Midwest Briefing - Great Plains Institute

Midwest Briefing Ben Paulos Project Manager September 26, 2013

Part reaction…

Plan for change, or “get run over”

Innovation vs. Tradition

From Edison Electric Institute’s report: Disruptive Challenges

… part inspiration

NREL’s Renewable Electricity Futures

The “Long, Tough Slog” “There's no technical reason renewable energy can't provide 80% of the power in the U.S. by midcentury. But there are a host of challenges that would have to be met first.” - Wall Street Journal

America’s Power Plan Finance Policy Todd Foley, Richard Caperton and Uday Varadarajan

Market Design Mike Hogan

Transmission John Jimison and Bill White

Siting Carl Zichella and Johnathan Hladik

and...

America’s Power Plan Distributed Generation Joe Wiedman and Tom Beach

Distributed Energy Resources James Newcomb et al.

Utility and Regulatory Models Ron Lehr

Overview Hal Harvey and Sonia Aggarwal

Reviewers and Contributors Aaron Zubati, Map Royalties Allison Clements, Sustainable FERC Project Alison Silverstein, former Senior Advisor to the FERC Chairman Bentham Paulos, Energy Foundation Beth Soholt, Wind on the Wires Bill Green, Macquarie Brian Parsons, NREL Byron Woertz, Western Electricity Coordinating Council Cliff Chen, Sea Change Colin Meehan, Comverge Dale Osborne, Midwest Independent System Operator Dan Adler, CalCEF Dave Olsen, Western Grid Group Dian Grueneich, former CPUC Doug Arent, NREL Drew Murphy, Macquarie Ed Randolph, CPUC Eric Perreca, Hunt Capital Gary Graham, Western Resource Advocates Ginny Kreitler, National Audubon Society Greg Rosen, Mosaic Gregg Small, Climate Solutions Izzet Bensusan, Karbone Jaquelin Cochran, NREL Jeff Bladen, DNV Kema Jigar Shah, Inerjys

Jim Detmers, former CAISO Jim Marston, EDF Jimmy Glotfelty, Clean Lines Energy Partners John Moore, Sustainable FERC John Nielsen, Western Resource Advocates John Shepard, Sonoran Institute John White, CEERT Johnathan Hladik, Center for Rural Affairs Julia Prochnik, JAS Consulting Jurgen Weiss, Brattle Group Karl R. Rábago, Rábago Energy LLC Karlynn Cory, NREL Kenneth Costello, National Regulatory Research Institute Kevin Genieser, Morgan Stanley Kit Kennedy, NRDC Lauren Azar, U.S. DOE Liese Dart, The Wilderness Society Linda Davis, Western Governors Association Lisa Schwartz, OR DOE Lisa Wood, Edison Foundation Marija Ilic, Carnegie Mellon University Mark Fulton, Deutsche Bank Matt Cheney, Cleanpath Michael Brairton, ITC Holdings Corp. Michael Goggin, American Wind Energy Association Michael Liebreich, Bloomberg New Energy Finance

Mike Gregerson, Midwest Governors’ Association and the Great Plains Institute Peter Flynn, Bostonia Group Peter Fox-Penner, Brattle Group Peter Liu, Clean Energy Advantage Ralph Cavanagh, NRDC Randy Fordice, Great River Energy Richard Perez, State University of New York - Albany Rob Marmet, Piedmont Environmental Council Ron Binz, former CO PUC Commissioner Sam Baldwin, DOE Sky Stanfield, IREC Steve Fine, ICF International Steve Weissman, Berkeley Law Steven Franz, Sacramento Municipal Utility District Sue Tierney, Analysis Group Timothy Distler, Recurrent Energy Tom Hoff, Clean Power Research Tom King, National Grid Tom Plant, Center for the New Energy Economy Tom Wray, Sun Zia Trieu Mai, NREL

Here Today from America’s Power Plan Joe Wiedman Interstate Renewable Energy Council Ron Lehr former Colorado PUC Commissioner

James Newcomb Rocky Mountain Institute

America’s Power Plan Utility and Regulatory Models for the Modern Era

Midwest Governor’s Association Briefing September 26, 2013 Ronald L. Lehr

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

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

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

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

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

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

Thanks for inviting me. I look forward to our discussion. Ron Lehr [email protected] 303 504 0940 AmericasPowerPlan.org Changing Business Models

AMERICA’S POWER PLAN

Transforming Utility Regulation

Midwest Briefing: America’s Power Plan

James Newcomb September 26, 2013

The distributed Distributed Innovation

resource revolution

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

…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).

EV Choices Are Proliferating

Advanced EV Charging

PJM savings from demand response Saves Big

• Incorporating demand response and efficiency into forward capacity procurement has significantly reduced capacity costs • Recent round chose 12.4 GW of DR plus 1.1 GW of efficiency

• Pilot projects are testing aggregation of electric vehicles for voltage control service

Demand Response Aggregation: Thermostats

Microgrids

NREL’s Renewable Electricity Futures Study

10

Annual Electricity Generation (TWh/y)

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.

What’s the right balance?

