The daunting cost of getting new transmission lines built is spurring the search for alternatives that not only cost less but can make the electricity system more resilient in the face of natural disasters like Hurricane Sandy.
Proponents of distributed generation, like rooftop solar panels, have been promoting many of these options as clean energy. But Doug Hurley, senior associate with Synapse Energy Economics, told the National Association of Regulatory Utility Commissioners (NARUC) in Baltimore this week that cost alone will drive the power industry toward “non-transmission alternatives” (NTAs).
NTAs can include distributed generation, efficiency, demand response, and hybrids of multiple technologies including some transmission, Hurley said.
He and other speakers said the key is to break out of decades of thinking and regulation that assume transmission on a large centralized system is the only solution for electricity delivery.
James Volz, Chairman of the Vermont Public Service Board, said NTAs will require rethinking how costs for the grid are allocated. For instance, he said, Vermont’s share of the New England regional grid’s transmission projects is 4%. A problem might be solved more cheaply with an NTA solution all in his state, but under current practice, Vermont would then pay the whole cost. So Vermont’s 4% share of a $200 million regional solution would look better than a $50 million local solution.
“What’s cheapest for the state may not be cheapest for the region.” – Hurley
Commissioner Joseph Fiordaliso of the New Jersey Board of Public Utilities (BPU) said regulators and the industry need to look at power delivery as a “jigsaw puzzle.” Rethinking challenges such as climate “will take approaches that are revolutionary,” he said.
Hurley pointed to Con Edison, which must seeks solutions that don’t require more of New York City’s extraordinarily expensive real estate. Helping large office buildings become more efficient energy users and even installing distributed generation in congested urban areas can be far cheaper than stringing in new transmission.
Thomas Casten, Chairman of Recycled Energy Development, said NTAs are also an opportunity for states to retain large manufacturing and other large energy users. He cited projects where businesses could lower their own costs by utilizing waste heat and could also lower the local utility’s costs of service.
Casten said generation from waste heat, at sites like hospitals and factories, means electricity produced with no more fuel burned and no line losses, so on-site generation is worth more than generation at another central generating plant.
BPU Commissioner Jeanne Fox said New Jersey has a lot of manufacturers interested in better energy options, but her state is struggling with “how to incentivize them without just giving away money.”
Federal Energy Regulatory Commission Chairman Jon Wellinghoff said NTAs and distributed generation can mean both costs and value that are not fully recognized in current regulatory paradigms. Rate design has to be changed to properly account for them, he said.
John Farrell with the Institute for Local Self-Reliance said regulators shouldn’t wait too long. Recognition of the value of microgrids and NTAs is coming from the bottom up, he said. Large companies like Walmart “are already seeing the value proposition” of things like rooftop solar, as the cost of alternatives continues to fall, and proceeding on their own.
That’s getting pushback from traditional transmission suppliers who see themselves left providing the backup power for consumers who expect to pay little each month but be able to turn to the grid on the hottest summer days or during blizzards.
Speakers said major transmission providers are already asking state regulators to require users with larger on-site generation capacity to pay grid stand-by charges. They also worry large new investment in transmission lines may end up being stranded as more areas find ways to meet their electric needs with NTAs.
