Five years ago the idea of a major regulated electric utility comparing itself to a ride-sharing car service summoned via smartphone … that just wasn't a comparison you'd make.
Product aside, the basic lack of infrastructure was the major difference in business models. Uber contracted with third-party drivers in a variety of cities, generating revenues by providing the service platform to match cars with riders.
Central Hudson sold electricity, via wires it owned.
Last week investor-owned utilities in New York submitted a raft of innovative “demonstration” projects as a part of the state's Reforming the Energy Vision initiative. From community solar projects to efficiency marketplaces to microgrids, the utilities were tasked with finding not just new ways to supply electricity but also how they could profit from concepts where a third-party vendor was often involved in the product. And their filings indicate just how focused they are on evolving their business models, testing new revenue concepts and ultimately evolving their role.
“Uber has created a business model that uses a network of third party providers to benefit the consumer, the third party providers, and Uber.” Central Hudson said in its proposal. “Utilities are in a unique position to establish a similar business model.”
Times, it seems, have changed.
Taking on the challenge
It wasn't so long ago that the traditional narrative had utilities fighting distributed resources and the concept of electric companies as service providers. Just how true that was is debatable – companies are always looking for new ways to make money – but New York's progressive regulatory environment has pushed utilities to move quickly, and in ways they may not be immediately comfortable.
“Updating the energy delivery business model is a challenge we're embracing,” said Ed White, vice president of the New Energy Solution Group within National Grid. “We recognize that changes in customer needs, technologies and environmental concerns require us to deliver what the market needs tomorrow, not what what it used yesterday.”
John Maserjian, a spokesman for Central Hudson pointed out that the REV proceeding is about learning to address that challenge.
“Adopting to any new model can bring challenges, as well,” he said. “By starting with these demonstration projects, though, we can better understand what works and what might not work, how the marketplace will respond, determine the best way to engage with third party providers, and gain insights on customer benefits.”
National Grid – which proposed four projects aimed at integrating more renewables, developing microgrids and giving consumers more control – has developed an internal organization “solely focused on driving change and innovation,” White said.
White said the group aligns well with initiatives like REV in New York and Massachusetts' GridMod. “So, we are very comfortable taking on this challenge,” he said.
Central Hudson's own four projects include a microgrid, community solar, an energy program marketplace and targeted demand response. But ultimately, Maserjian said success will depend at least in part on how customers respond to and engage with the new tools and programs.
“Products and services must provide real value, and offer enough flexibility to appeal to all customer types and segments,” he said. . Although utilities and service providers have worked in this marketplace before, we look forward to participating together in new ways.”
Consolidated Edison: Can distributed residential assets be monetized?
Of Consolidated Edison's three proposals, its plans for a “Virtual Clean Power Plant” may be the most innovative. The project will try demonstrate how aggregated fleets of solar panels, in addition to storage assets in hundreds of homes, can boost grid services and resiliency.
Con Edison plans to partner with SunPower and Sunverge to integrate residential behind-the-meter storage resources into the grid. The “virtual plant” would have a total capacity of 1.8 MW and an aggregated energy output of 4 MWh.
The utility explained the virtual, aggregated plant would allow it to “explore how hundreds of residential distributed energy resources can be aggregated into grid operations to provide firm capacity for participation and monetization in competitive capacity and energy markets.”
“This demonstration provides a platform for evaluating the potential for new revenue streams related to aggregation and operations of aggregated fleets of distributed energy resources,” ConEd said in its filing. “This new grid services revenue stream will make battery installations profitable in the near future, as the price of the technology comes down.”
The utility is also proposing a Building Efficiency Marketplace, aimed at boosting customer awareness and participation in ConEd's programs, identifying distributed energy resource opportunities with minimal time and resources, and bringing those “to a new marketplace in a much quicker and more cost-effective way for the market participants.”
In its final proposal, ConEd will partner with Opower on a CONnectED Homes Platform, which the utility is calling a “new form of customer engagement.” Opower will deploy an analytics platform to provide targeted customers in with tools designed to proactively connect them with efficiency programs and distributed generation offerings that will be relevant to them.
“One of the most significant barriers to wide scale adoption of DERs in the residential segment is a lack of customer understanding of which offerings are best suited to help them manage their energy usage, energy costs and comfort in their homes,” the utility wrote to regulators.
NYSEG, RG&E would simplify interconnection process
Iberdrola utilities New York State Electric and Gas and Rochester Gas and Electric put forth three proposals: development of an energy marketplace; a more flexible interconnection process; and the use of a “community-based energy asset planning process that considers procurement of distributed energy resources.”
The proposed Flexible Interconnect Capacity Solution (FICS) would be a new model for connecting large-scale controllable distributed generation to the grid, allowing the utility to either dispatch or curtail power. The utilities explained that in the traditional interconnection process the distribution utility must invest in distribution facilities necessary to accommodate the maximum capacity of the new resource, and the customer is required to finance the incremental grid costs – possibly resulting in the generation not being economic.
