Distributed Energy: What Lies Ahead? PILLSBURY WINTHROP LLP 2004 GLOBAL ENERGY CONFERENCE SAN...
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Transcript of Distributed Energy: What Lies Ahead? PILLSBURY WINTHROP LLP 2004 GLOBAL ENERGY CONFERENCE SAN...
Distributed Energy: What Lies Ahead?
PILLSBURY WINTHROP LLP2004 GLOBAL ENERGY CONFERENCE
SAN ANTONIO, TEXASJUNE 12, 2004
ROBERT W. GEEPRESIDENT
GEE STRATEGIES GROUP LLC
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What is Distributed Energy (DE)?
• Distributed generation (DG): – Small electricity generation facilities: < 50 MW
– Located on the distribution system close to the point of consumption
– Includes: micro-turbines, fuel cells, internal combustion engines and small gas turbines
– Combined heat and power facilities & emergency back-up = 95 percent of customer-owned generation in U.S. today
• But also will include:– End use enabling technologies– Load management applications– Sensors/nodes to “smarten” grid intelligence
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Driving Forces Behind DE/DG
• Decline in cost of renewable & high-efficiency technologies suited for households & small businesses
• Competition for wholesale power opened possibility for sales of customer-owned power during peak periods in real-time markets
• Commercial & Industrial customers placing increased reliance on high-quality power
• Opposition to siting of new transmission capacity drives search for alternatives
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Benefits of Distributed Energy/Generation
• In real-time markets, could be more cost effective in meeting peak demand than additional central station power
• If operating costs lower than central station power, could reduce wholesale prices
• Enhanced system flexibility could increase reliability
• If supply increased and customer demand more flexible, power price volatility could be reduced
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Risks of Distributed Energy/Generation
• Reliability could decrease if system operators unable to manage greater number of generation inputs
• Retail power price could increase if ratepayer-funded investments required to maintain power quality
• Proliferation of fossil-fired DG potentially poses threat to air quality
• Migration of customers off grid poses threat of embedded cost shift to remaining utility customers
• Escalating fuel costs of fossil-fired generation, reducing “spark spread for DG”
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The Story Thus Far. . .
• DG deployment has been halting owing to barriers & failure to meet financial expectations (insufficient pay back rates)
• Market support nosedived following “dot com” bust
• DG has struggled to find successful business models
• Market penetration impeded by slowed or regressive restructuring policies
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Major Barriers to Distributed Generation
• Contractual & technical interconnection requirements for equipment protection and safety to ensure power quality
• Utility tariffs requiring surcharges for standby service
• Environmental & permitting requirements of local governments restricting installation and operation of generating equipment
• Average cost pricing of utility services
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Contractual and Technical Interconnection Issues
• DG developers claim contractual issues used to impede interconnection
• Lack of common technical interconnection standards raises cost of manufacturing
• Progress on developing some technical standards (i.e., IEEE 1547) helpful but not sufficient
• FERC proposal to mandate national standards for small DG (<20 MW) spawns opposition from certain states and co-ops, and concerns about state air quality standards
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The “Standby Charge” Tariff Debate
• Utilities seek to recover fixed costs associated with continued obligation to serve
• DG-owning customers seek to avoid charges, and want credit for benefits they provide to system (enhanced reliability, transmission capacity avoidance)
• Larger issue: pace and scope of industry restructuring
• DG deployment looks to success of competitive markets and ability of customers to purchase in real-time power markets
• Will regulators be willing to unbundle services further and expose customers to actual costs through deaveraging?
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Is There a New Dawn for Distributed Energy?
• DG’s enhanced security & reliability advantages now spotlighted following NE-MW power blackout
• Since August 14, DG market has rebounded (so far)
• Development of new energy control technologies and “smart” management systems likely to benefit DG deployment
• Vision: “Plug and Play” DG a key part of a seamless “Smart Grid” energy load management system
• “Smart Grid” touted by foundation-funded think tanks, but vision needs embrace of federal and state policymakers
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A Non-central Station Perspective of the Future
Source: CA Energy Commission
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An Even More Aggressive View
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Robert W. GeePresidentGee Strategies Group LLC7609 Brittany Parc CourtFalls Church, VA 22304703.593.0116703.698.2033 (fax)[email protected]