Distributed Energy Resource Options and The Importance of

The Electric Power Grid

David K. Owens Executive Vice President Edison Electric Institute

National Conference of State Legislatures Task Force on Energy Supply

August 11, 2013 Atlanta, GA

The Electric Distribution System Is In Transition

Customers are gaining new distributed energy resource (DER) options, including distributed generation (DG)

The structure and operation of distribution systems will change as “smart” infrastructures are built out and new DER technologies are deployed

Ultimately, power will flow in 2 directions across distribution systems

Supporting a safe and reliable grid infrastructure is critical to the deployment of new technologies

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Public Policies Aare Accelerating The Transition

29 states plus D.C. have RPS programs, 17 with mandates for solar and other DG

Net metering policies are present in 43 states

Feed-In tariffs have been adopted or proposed in a few states

Virtual net metering is present in 14 states

Subsidies, rebates, tax incentives, and financing incentives also exist (CA is providing $1.9 billion over 10 years)

Zero net energy goals and targets, microgrids (??) 3

Source: EIA

State Renewable Policies State Net Metering Policies

Public Policies Are Spurring DER Adoption

EEI, Energy Supply Department, 04/19/2013 2

Utilities with Net Metering:

All utilities bound by the requirements in the states above.

Utilities in Texas, Idaho and South Carolina have voluntary net metering programs.

Feed-In Tariff (FIT) What is it?

FIT-like programs are also called standard offer contracts or CLEAN Initiatives (Clean Local Energy Accessible Now) and many utilities are giving their own programs individual names. Typically, a FIT or FIT-like program requires a utility to purchase electricity (and sometimes also RECs) from eligible renewable generators, independent of any energy consumption by those generators. The FIT provides a guarantee of payments ($/kWh) for the full output of the system for a guaranteed length of time and ensures access to the grid. FIT rates typically vary by technology, project size, and other project-specific variables. Some FIT-like programs are being implemented with rates that adjust periodically based on market or other conditions.

Benefits of a FIT:

By charging a customer for their consumption (as if they had no solar) and separately paying them for the value of their generation, a FIT solves the cross subsidy/cost shifting/revenue loss problems associated with net metering. The utility still charges for the full costs of providing service to a customer.

State policy

Voluntary utility programs

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43 States Have Net Metering + 17 States Have DG/Renewable DG Goals

Other Factors Contributing To The Transition

The Department of Defense, the largest energy user in the U.S., is actively seeking to implement renewables, “islanding” policies, and virtual net metering

Higher retail electric rates

Declining cost of PV

Evolution of “smart” infrastructure technologies (power electronics, storage, sensing and measurement, controls), high speed communications)

ARRA funding for AMI deployment, smart grid demos

Storm outages 5

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Utilities Already Are Making Significant Investments In The Grid

Distribution: Approximately $18.8 billion in 2012

Projected distribution investments expected to grow

Transmission: Approximately $11.1 billion in 2011

Projected to spend an additional $54.6 billion through 2015

Renewables Projects:

Require adequate transmission to deliver power from remote areas to population centers

Solar and wind power accounted for 50 percent of new capacity built by the electric power industry in 2012

Electric companies led all PV installations in 2012, with 1,549 MW, a 134-percent increase from 2011

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The Transition Will Drive Future Investment Needs To Enhance The Grid

Legacy distribution systems will need to be re-developed to support two way and variable power flows safely and reliably

Investments in:

Physical infrastructure – including interconnections

Operating systems

Communication systems

Risk management, including cyber security

Coordination with transmission and generation systems

Technological obsolescence will be an increasing challenge

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New Regulatory Policy and Rate Design Are Needed

To ensure reliability: Enhance electric infrastructure

To ensure safety: Update interconnection standards & procedures

To ensure fairness: Adopt new approaches to designing rates for distributed

generation so all users of the grid contribute to grid infrastructure

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Collaboration Among Stakeholders

EEI and our members recognize the transitioning distribution system and the growth of distributed generation raise complicated issues, and will require collaboration between the various stakeholders and investment in the grid to ensure continued reliable and affordable power.

EEI members are committed to working on these issues with state regulators and consumer advocates through several different collaborative venues, such as the Critical Consumer Issues Forum (CCIF).

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Shaping the Future Is Transformational

New Opportunities

A changing customer model

A changing utility business model

A changing regulatory model

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