The Boy Scouts have adult supervision. So goes an old (and admittedly untrue) wisecrack about electric utilities.
A few years ago, Lee Willis, a seasoned-veteran of the utility industry at Raleigh, NC-based Quanta Technology, identified at least one valid aspect of this cynical analogy.
"The Boy Scouts have a map and a compass," wrote Willis in the journal Natural Gas & Electricity. "They know where they are, where they need to go, and what direction to take."
The same cannot always be said for electric utilities, which are prone to conservatism and institutional inertia. In recent years, this dynamic has become especially problematic as technological advances have accelerated market penetration of customer-sited solar photovoltaics, combined heat and power and other genres of distributed generation.
Distributed generation, or DG, which the Rocky Mountain Institute has defined as any electricity generation device installed on the customer's side of the utility meter and interconnected with the electric grid, is hardly new. As early as the 1980s, large industrial and commercial customers began installing onsite cogeneration systems for heat-intensive applications. By the 1990s, smaller customers began installing smaller onsite generators. In recent years, as the cost of DG technologies have declined, customer adoption has accelerated more rapidly than most utility executives had imagined possible.
While most utilities now admit that DG is more than a technophile's pipe dream or a passing environmental fad, many utilities still seem to be expending more effort resisting the growth of DG than adapting to it. Until recently, I would have put Con Edison, the regulated utility that provides electric, gas and steam service in New York City and Westchester County, NY, near the top of the "resisting DG" list.
I would have been wrong to do so – at least partially. I'll explain what I mean by "partially" in a future post.
In any event, the sudden reassessment is largely attributable to an essay in Public Utilities Fortnightly by Margarett Jolly and David Logsdon. Jolly, a mechanicalengineer from northern California who now serves as Con Edison's Distributed Generation Ombudsman, is seldom more than a stone's throw away from any DG project in New York City. Logsdon, a DG specialist with a Masters in Sustainability Management from Columbia University who joined Con Edison last year, is rarely far behind.
In "Capturing Distributed Benefits," Jolly and Logsdon make an enormously compelling case why utilities should embrace DG – albeit cautiously – rather than adjusting or resisting it. After years of trench warfare with Con Edison on the subject of DG in the Big Apple, I was genuinely stunned (and inspired) to encounter the functional equivalent of a DG manifesto authored and endorsed by the 800-pound gorilla called the Consolidated Edison Company of New York.
On Friday, I had an opportunity to ask Jolly and Logsdon a few questions about the Fortnightly piece. Here is what I learned:
Clean Beta: Why did you write the piece? Who is the target audience?
MJ/DL: We wrote the piece because there is much optimism about the benefits of DG, particularly its ability to provide T&D deferrals. There has been a recent push by customers to manage their own energy options and this is a trend we see continuing and potentially accelerating going forward. We view this as an eventuality of deregulation that empowers our customers with new, potentially-cost effective energy options that will help ensure the long-term robustness of New York's retail energy market, so long as it is not over-subsidized.
This piece is not meant to temper or bolster the enthusiasm for DG but rather to show a systematic approach to fitting distributed resources into legacy utility planning, forecasting, and operations. Especially given the forum, the audience is other utilities and DG developers or technologists. This is an emerging area and sharing information and planning methodologies will get us all a little further.
Clean Beta: What are the biggest non-technical barriers to expanding deployment of customer-sited clean DG in NYC? Are the technical challenges of integrating customer-sited solar photovoltaics into the distribution grid different from those posed by clean heat and power?
MJ/DL: Customer familiarity is a big barrier—these are complex systems that require expertise, on-going maintenance, and (for existing buildings) extensive retrofits. Likewise, most are not comfortable taking on the responsibility and risk of operating on-site generation. And, of course, there are space constraints in a dense urban environment such as New York City and most systems have quite a large footprint.
Solar PV is inverter-based and generally constrained to the size of available roof space which is (generally) proportionally smaller than the customer's usage with (again, generally) some amount of export allowed. The inverter manages the interconnection and export requirements. Synchronous- and induction-based DG require additional protections (which could include the addition of an inverter, though this adds costs and yields some energy losses). CHP should rationally be sized to the customer's thermal needs, which generally leads to base-load or load-following operation that is less than the customer's lowest electric load.
Clean Beta: What improvements in fuel cell and microturbine technology would potentially accelerate adoption of CHP? What would "innovative financing" solutions need to address in order to accelerate adoption?
