Advancing Implementation of NY REV and the Role of Utilities: A interview with Frank Peverly
Written By: Stratton Report
August 18, 2017
Interview with Frank Peverly, Vice President, Operations, ORANGE & ROCKLAND UTILITIES
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Stratton Report: What do you see as the biggest business opportunity or challenge regarding the New York REV?
Frank Peverly: I think what we all are grappling with and by we all, I mean that the utilities, the development communities, the public policy advocates, regulators, is how do we properly structure the markets particularly on the distribution level so that these DER providers and ourselves, the local utilities, little serving entities continue to be successful and I think that’s an important piece because we do have this regulatory impact where, it’s incumbent upon us to provide safe and reliable service, and yet, this on a manner that pushes forth the public policy agenda especially around the wind energy renewables and addressing climate change. We know REV itself is consumer oriented, so we were trying to reform the regulatory market to give the consumers an opportunity to be more engaged in the market. I think as utilities we’re coordinating and managing a wide range of distribution or distributed energy resources. And when I say DER, just for clarity, I’m including things such as energy efficiency programs as well. Other minor things are distribution systems, integrating clean power, and really having that sustainable business model for everyone or some of the challenges and opportunities and those are at least in New York, I think what we’re trying to work through.
SR: You recently spoke at Infocast’s New York Energy REVolution Conference. By attending, what new insights or ideas on how to take advantage of opportunities or overcome challenges did you gain?
FP: The takeaway from the conference is whether you’re a utility, a developer, consultant, state senator or other advocate, I do think everyone is pointing to north and by then I really do believe all the stakeholders in this process are on board with the vision of REV and the vision governor had set forth for us in New York. On the panel I was on, I talked about this constructive conflict between all the parties and by that I mean, there’s just really healthy debate that’s driving reforms in whether it’s rate making, rate design, utility planning and transparency and the different approaches of the DER integration and it’s that constructive conflict to a collaborative process doing well with stakeholders which now if you ask anyone on there and not everyone is going to agree, it’s maybe challenging at times but I do think it’s something that is building a new evolutionary platform and we want to make sure it’s done right and I think we’re doing so on a manner that’s going to guarantee consensus and protections for the consumers and opportunities and business growth for the DER providers.
SR: Right. So being sure that everybody has a platform where they can come together and build that constructive conflict to move forward with it, right?
FP: Right. And it’s like any healthy debate, you want opposing viewpoints. You know, we’ve often see those exercises, right? Where you come up with idea, and I come up with an idea and then the facilitator makes us get together and our individual ideas combined become a better idea. And now that’s what we’re working through in New York. It’s challenging in maybe at times, but I do think we’re developing the better process for it. And the other side, the other thing I assume gets lost in all this, it’s really an opportunity for both parties and all stakeholders really to educate each other on the nuances of their issues and concerns, from our perspective the new nuances and complexities of planning for the distribution system and the need for safety and reliability from the DER providers, educating utilities on the new technologies and a way to overcome some of the concerns and obstacles perceived by the utilities under this model.
SR: How is the VDER approved by the NY PSC working to further the goals of the NY-REV?” and what might the most useful next steps be in making the VDER more impactful?
FP: The VDER is really a multi-step process that will ultimately lay the groundwork for us to transition away from traditional net energy metering, net metering, you know, the way we have structured it both with the staff and the contributions in the solar progress partnership which were other stakeholders and utilities is really to establish this new compensation mechanism to compensate those in the net retail or in the retail net energy markets introduces concept of a value stock which really determines the value both locational and distribution deferrals, or the sliding BG and then establish market transition credits which helps the mass market customers really make the transition from net metering over to VDER. The thing with VDER is the traditional rooftop retail net market customers, they will continue to be eligible for net metering as everyone traditionally knows it to at least 2020. It really they’ll send the appropriate signals today to what I’d say community DG, remote net metering, the larger offsite solar and DG projects to really place their projects and generation where it adds the most value to the utility system, in particular the distribution system. Now while we’re working through all that and utilities are now aware is the best value to begin and therefore the higher price to be paid for the developers. We have also begun phase 2 back in May and VDER and what phase 2 is all about is really to develop a more granular message to capture all of the value of distributed energy resources distribution systems and then how to give that benefit to low moderate income customers, how to provide the rate design that creates more and clear pricing notes to the dominant community so we go with the greatest value for the utility system. What other technologies, DG technology are out there that perhaps should be eligible for this new value stock. And then, you know, how do we improve the value stock? Are we comfortable that we have all the right element whether that’s the price of carbon, the price of deferred distribution, locational base pricing based on a data grid. So, there’s a lot more work to be done but I do think it’s an innovative approach that moved us away from traditional net metering. I think that’s good for the utilities and that creates a sustainable business model and I think it’s good for development community as they will focus their investment in areas that have the best opportunities not only for financial reward but for production opportunity and the distribution grid.
