dynamic pricing and “smart” devices on the electric grid itself, has moved to the fore of discussions about electric utility regulation, utility business models and entrepreneurial planning. In Massachusetts, there is an effort underway to develop a broad understanding of grid modernization in order to capture its potential benefits. While the scope and variety of these benefits are significant, there are numerous complexities and challenges for utilities, regulators, customers and technology innovators in realizing these opportunities.
The Massachusetts Department of Public Utilities (DPU) undertook an intensive seven-month stakeholder working group process, from 2012 through mid-2013. The process began with a day-long kick-off workshop, with more than 125 attendees, and culminated in a consensus-based Grid Modernization Working Group Report, submitted to the DPU in July 2013. This article summarizes the process, highlighting several of its salient benefits and key contributions.
After the initial workshop, a working group was formed, with more than 25 stakeholder groups and organizations, including local electric distribution companies, environmental advocates, competitive suppliers, technology companies, third party service providers, distributed resource advocates (renewable energy, storage, electric vehicles), consumer and low income advocates and other state agencies. The working group met for 15 full-day meetings, and members contributed countless hours of work between meetings. The process involved three basic phases of joint fact finding, option generation and assessment, and drafting and “negotiating” the final report. Apart from basic informational meetings at the beginning of the process, the commissioners from the utilities department were not part of the process, as they wanted to let the stakeholder process drive the development of frameworks and regulatory mechanisms.
Working group members provided broad-based and detailed expertise to address the inherent complexity of grid modernization. For example, the working group identified the need to develop a grid modernization taxonomy to organize, categorize and define what grid modernization really means in Massachusetts, so as to establish a common vocabulary for stakeholders. The group aimed to define what utility functions the Department should consider grid modernization, and which ones, though important, should not qualify.
One overarching conclusion inherent in the taxonomy is the recommendation that the Department of Public Utilities focus on outcomes and capabilities to be achieved by the distribution companies, rather than focus on specific technology solutions. The broad outcomes that the working group identified as constituting grid modernization are to: (1) reduce the impact of outages; (2) optimize demand; (3) integrate distributed resources; and (4) improve workforce and asset management. The working group emphasized focusing on the outcomes or functions of the grid the DPU would like to improve and allowing utilities to determine how best to reach those goals, rather than requiring specific technologies such as new meters or distribution automation systems.
Advanced metering infrastructure (AMI) is commonly considered a core technology of grid modernization. The Massachusetts stakeholder process prompted rich discussion and information sharing related to the question of AMI deployment. For example, since most Massachusetts electric distribution companies have automated meter reading, one benefit often attributed to AMI—reduced meter reading costs—would be smaller than in other states considering advanced metering. But AMI was found to have other potential benefits for Massachusetts customers, including the ability to collect customer interval data, automatically notifying the utility of outages and allowing two-way communication between the utility and customers. It also could provide a platform for yet-to-be-developed technologies that can enhance customer choice, energy efficiency and distributed generation and storage.
To support analysis of potential metering changes, the working group provided detailed information about the capability and planning related to present-day metering, as well as the capabilities and costs of alternative metering solutions, including AMI and other types of enhanced automated reading.
The working group also carefully considered the issue of dynamic pricing. With dynamic pricing, customers experience price signals that allow them to respond to changing electricity costs and shift peak loads, and thereby reduce bills and achieve broader system efficiencies. The working group identified the particular complexities related to implementing dynamic pricing in Massachusetts, which is a retail-choice state, where customers can receive electric supply service either from the distribution companies or from a competitive supplier. In that situation it is unclear whether the utility should offer dynamic pricing options to customers as part of their obligation to provide service of last resort, or if dynamic rates should be offered only by the competitive market. In addition, it is unclear if converting only the supply portion of a customer’s bill to a dynamic rate will result in large enough price signals to stimulate a change in behavior.
One common recommendation in the working group’s report is that the distribution companies file grid modernization plans. The working group provided detailed analysis about what should be included in such plans, including a cost benefit analysis, metrics, requests for preapproval and special cost recovery treatment.
One overarching element of this working group process is that it was consensus driven. The DPU engaged a facilitation consultant team (Raab Associates, Ltd. and Synapse Energy Economics); where possible, working group members were to provide a single recommendation, and where consensus was not achieved, to provide two or more options. This achieved the benefit of bringing various sides together to provide a small number of clear and well-thought out proposals and perspectives for the Department to consider.
This overall process has been invaluable, and we are grateful to stakeholders for working together to advance this important and complex task of modernizing the grid. Several fundamental goals were reached as part of this rich stakeholder process. First, information was exchanged and all engaged were brought to a similar level of understanding. In such a rapidly changing field, this was critically important, and ultimately, for the Department of Public Utilities, fundamental in assisting regulatory decision-making. Second, different perspectives from many different stakeholders were aired, discussed and debated. Third, the process resulted in a report that illuminated the multiple regulatory paths forward and the pros and cons of each, which will be invaluable for the DPU as it develops the next steps. And finally, the process galvanized a community of stakeholders, so that as grid modernization moves forward in Massachusetts, there will already be an engaged group of experts, interested parties, businesses and regulators that are poised to usher in a smarter grid.