What’s the best way to talk about transitions to clean energy systems? Governing Green Power’s third annual conference included a panel composed of three panelists from the U.S. Mainland (Severin Borenstein, U.C. Berkeley; Jim Lazar, Regulatory Assistance Project; and David Spence, University of Texas – Austin) and two from Hawai’i (Lorraine Akiba, LHA Ventures and Robert Harris, Sunrun Inc.). Their charge was to open the conference addressing not the best designs for high renewables, low carbon systems that are efficient, reliable and fair, but how existing systems make the change to them.
Planning for this session raised a basic question: how can we talk about a transition without agreement on what the endpoint system will be? This question implied others:
— What does it mean to talk about “transitions” given there can be overlap between discussing the goal and talking about how to get there. For example, last year’s conference focused on how a traditional utility should make money in the new environment of renewables, which is both about the transition and the goal.
— Looking at this the other way, is it possible to reach our goals without recognizing the opportunities and reducing the obstacles that lie between where systems are now and where they need to be? There are many stories of great policy proposals undermined by surprises while trying to implement them.
— When is the right time to have a conversation about transitioning traditional electricity systems? Is it when there is consensus on the new system? If that’s the case, it’s fair assume the conversation never will happen given debates about key elements of the most preferable system.
— Finally, who should be in a discussion about transitions? Since it includes nitty-gritty political, legal, community and cultural issues many academics may feel it’s beyond their expertise, On the other hand, some stakeholders may be too invested in particular outcomes to have the open exchanges that scholars find so valuable.
With these questions as background we created an “ideal” system as a heuristic and invited people with diverse scholarly and practitioner backgrounds to join the panel. The heuristic system was derived from the responses of eight Mainland and Hawai`i experts who were sent these questions:
“What should be three or more key elements of an ideal high-renewable electricity system of the future?”
“Which of these elements apply to systems in places like Hawai’i that are small, vertically integrated, managed by investor-owned utilities, and lack regional interconnections?”
“What other elements do you think should be part of these systems?”
Merging key points made by each of the respondents yielded a system of eight elements. This was labeled “ideal” to signal that no one, including the panelists, was expected to agree with all its elements, although everyone likely would embrace many of them. The eight elements are:
— A market that dispatches available generation and storage regardless of ownership, whether centralized or distributed, on a least cost basis. Grid flexibility is acquired from using effective sources on either side of meters.
— Interconnection practices that result in low barriers to entry for new renewable resources and storage.
— Rate design and pricing informed by location- and time-specific marginal costs to provide optimal price signals for storage and load-shifting technology investments.
— Smart systems govern commercial, industrial, and perhaps residential users, enabling automated demand response.
— Utility costs not covered by revenues derived from rates based on marginal costs should be recovered via fixed charges.
— Negative impact of charges on low-income customers is reduced through low-income and vulnerable customer protection programs.
— Transparent operation and dispatch of the system with improved customer access to and control over data.
— Customers have choices of different services and different levels of reliability.
That the “ideal” system provoked reactions ahead of the conference is interesting and not at all surprising. A member of GovGreen suggested dropping or modifying several elements that touched on rate design. A panelist proposed an edit of references to fixed charges. I argued it would be better not to send the “ideal” system ahead to participants out of concern it might foster debates about it rather than discussions of transitions.
These prior concerns aside, the panel itself stayed focused on transitions and offered a number of suggestions for smoothing them. Here is a sampling:
— Don’t force dynamic pricing. Instead set it up so that people who stay with a flat rate tariff have an incentive to join later.
— Stakeholders make plans around subsidies and taking one away is very hard. Create subsidies with caution, a clear purpose in mind, and repeated announcements that (in most cases) they will be sun-setted.
— Unquestionably these changes create hardships in communities but it also is true not all “losers” are from disadvantaged groups. The best approach is to maintain focus on the overall policy goal while acknowledging all losers can’t be compensated.
— Every stakeholder should be committed to a 100 percent renewable portfolio and supportive of customer choice.
— Sudden cost shifts should be avoided; subsidies are one means of doing this.
— Essential technologies should be promoted. These include smart hot water heaters for when power is cheap; ice storage air conditioning for times power is expensive; and a program that lets the utility buy access to customer storage to avoid building redundant storage on both sides of the meter.
–Consider allowing utilities to recover 100% of the stranded costs associated with divesting plants.
— Acknowledge that concerns about reliability may not be realistic until system penetration gets very far along.
— Anticipate a point when adding renewables may not be cheaper due to having an excess of electricity. At that point the question may be whether it is better to reach zero carbon emissions by means less expensive than seeking 100% renewables.
–Although the production of electricity has captured much of the attention to date, in the future transmission and delivery are likely to be the issues.
— Customer choice can be used to put external pressure on the utility to manage its non-energy production costs. The consumer will be the utility’s customer, not a public utility commission.
— The complexity of changes must be addressed, but it should be in the simplest possible way so the customer can understand what is going on.
— Acknowledge the inevitability of the utility playing a role that relies on new revenue opportunities, perhaps as an energy services manager in the new system.
— Build a more nimble and responsive regulatory framework through initiatives like PBR, so the utility has incentives to help create markets and build the grid of the future.
— The dialogue process is critical and there must be on-going stakeholder involvement despite these not being easy to sustain.
What lessons can be drawn for future forums that couple a focus on transitions with discussions about outcomes? Here are a few:
1. Incorporate a range of scholarly, practitioner and stakeholder perspectives that reach beyond economics, engineering and the law, including sociological, cultural, political and psychological.
2. Ensure that attention given to transition issues is no less informed, analytic, and open than discussion of other issues.
3. Take steps to create an environment in which all stakeholders can be comfortable sharing their transition hopes, plans and concerns.
4. Ask questions that deepen the conversation about electricity system changes in general as well as specific cases. Invite keynote and other speakers to share the positive or negative lessons of on-going transitions.
5. Examine the “transition character” of specific issues; that is, the particular opportunities and challenges an issue, such as commitments to equity, present for transitions. Develop a “transition index” that scales the ease or difficulty of adopting different elements of a desirable clean energy system.