Moving Forward: regulatory trends shaping a clean energy nation
Along with the season’s time-honored traditions, comes time to pause and reflect on the past year and year to come. Last month, IREC gave you the 2014 Trends Report and Jane Weissman offered six clean energy trends to keep an eye on in 2015. Following up, here’s a closer look at what we can expect to play out in the national regulatory arena next year. It’s definitely shaping up to be an energetic year.
Two pillar policies for distributed clean energy — net energy metering (NEM) and interconnection procedures – have been the topic of much discussion, and we expect this trend will continue into next year. IREC recently released with the Vote Solar Initiative the 2014 Freeing the Grid, a scorecard that offers insight on the state of play of these two policies. Most notably, and unlike previous report years, most state grades remain relatively unchanged from 2013 to 2014. The takeaway? These pillar policies are still standing, but progress is stagnating.
Heading into 2015, the risk of lower NEM grades remains, as more than a dozen states actively consider changes to existing policies, through legislative or regulatory means (or, in some cases, both). Spurring the call to “fix” NEM policies are three commonly cited concerns: ratepayer inequities, threats to utility profitability, and grid disruption from high penetrations of distributed energy.
Important issues, no doubt.
Their complexities, however, are often oversimplified for the sake of sound bites, leading to premature conclusions about the merits of NEM, without the benefit of thoughtful analysis or engaged dialogue. But some states are taking a more measured approach, attempting to answer core questions underlying the aforementioned concerns.
What is the full, net value of distributed generation (DG) to the grid and ratepayers? What are the costs and benefits of a more distributed electricity grid? What changes might be needed to facilitate and maximize the benefits of such a grid? How does the value of DG change when combined with energy storage? And, perhaps most importantly, what are the consequences of staying the course verses changing direction on this pillar policy?
No longer merely an academic exercise, these discussions are playing out in real time, as industries, advocates, customers, utilities and investors all anxiously seek greater clarity on the future of NEM and DG. To that end, we’ll see a continued emphasis on cost-benefit analyses and solar valuation studies. We’ll also likely see more utility-proposed rate design changes and customer charges in forthcoming rate cases, along with policy proposals in 2015 state legislative sessions.
Certainly, all eyes will be on the Golden State as the California Public Utilities Commission tackles a suite of regulatory dockets aimed at transitioning the country’s leading solar market to the next net metering iteration, NEM 2.0. Indeed, much is at stake this year. And, as decision-makers dive in, we’ll continue to call for expanded emphasis on standardized valuation methodologies and sound assumptions that reflect the full benefits of NEM and DG, combined with thoughtful public processes and stakeholder input.
On the interconnection front, we expect to help more states adopt changes that simplify and streamline the process for small generation systems to connect to the grid. Final orders are anticipated from the North Carolina and Illinois utility commissions, both of which are evaluating elements of the FERC pro forma Small Generator Interconnection Procedures (SGIP), which was developed last year with substantial input from IREC. We consider it a best practice model applicable for all states.
The pro forma SGIP acknowledges that smaller systems have different study needs than large systems. It relieves some of the study burden on small generator systems, reducing time and costs for all involved parties (project developer, consumer and utilities), while continuing to ensure a safe, reliable electric system. These changes have been in place in California for a little over two years now and the early evidence suggests they are working as intended. As a national leader on interconnection, IREC looks forward to helping more states adopt meaningful interconnection reform in 2015 and beyond.
Closely connected to these two pillar policies, the transition to a modern, clean electricity grid will be a hot topic in 2015. Leading the charge are New York, California, Massachusetts and Hawaii, all of which are evaluating the technical and regulatory changes needed to promote and enable more efficient use of energy, deeper penetration of renewable energy resources, increased adoption of advanced energy management products, and consumer empowerment.
Central to all of these discussions is a growing recognition that the roles of utilities, energy customers and regulators will inevitably transform along with the grid. We can anticipate some intense discussions, deliberations and decision-making in the year(s) to come. Watch for an upcoming IREC report, “Easing the Transition to a More Distributed Electricity System: The Changing Roles of Consumers, Utilities and Regulators within the Regulatory Compact.”
Lastly, expect 2015 to be the year of the energy customer: that’s you (and me). Making clean energy simple, economical, safe and streamlined for the energy customer is core to IREC’s mission.
Energy customers are a lynchpin in all of these discussions, and today’s regulatory decisions will have a huge impact on customer choices and behaviors (and thus the functionality and benefits of the modern grid) for decades to come. Certainly, more energy customers are becoming engaged, deliberate consumers, and producers of clean energy. And this trend is expected to continue.
Going forward, more attention will necessarily be paid to expanding access to clean energy to more people, while also ensuring their energy experience is positive, beneficial, simple and secure. So, in 2015, anticipate a heightened focus on the customer issues of rate design, data access, privacy and cyber security, shared community renewables, market choice and competition, and quality assurances.
With much on our plates and more on the horizon, IREC looks forward to what’s sure to be an exciting and proactive regulatory year.