SR: What are the greatest areas of uncertainty that remain in your perspective?
Frank: Efficient markets need really two things. They need clear public policy and they need regulatory certainty. And I think the challenge we have right now is there’s a lot of activity, a lot of the ground breaking activity represented by the REV. As we are and all the parties are, I think we’re all continuing to work to really a large magnitude of proceedings and really trying to make sure that we develop a value proposition that clearly animates markets, creates the value for the development community, puts the DG where it offers the greatest value to the distribution grid and ensure that utilities have the proper levels of control for not only the DG but for the planning and operation system. So, simply put, we need to continue to work for clear public policy and regulatory certainty. I think we’ll get there on due course but that right now I think is the greatest challenge both us and the development community are probably working through.
SR: How do you think the retail market is going to be affected in New York?
FP: I want to believe when we’re all done with this that the net result is going to be lower cost for the consumers, more engagement by the consumers in managing their energy usage and a cleaner distribution system and by that I mean more renewables, intermittent power sources and cleaner generation on the grid. I think customers are going to be able to choose from a variety of distribution resources to manage their consumption whether that’s production, whether it’s storage, whether it’s energy efficiency and that clearly is going to have tremendous value for the customers we serve and then I think what New York has done and I agree with this, that distribution companies will be the DSP, distribution system platform provider. We’re going to have to be able to transform our green management and operations. I think to be less dependent on kilowatt hours and more focused on value added services associated with grid management and DER integration and I think that will bring about greater resilience to the system and that in turn will also manually help keep the lights on especially during adverse weather but I think also help control cost in a sense that we’ll be able to minimize capital investment and utilize third party investment into the system to grow where we need to grow and to continue to run safe, reliable service where we’re obligated to do so by statute.
SR: How do you see the utilities grow in integrating VDER into the planning operations and administration?
FP: Well, that’s sort of where the Public Service Commission and us are in clear agreement. As a distribution system platform provider, it will be our role to manage the input and output of the electrons coming through the system whether it comes through traditional generation both power entering the system where the integration is DG. It’s going to be incumbent upon us to do our distribution system implementation plans or the DSIPs to provide the transparency in our planning process so that we can make sure that the development community is aware of our plans and our objectives for developing the grid so they can offer some input and they can offer insight and they can perhaps get their products into our integrated grid platform. We’re working through the DSIPs, it’s a work in progress. We want to stimulate I think further involvement by the market. And I think the market would like that to happen much quicker than perhaps providing information but that all said there’s been, you know, where we’ve gone from basically zero to 60 in a very short period of time. I do believe we’ve made a lot of progress. We developed a lot of background processes. We developed how to integrate DER into normal operations, making modifications or planning and billing and interconnection process. And I reminded folks at the conference that in our own system we have over 6,000 distributed generation devices, generation sources, representing about 70 megawatts in our system. So we have been integrating DG on a system for a number of years and we have a system of we’ll pack a little over 1400 megawatts this summer. So 70 megawatts on a system is a pretty good percentage and, we’ve been able to do that and manage to keep the lights on as they say, and keep voltage levels stable and to work to the few when the interconnection process with what I think has been minimal issues and concerns by the development community and we’ll continue to do so.
SR: What kind of control and access to customer VDERs you think utility are there any to further optimize the operations and the distribution system?
