Regulators Explore Policies and Models That Encourage Grid Innovation

By Linda Barney and Lauren Bhaskar

Many regulators understand that innovation is increasingly important but candid discussion of new, sometimes disruptive, approaches is not simple. The Grid Forward launch event, Accelerating Grid Innovation Summit, provided a rare opportunity to address how energy policies and regulations might lead to grid innovations, with panelists Letha Tawney, Commissioner with the Oregon Public Utilities Commission (OPUC), and Alison Silverstein of Alison Silverstein Consulting, who has served as a state and federal electric regulator.

Alison Silverstein and Letha Tawney address the Grid Forward launch event.

The Challenge of Creating Innovative Energy Policies based in Safety and Equity

Given their mandate to ensure public safety, utilities often find their cautious nature at odds with the need to innovate.  “Public safety is a core part of the electricity sector and utility cultures. It’s a part of what contributes to the sense that utilities and commissions don’t move very quickly. We have to find a way within our safety culture to adopt an innovation mindset,” stated OPUC Commissioner Tawney.   

As the U.S. encounters more frequent and severe flooding and wildfires which affect utility assets and harm customers directly and through their energy service, this adherence to safety culture must form a bridge to new energy policies and business practices.  Silverstein asserted that utilities must create innovative business and service delivery models that respond to extreme weather and climate change events. Tawney continued, “The way I personally am trying to approach the issues is to consider how fast can we learn? How fast can we put dialogue together where folks are feeling that it’s safe to share failures and successes, opportunities, and what they’re learning about how to ensure public safety and reliability? That leads to the question of how do you think about what’s reasonable to do and who should bear what risks?”

How fast can we put dialogue together where folks are feeling that it’s safe to share failures and successes, opportunities, and what they’re learning about how to ensure public safety and reliability?

Letha Tawney – OPUC

Tawney said that it is the responsibility of the utility to consider how their policies and solutions impact their customers. In Oregon, approximately 20 percent of customers struggle to pay their electric or gas bills—this vulnerable population does not have up-front money to spend on solar panels, battery storage, or generators. Tawney concluded, “As the regulator, those folks are my responsibility too. How do we drive energy and grid innovation to keep those customers front and center both in what’s going to show up in their bills and what’s going to be available in their homes?” 

Utilities can look to other markets for ideas on how to innovate with an eye toward equity.  Silverstein notes that Hawaii, New York and California (to a lesser degree), are the leaders in taking different approaches to equitable access to clean energy and grid innovation. These states have taken novel approaches in areas such as community PV. Looking forward, Silverstein suggested, “States might address equity issues by requiring developers receiving government funding for solar systems to build more solar and storage for low-income communities, or requiring development of community centers for heating, cooling and feeding to help rural or poor populations survive extended outages and disasters.”

Models and Policies for Energy Innovation

Silverstein and Tawney discussed various models and incentives that regulators and policy-makers might implement to encourage greater energy and grid innovation.

  • Tax policy depreciation rules: These rules affect decisions like whether utility regulation allows performance-based rate making, to create incentives, balance accounts or to encourage construction work in progress for innovative technologies and investments.
  • Inverter adoption and interconnection rules:  Do interconnection requirements need modern inverters with communications and curtailment capability and the ability to operate under islanded conditions?  Is it feasible, cost-effective and appropriate to have the utility completely replace every old PV inverter with a smart inverter to get better grid performance fast? Are distributed generation (DG) interconnection rules out of date?
  • Performance-based rate making: Silverstein indicated that innovation can be aided by having clear utility performance-based rate rules. Guidelines need to state the goal, the metric (such as the amount of energy efficiency or dispatchable storage achieved) and the reward.  Tawney noted that “the actual mechanics of it [performance-based ratemaking] are not as straightforward as the vision of it;” Regulators and stakeholders must consider how to set the baseline and effectively measure performance.
  • Pilot and smart grid projects: Utilities have traditionally used energy pilot projects to foster innovation. Tawney stated, “At the Oregon PUC, I think we’ve leaned in on the pilot approach, and we’re asking ourselves now, when do pilots scale up and when are they not pilots anymore?”

“States might address equity issues by requiring developers receiving government funding for solar systems to build more solar and storage for low-income communities, or requiring development of community centers for heating, cooling and feeding to help rural or poor populations survive extended outages and disasters.”

Alison Silverstein, Alison Silverstein Consulting

OPUC Smart Grid Report

OPUC published a legislative report on the changing electricity sector (SB978) in September, 2018. That report highlighted the PUC’s commitment to “enable customer and competitive options to be fully and accurately valued”. Tawney said, “This year’s Smart Grid Reports, written by each utility, have evolved to provide a holistic overview of the utilities’ vision for smart grid with several implementing projects underneath that umbrella. In parallel, the OPUC has launched a distribution system planning investigation (docket UM2005) in recognition that the ‘Smart Grid’ is becoming a real locus of growth and activity, and is ready for a deeper level of planning attention. A goal of these efforts and others at the PUC is to create a platform that helps developers, companies and providers figure out how their use case might build on what both customers want and the grid needs.”

### Linda Barney is the founder and owner of Barney and Associates, a technical/marketing writing, training and web design firm in Beaverton, OR. Lauren Bhaskar is a member of Grid Forward and an engineer on the distribution modernization team at Burns & McDonnell.