MJ/DL: The only certainty in any forecast is that it will be wrong. We left some room in our "high-case" forecast to account for improvements that aren't easily planned for. Technologies such as internal combustion engines and gas turbines will continue to improve gradually in efficiency but they are familiar and developed. Microturbines, and fuel cells in particular, are newer and have a greater opportunity for disruption. Installed costs for fuel cells remain high, in excess of $7,000 per kW, and their current market penetration is limited and aided by incentives.
There's a potential for scale benefits and improvements in the more recent technologies such as solid oxide fuel cells, polymer electrolyte membranes, and molten carbonate. The U.S. Department of Energy has formed the Solid State Energy Conversion Alliance (SECA) to work towards the goal of mass-producing fuel cells at $700/kW. Microturbines have realized recent efficiency and price improvements that are opening up a previously underpenetrated, smaller-scale, market—we have seen increasing adoption amongst many multifamily residences and hotels.
Financing options that would accelerate adoption reduce the upfront capital requirements for installing DG—these can take the form of PPAs or ESAs under which the customer faces no upfront cost and a fixed kWh cost paid to the technology provider; the (potential) savings versus the cost of grid electricity are split between the customer and provider. These arrangements could arguably increase adoption for all forms of DG, but we have seen the most movement on fuel cells, and solar leases are increasing in popularity as well. Robust O&M and warrantee arrangements will also further customer comfort with technology adoption.
Clean Beta: Con Edison owns and operates the world's largest district steam system, which is a perennial subject of debate in New York City and is conspicuously absent in your Fortnightly piece. Why?
MJ/DL: Our planning process accounts for trends in all three of our commodities (electric, gas, and steam). This can be explored in more depth in our recently published Integrated Long-Range Plan. Steam may have gotten short shrift in the article only in the interest of building up to the electric-system benefits in a limited forum. The steam system has also helped to expand customer choice and has strengthened the electric grid by reducing electric system peaks while reducing emissions.
We believe it will continue to offer improved energy options to DG and non-DG customers. For instance, many customers adopting CHP will find backing up their thermal output with Con Edison steam to be preferred over installing costly and space-hungry boilers, and our recently launched Customer Sited Supply Pilot Program offers an additional revenue stream to customers wishing to sell excess thermal output back into the steam system.
Clean Beta: The acronym "DG" stands for "distributed generation," not "diesel generators." The latter is commonly considered to be more of a risk than a resource. For example, in 2003, the Northeast States for Coordinated Air Use Management assessed the impact of stationary diesel generators on air pollution in the Northeast, which concluded that diesel generators located near urban areas pose significant public health concerns, especially if they are operated during peak demand hours. Given these concerns, how is Con Edison managing the adverse public health impacts of diesel generators?
MJ/DL: Con Edison is very concerned about local ambient air quality and environmental-justice issues. We have consistently argued for the lowering of the current "clean DG" standard as we do not encourage the use of DG that lowers the local quality of the environment. Back-up emergency generation remains underutilized for exactly the reason you state – it is often highly polluting. Back-up generators are only a small part of existing demand response programs and those that do participate must meet environmental standards and have limitations placed on the numbers of hours they may operate per year.
Oxidation catalysts and other emissions controls can be installed to reduce the polluting effect of diesel generation—and it must also be considered that peak-shaving DR resources will displace peaking units which are the most pollution-heavy resources on the supply-dispatch curve that are also closest to load centers. We remain interested in programs such as PGE's Dispatchable Standby Generation in which the utility upgrades and maintains back-up generators and installs environmental controls and gets the benefit of a dispatchable peak-capacity resource, though we currently do not have any analogous programs.
Clean Beta: Is it possible to "future proof" the distribution grid?
MJ/DL: Con Edison engages in extensive forecasting and thinks about all of our commodities in an interlinked way over a 30-year time horizon. As we plan for contingencies in designing and operating the grid we try to factor all likely scenarios into our planning process. T&D deferrals such as those mentioned in the Public Utilities Fortnightly article are good because they help stabilize rates for all customers and DG, energy efficiency, and demand response will continue to help manage load growth, but infrastructure requires on-going maintenance and substations can't operate forever – big capital investments will be inevitable.
Savings from DG will represent only a small percentage of our overall capital requirements, but by taking advantage of the benefits of a healthily diverse energy market in New York and the interplay between company-provided commodities and customer-sited solutions—such as DG, demand response, and energy efficiency—we will do our best to strengthen existing infrastructure, manage load growth, and research future cost-effective innovations.
