Across the country, signs of a cleaner, more efficient, and more affordable U.S. energy system are emerging. But we can’t reach the clean energy future without updating the way utilities make money. Today, utilities earn revenue based on how much electricity they deliver. Companies earn less when they sell less electricity, so they have little incentive to provide energy efficiency programs for their customers.
To address this issue, the Pennsylvania Public Utilities Commission is considering changing how utilities are paid for the electricity they sell. The goal – determining whether new rate plans could eliminate the barriers to energy efficiency programs – is an admirable step toward the clean energy future. Environmental Defense Fund (EDF) has a number of ideas on how to design a more efficient grid, which we filed in comments today:
- Performance-based regulation – Utilities have few incentives to help people adopt solar panels or energy efficiency, so the Commission should implement performance-based regulation plans. Rather than encouraging the sale of more electricity, a performance-based framework would reward utilities for meeting goals that benefit customers and the environment, like encouraging the use of rooftop solar or increasing the use of energy efficiency programs.
- Transactive energy – In a transactive energy approach, the utility would operate as a neutral “platform” that provides price signals for self-generated energy and energy reduction programs. For example, if the grid were stressed, the utility would signal for people to reduce their usage or sell self-generated power, like from an electric vehicle battery or rooftop solar that’s not being used. This “open source” model encourages customers and third parties to provide services via the utility’s platform, instead of the traditional model where the utility has sole control over power and energy efficiency programs. This new approach opens the door for lower energy bills and cleaner energy resources, and the New York Public Service Commission is leading the way with its innovative Reforming Energy Vision.
- Data access – Utilities should provide customers and third parties with real-time access to energy usage data. This would allow customers and entrepreneurs to use the data to save energy – like develop an app that sends recommendations via smart phone about how people can reduce their energy use and electricity bills. This type of innovation has the potential to cut energy bills by up to 15 percent. The Commission should adopt the Open Data Access Framework, a protocol for securely handling and maximizing data that EDF helped develop for Illinois.
- Using clean energy in distribution system planning – Pennsylvania should not routinely approve utility requests to keep expanding the grid. Instead, utilities should evaluate whether distributed energy – like rooftop solar or energy efficiency – could be used to delay the need for building a bigger grid. Other utilities, particularly in New York and California, are using this approach to lower their costs and deliver cleaner energy while delaying costly grid upgrades.
- Voltage optimization – Voltage optimization is a proven, cost-effective technology that uses sensors and capacitors to “right-size” voltage, resulting in less energy use, pollution, and peak demand. In neighboring Ohio, the state’s Public Utilities Commission estimated an average benefit of $35.87 annually per customer through continuous use of voltage optimization technology. Many utilities have already deployed this technology, but others, like FirstEnergy, are resisting because the increased efficiency erodes their revenues and profits. The Commission should require all Pennsylvania utilities to file plans for installing this important technology.
This discussion comes shortly after the Commission approved multiple utilities’ plans to reduce energy consumption and peak electric demand, which are a state requirement. Last year, Pennsylvania extended these energy efficiency and conservation programs for an additional five years.
“Increasing energy efficiency, encouraging conservation, and reducing the demand for electricity benefits Pennsylvania in many ways – including more affordable and reliable service, reduced need for new power generation, and lower emissions from power plants,” said Commission Chairman Gladys M. Brown.
Hats off to the Commission for thoughtfully considering how it can eliminate barriers to clean energy, while fulfilling its mission to make electricity safe, reliable, and affordable for everyone. We hope the Commission will incorporate the ideas EDF presented, and deliver a win-win for customers and the environment.
By John Finnigan
Originally Published on March 16, 2016
The Energy Exchange Blog is a forum where EDF‘s energy experts discuss how to accelerate the transition to a clean, low-carbon energy economy. Follow them on Twitter here: @EDFEnergyEX