“In contrast, the FICS establishes a flexible process for the project developer and utility to come to an agreement that maintains the viability and benefits of the project,” the utilities said. “For example, the customer may agree to have the utility dispatch the generation at something less than the maximum capacity or taken off-line by the utility when the local grid network is constrained, thus significantly reducing the incremental grid costs that they would otherwise be responsible for.
The concept has already proven by Iberdrola SA affiliate ScottishPower, the utilities said, adding “the solution allows the companies to leverage the distribution system to support a 'platform as a service' business model.”
The Community Energy Coordination (CEC) proposal would be a new way to approach planning and procurement of distributed resources.
“The entire premise of CEC is that DER deployment can best be implemented through a process involving cooperation among customers, communities and key stakeholders,” the utilities said. In this case, that would be Cornell, the city of Ithaca and Tompkins County, where the demonstration would take place. “This demonstration project is designed to be self-funding with a portion of any cost savings going to customers, the community, the utility and the coordinating partner,” they added.
The utilities' final proposal calls for an energy marketplace: an e-commerce website enabling consumers and DER providers to directly interact.
National Grid: Distributed solar to reduce low-income bills
National Grid is proposing a slate of projects targeting three distinct geographic areas and divergent customer needs. The proposals include integration of distributed energy resources and automated demand management capabilities at the Buffalo Niagara Medical Campus, as well as introducing solar options in a nearby neighborhood in Western New York.
In the Fruit Belt area bordering the campus – named for street names like Grape, Peach and Orange – National Grid is looking to bolster the neighborhood’s “strengths and to build a replicable model” by installing 100 residential solar photovoltaic systems in a low-income area.
“The energy produced by these solar PV units will be captured in front of the utility meter, aggregated collectively, and monetized,” National Grid said. “The resulting revenue, in its entirety, will then be redistributed equally amongst a larger group of neighborhood residential electric accounts.”
Residents would see a “very tangible reduction in their electric bills as a direct result of this demonstration project’s solar PV system installations.”
In Northern New York the utility is partnering with Clarkson University, SUNY Potsdam and others, to examine the feasibility of building a community microgrid to add resiliency and efficiency to the area’s electricity grid.
“In emergencies, the microgrid would separate from the electricity system and independently provide power to the campuses and to local police, fire, hospital and emergency response facilities,” National Grid explained. “The demonstration project will introduce business model innovation to the development of a community resiliency microgrid.”
In the eastern portion of the state, in Clifton Park, National grid is proposing to incorporate advanced systems so that residential and small commercial customers can actively monitor and control energy consumption. Customers will have more predictable bills, the utility said, and there will be additional opportunities to better manage energy usage and new energy technologies.
The project is aimed at improving reliability and reducing consumption in a fairly small area targeting just 15,000 customers.
Orange & Rockland looks to generate revenue from the provider platform
Orange & Rockland proposed a residential Customer Engagement and Marketplace Platform, aimed at giving customers access to emails, printed reports or text messages with energy suggestions and comparison.
The utility noted that a potential obstacle to wide-scale adoption of DER in the residential segment is a lack of customer understanding regarding which resources may be best suited to their needs. The platform being developed would help pair customers with solutions which best suit their needs, while also demonstrating how the utility can profit.
The recommendations would be “customized to incorporate third party solutions in the marketplace where products and services are offered in a streamlined customer experience,” O&R said. “An important objective of the demonstration project is to test alternative revenue stream opportunities for O&R. Our hypothesis is that there is a potential to generate revenue from product vendors, third party installers and DER providers through advertising, customer/vendor transactions and bundled solutions with ongoing service fees.”
Central Hudson: Solar for all
Central Hudson Gas & Electric Corporation proposed four projects to empower customers with new tools, develop a new renewable energy resource in the region, help reduce peak energy use in key areas and to consider the feasibility of a demonstration microgrid in the Mid-Hudson Valley.
In its community solar proposal, Central Hudson said it would contract to build a utility-scale solar facility offering fixed rates on a subscription basis for up to 25 years. The program would allow customers typically left out of rooftop solar, like low-income families, renters and homeowners without sun access, a chance to utilize solar energy.
“Research shows that utility-scale solar facilities are typically half the cost of residential rooftop systems on an energy capacity basis, therefore providing value to customers wishing to support renewable energy,” the utility said. “Nationwide, growth in utility-scale solar is projected to match or exceed growth in residential and commercial rooftop installations combined. The facility will interconnect with the local electric grid as a distributed generation resource.”
A targeted demand response program would offer incentives to homes and businesses in specific areas to reduce peak usage. The utility also partnered with other groups to consider a microgrid project through N.Y. Prize, a $40 million competition offered by the New York State Energy Research and Development Authority.
“The aim of the competition is to help communities create microgrids, or standalone energy systems, that can operate independently in the event of a power outage,” the utility said. “Central Hudson is also supporting efforts by other local entities that have applied for funding to study additional microgrid installations in the region. The results of this competition are pending.”
Central Hudson's “Central-E. Your Energy Exchange,” would be a web-based platform providing customers with information on energy management and access to third-party products and services.