NREL

Reinventing Fire

RE Futures

Renew

Transform

Distributed renewable generation as % of total 2050 generation Distributed solar PV as % of total 2050 generation

2.6–5.2%

15.2%

33.8%

2.6–5.2%

15.2%

23.7%

Demand response: % of peak load, 2050

16–24%

16– 24%

16–24%

Share of distributed resources

Distributed resources’ contribution to a renewable electricity future • Efficiency: $850bn supply-side cost savings • Distributed renewable supply: up to 30–40% of total generation • Flexibility resources: • Demand response 16–24% of peak • Distributed thermal and electricity storage • Integrated EV charging

Analyzing the options 1. Measure the full range of costs and benefits for distributed energy resources.

2. Analyze trade-offs between centralized and distributed resource portfolios. 3. Integrate distributed energy resources into resource planning processes.

Revamping the rules of the game 4. Create new electric utility business models for a distributed resource future.

5. Adapt wholesale markets to allow distributed resources to compete.

Encouraging innovative technologies 6. Enable microgrids and virtual power plants to support integration and aggregation of distributed resources.

7. Drive down “soft costs” for solar PV by streamlining permitting and interconnection procedures. 8. Encourage smart electric vehicle charging.

Natural Gas Price Projections History 10.00

9.00

Actual Wellhead Price

90 09

8.00

91 85

7.00

86

08

92 87

06

89

07

6.00 Price (2011 $/mcf)

10

05

93

04

94 95

5.00

03 02 01 00 99

4.00

96 97

3.00

98

EIA Estimates

2.00

1.00

0.00

Year

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Joseph Wiedman Interstate Renewable Energy Council September 26, 2013

Curated by the Energy Foundation in partnership with Energy Innovation.

Mechanisms that Support Retail Solar Aggregated Net Metering Shared Renewables OneCustomers, Customer, Multiple Multiple Meters Multiple Net Metering Virtual Net Metering Meters, Multiple Locations One Customer, One MeterMeters One or Multiple Customers, Multiple

Curated by the Energy Foundation in partnership with Energy Innovation.

Wholesale Segment Growth

Curated by the Energy Foundation in partnership with Energy Innovation.

Bringing Down BOS costs – Permitting and Interconnection

Curated by the Energy Foundation in partnership with Energy Innovation.

Integrated Distribution Planning Five Steps of IDP

Curated by the Energy Foundation in partnership with Energy Innovation.

Discussion Have further questions? [email protected] 510-314-8202

Curated by the Energy Foundation in partnership with Energy Innovation.

Xcel Energy and Wind Power Challenges and Success Stephen Beuning Director Market Operations Xcel Energy, Inc. “America’s Power Plan” St. Paul, MN September 26, 2013 1

Overview Introduction to Xcel Energy Wind Integration Success The Role of Markets Future Challenges

2

Xcel Energy Inc. Northern States Power Company Northern States Minnesota Power Company Wisconsin Public Service Company of Colorado

Southwestern Public Service Company

 No.

1 wind provider

 No.

3 in green pricing

 No.

5 in solar capacity

 Leader

in conservation

 Leader

in emission reductions

Gas Customers 1.9 M Electric Customers 3.4 M 3

Xcel Energy Experience Wind & Solar Number 1 wind provider, 9 years ~5,000 MW of wind (Dec 2012) ~250 MW of solar PV

2012 energy contribution NSP: 11.9% PSCo: 17.7% SPS: 7.8% 4

Xcel Energy Wind Growth 2016 is a 40% increase over 2012

NSP Wind Growth

5

NSP Wind as a Percentage of Obligation Load (2012)

6

Initiatives that Support High Wind Integration Regional energy market Sophisticated wind forecasting Enhanced flexible generation capability Sub-hourly scheduling Geographic balancing diversity Improved reserves management Proposed Consumer Renewable Credit 7

Regional Markets 66% of US electric load is in a central market Managing wind integration MISO manages over very large pool ~128,000 MW of generation SPP (Southwest Power Pool) does the same with ~ 50,000 MWs

Xcel Energy company PSCo is not in a market, but integrates wind and solar over just 5,000 MWs of thermal generation 8

NCAR Wind Prediction Model – Advanced Wind Forecasting system Joint project with National Center for Atmospheric Research, Global Weather Corp More accurate decisions for generating plan commitment and dispatch $$ savings

9

Improved Thermal Generation Flexibility Reduce generating unit minimum loads Faster ramp rates Reduced start up times Operator training Cycling coal units

10

Looking Ahead Wind Study of 40% penetration levels Minimum system load condition

Solar Wind experience translates to transmission level integration for utility scale solar Rooftop solar presents new challenges for distribution level integration 11

US Markets Information Resources ISO/RTO Council: Site includes links to member markets info http://www.isorto.org/site/c.jhKQIZPBImE/b.2603295/k.B EAD/Home.htm

Western Interconnection market expansion discussions: CAISO & PacifiCorp EIM information http://www.caiso.com/informed/Pages/StakeholderProce sses/EnergyImbalanceMarket.aspx State regulators PUC/EIM information http://www.westgov.org/PUCeim/ 12

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