Utility Sector Disruptive Changes (In Eleven Pictures)

Remarks of Ron BinzPublic Policy Consulting

June 26, 2013 Ann Arbor

Public Policy Consulting

www.rbinz.com

US Electric IOUs Rating History1970 – 2010

4%

22%

46%

27%

1%

Source: Standard & Poor’s, Macquarie Capital

AA

AA AAAA

A

AA

AA

BBBBBB BBB

BBB

BBB-

Potential Bypass Threats from Distributed Generation are Large

• WECC-wide Behind-the-Meter DG: 19 GW of solar PV + 7 GW of CHP• Distributed PV based on “interconnection potential” (no back-flow through

feeders), with adjustments to reflect relative economics among states• CHP additions represent a fixed percentage (~40%) of technical potential in

each state7

0%

5%

10%

15%

20%

25%

30%

AB AZ BC CA CO ID MT MX NV NM OR UT WA WY

CHP Solar PV Customer-Sited DG Additions in WECC High DSM Case(Percent of Peak Demand)

Perc

ent o

f 203

2 Pe

ak D

eman

d

Source: E3 (2013).

MichiganColorado New Jersey GermanyArizona

Renewable Electricity Futures Study (REF)

Exploration of High-PenetrationRenewable Electricity Futures

Available at NREL.gov

Baseline Case

REF ITI Case

How does the assumption of an HREF affect the business model?

Much higher levels of variable generation at the bulk power scale

Greater penetration of distributed energy resources at the distribution scale

Greater need for flexibility in the grid components, operations, and architecture

Much higher levels of energy efficiency (sufficient to eliminate load growth)

(affects utility organization, operations)

(affects utility revenues, services)

(affects utility investment, operations)

(affects utility role, services)

• Thesis: Utilities must develop a set of new business models

• Thesis: Today’s regulation may not be up to the task– Rarely rewards utilities for desired behavior– Lack of incentives for

• firm efficiency• clean energy investment• energy efficiency• innovation

– Rate structures need revision– Focus on commodity sales– Balky, judicial process

• Authors– Ron Binz– Richard Sedano– Denise Furey– Dan Mullen

Available at www.ceres.org

I look forward to your questions.

Thanks for the invitation