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Disruption Abounds

Energy sector leaders on transformation ahead

The United States should look to the European Union to figure out how to reconstruct its electric sector to make it more distributed and digital, author Jeremy Rifkin said during his keynote at the Energy Times Empowering Customers & Cities conference in Chicago this month.

Rifkin is an economic and energy advisor to the European Union and author of The Zero Marginal Cost Society.

Rifkin helped German Chancellor Angela Merkel develop the country’s energy strategy. Now he wants our energy sector to mirror theirs. He said Germany’s electric grid will be 100 percent reliant on renewable energy by 2040. The president of the World Bank said Germany has successfully shown the world that economic growth is not tied to fossil fuel growth and that it can reduce overall energy consumption and still enjoy economic growth, albeit modest. This does not speak to the rising electricity costs in the country, however.

Audrey Zibelman, at Empowering Customers & Cities.
 

The Energy Times conference was a gathering of the country’s top electricity experts and stakeholders.

David Owens, executive vice president, business operations group and regulatory affairs at Edison Electric Institute, which represents utilities, said he can see the holes in Rifkin’s vision.

There are a number of weaknesses in Rifkin’s vision, Owens said. But it was the way Owens, a panel moderator, got a swath of stakeholders to reveal those weaknesses during the conference that was artful.

The evolution of a distributed grid may be stymied by the threat of cyberattacks, since  a digital grid makes utilities more vulnerable. Big questions loom about  how to price electricity under a new distributed system, the role of regulators and utilities under a distributed system, and the fate of stranded assets.  

The utility sector is already struggling to make sure the existing grid is protected against cyberattacks. If the grid moves from a centralized one to a more distributed one that exists on a digital platform, how do we protect it?  

Black & Veatch released a report in 2014, “Strategic Directions: U.S. Electric Industry,” which showed cybersecurity is a top concern for utilities, behind reliability, environmental regulation, and economic regulation. Even under the current system, only 32 percent of electric utilities had proper protection from cyberthreats.

Rifkin’s comments kicked off a contentious two-day discussion about the traditional utility model.

He targeted traditional utilities, but he also targeted fossil fuels.

“Everything in civilization is based on fossil fuels, from pharmaceuticals to fertilizer and where there’s oil, there are failed states,” like Nigeria, Brazil and Venezuela, Rifkin said.

Stuart Nachmias, of Con Edison, center, and David Owens, of EEI, right.

The goal is to ween ourselves off of fossil fuels, dismantle the traditional utility model, allow multiple stakeholders to build microgrids for communities and allow those grids to run on a digital platform that allows a broader integration of renewable electricity generation.

Rifkin says the world is in its third industrial revolution.

But instead of America leading as it did in the 19th and 20th centuries, the EU and China are leading.

The two powers are planning a digitized communication Internet that converges with a digitized renewable Energy Internet and a digitized automated Transportation and Logistics Internet to create a super-Internet of Things infrastructure, Rifkin writes in his paper, One Belt, One Road: Ushering in a Green Internet Plus Third Industrial Revolution in China, the European Union and across Eurasia, which he drew from during the keynote.

The climate is getting worse, he said. Atmospheric carbon concentration is at an all-time high at 385 parts per million, so high that half of the Earth’s species could be extinct by the end of the current century.

Luckily, technology is improving, especially sensor technology, he said.

Sensors attached to almost everything from warehouses to road systems to utility infrastructure allow each to communicate with the other, and people can communicate with those things digitally.

This will optimize the electric grid of the future. It will look different than the current grid and its giant baseload plants and large transmission lines.

Rifkin said the distributed grid takes a village and many stakeholders to build, but it obviates the need for large baseload plants, long-distance transmission and the arguably cumbersome siting and approval process under the old regulatory structure.

Because of the climate reality, a new economic paradigm is emerging that will change the way we organize economic life on the planet, he said.

Anne Pramaggiore, president and chief executive of ComEd, who co-chaired the Chicago conference, said “There’s something about the digital revolution that’s community oriented.”

Mary Powell, president and chief executive of Green Mountain Power called Rifkin’s vision a “cultural revolution.” She said, “The consumer revolution for distributed generation is happening.”

Most utilities, however, are doubling down on the bulk power system which is “the most inefficient way to deliver power,” she said.

Audrey Zibelman, chairman of the New York State Public Service Commission, and former executive of the PJM interconnection, talked about the emergence of microgrids on a digital platform.

 “No more time than now do we need engineers who understand data, information and systems,” Zibelman said. “I’m absolutely bullish on what we’re doing in New York.”

She has spearheaded the 2014 launch of Reforming the Energy Vision initiative which will transform utilities into Distribution System Platform Providers.

Around the country, markets need to be integrated better, she said. “New York has five different distribution markets, but we want retail markets to look the same.”

There are certainly questions about how to normalize the new landscape. “How the country values distributed resources is critical,” Zibelman said. “Pricing needs to be accurate. Getting that right becomes very important.”

“The utility should be the distribution provider, and the role of the retail regulator is going to turn into the market monitor,” Zibelman said.

 “The opportunity is there because the technology is there,” said Dominic Thasarathar, construction, energy and natural resources strategist at Autodesk. “The utility sector is at that tipping point of going through that significant change.”

Illinois Commerce Commission Chairman Brien Sheahan said change was a constant. Then he quoted Ecclesiastes. “What has been will be again. What has been done will be done again.”

A long time ago, he said, there was small-scale electric service, two lamps at a saloon on Madison Street in Chicago. We’re back to that, a distributed world.

The electricity industry is “on the verge of change, revolutionizing how utilities produce” power, he said.

He added, “Utilities are ill-equipped” to move from a large centralized grid to a decentralized structure that is smarter and more interconnected.

“Businesses must adapt,” Sheahan said. “Regulators must adapt.”

Picking a winning business model will be difficult, according to Miles Keogh, director of the Research Lab at the National Association of Regulatory Utility Commissioners.

“I’m inspired,” by the transformation ahead, he said. But he cautioned, “We shouldn’t pick a side. I want to not pick a side.”

Dipka Bhambhani, is director of communications at the U.S. Energy Association.

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