EDITOR'S NOTE: Michael Champley, a veteran regulator and utility executive, was at the heart of Hawaii's transition to a leading solar state. He will be bringing that experience to discussions of the new utility business model and electric power revolution at Empowering Customers & Cities in Chicago November 1-2.
Because of rapid advances in technology and increasing customer interests in distributed energy resources, electric distribution systems are the next frontier for major electric utility transformation.
Creating the 21st century electric distribution grid will undoubtedly require substantial capital investment. The market structure, business models and regulatory framework under which grid modernization investments will be made, and which will serve as the platform for integrating new and emerging technologies, are being examined by state utility regulatory commissions.
Hawaii is at the forefront of solving a number of significant economic, regulatory policy and grid-related technical challenges associated with high penetrations of distributed solar PV.
The state experienced exponential growth in rooftop solar PV systems as customers’ exercised choice to install distributed solar PV in response to very attractive market conditions. As a result, Hawaii leads the nation in the penetration of rooftop solar PV systems. Installations amount to almost 70,000 customers, which is 15 percent of all residential customers and 30 percent of single family homes.
Guided by insights from recent events, Hawaii is creating a sustainable, market-based DER structure that would provide customers with energy choices and enable multiple DER technologies to offer the greatest competitive value possible to the grid, such that non-participant customers may benefit from distributed energy deployment.
It is generally acknowledged that existing net energy metering mechanisms do not properly recognize the potential benefits of other valuable distributed energy technologies such as energy storage, demand response or energy efficiency.
The net energy metering program in Hawaii was discontinued for new customers. In its place, the state implemented two interim distributed solar PV development options. One was customer grid-supply which is a wholesale centric, export model. The other is a customer self-supply, retail centric, non-export model. The latter option has fostered development of new customer product offerings that combine solar PV with customer-sited energy storage, which could provide measurable grid benefits.
Several factors differentiate distributed energy technologies from their utility-scale counterparts, and provide the justification for incremental compensation beyond utility-scale project competitive pricing levels.
New utility distribution planning processes, utility business models and regulatory mechanisms will be required in order to create future distribution system platforms and markets to unlock the potential of distributed energy and incent desired utility performance.
Distributed energy provider business models and product offerings will need to evolve and expand in response to new distribution market mechanisms.
Monetizing the value of measurable grid benefits supplied by competitive technologies would provide compensation to distributed energy providers and customers. It is fundamental to developing a lower-cost 21st century electric grid, expanding distributed energy choices for customers and enhancing prospects for a financially sound distributed energy resources provider industry.
Michael Champley, former Hawaii Public Utilities Commissioner, is an energy adviser and retired utility executive.