Frank: Well, I think there’s a number of things about technology and empowering customers and all that stuff. There’s really three things that’s going to make this work I think across the board for everyone in the REV. Energy storage is going to be key. AMI, you know, Automated Major infrastructure, NADMS and advance distribution management system, I think all three of them by themselves begin changes in how we manage grid but when you bring them altogether, you know, NADMS with AMI and energy storage, you’re really creating a command and control of the grid that’s going to be necessary to implement especially in the transformative energy markets that REV is looking to introduce. You know, when energy storage that’s going to allow us to command and control more distribution energy resources, make those resources dispatchable so we can meet, system meets, you know, real time. AMI is going to give us this unprecedented visibility into our system, not only the system at the distribution level but right down to customer utilization and then clearly an advance distribution management system or ADMS gives us the ability to manage the grid in a much more flexible and responsible way. And I think as we put more DG in the system, we are going to have to have that visibility to all corners of the grid to be able to dispatch, romp up, romp down these intermittent resources including battery storage to maximize the value the DER is providing for us. And meaning take that right down to, you know, NADMS managing net thermostats or other intelligent thermostats in control of hot water heaters or air conditioners, refrigerators and, you know, go on and yeah, I think those three technologies really are going to be the key ones that we need to have in place to really allow us to have that control of the DER resources.
SR: Do you see the utilities taking the same type of role on the distribution level as MISO does on the wholesale level and if not, how may the distribution system be best managed?
FP: I’m not sure I would say it’s the same as say the California New York ISO, the wholesale level, you know, in New York, ISO is created DER roadmap. We’re participating the comment to see how that is further deployed. I think what’s clear is the aggregation of DER to be entered into the wholesale market will generally, will have to go through for most of it through the distribution system and so I see the utility systems as being more integrator of this aggregated resource or employed into the wholesale markets. The challenge is going to be what is going to be the best economic value. So as an example we’re looking to put out a demonstration project shortly that will look at the value of battery storage in terms of its economic value to the wholesale market versus its economic value to the distribution company to offset pricing or peak demand utilization versus the economic value to the customer should be located behind the meter to reduce demand charges and being able to in real time determine what’s the best economic output for DG resource. It’s going to be challenging and I think that’s going to be where some of the role of the distribution system is going to play more than perhaps being the power transfer cop that might see with the ISO.
SR: We spoke a little bit earlier about building constructive conflict and having kind of a platform for stakeholders to be involved. How do you think communication between the utilities, the DER providers and use customers and other stakeholders be further enhanced?
FP: Well, I’ll just start and say that I think the stakeholder process at least in New York has been very active in terms of the REV proceedings. Not only are the stakeholders engaged in filing comments or responding to the filings but they’re extremely active in the REV working groups. They’re active at the technical work session and they’re active talking to the key utility stakeholders to clarify positions, to educate and to educate for policy that they believe is in the best interest of integrating resource into the grid. We have stakeholders playing significant leadership roles with the working groups. Working groups are comprised of not only the DER resource providers but consultants, the joint utility themselves, the public service commission staff and I would say that that process, that collaboration between all the parties has been a healthy one and a good one and is probably advancing the ideas of REV a bit quicker than if we’re to try to do this individually or, you know, without the input of the folks that want to play a key role in animating the markets.
SR: The NY REV seeks to empower customers: to make good choices they must receive price signals to inform investments in DERs and adjust their behaviors to benefit not only themselves but the entire system. How can customers be best engaged by utilities and ESCOs?
FP: Well, as I say, there’s really three technology platforms that I think are critical to really make this happen battery storage, ADMS and AMI and I think AMI is the gateway of entry for the customers to really engage in the marketplace. You know, the ability to send real time pricing, those customers to see their actual energy usage and to make conscious decision to curtail loads, ship load, and to modify load. Well, in my mind, if I say would be the game changer for not only how we manage grid but how people perceive and energy utilization and the power they have to control their own energy consumption. I do think that, you know, the role we are going to–so just to step up a bit, we are beginning at ONR the deployment of AMI began that in July and so, you know, we’re in the midst of beginning that process and I think part of that process is educating consumers, letting them know the potential for them to really manage their consumption in a way they’ve never probably thought about before and then it’s going to be incumbent upon us to take the information that comes off the AMI meters and design I think intelligent rate packages whether there’s smart home rates or something along similar vein that allows the consumers to really take advantage of, you know, the different designs of rates and rates and reforms we may put in place that will allow them to better utilize energy in the most efficient and cost effective manner.
SR: Are there any critical challenges you see moving forward with New York REV that need to be addressed critically or in the short term?
FP: I think, you know, technology is changing very rapidly around DG DER integration. There’s a lot of lessons to be learned from Hawaii, from California, from Nevada, Illinois, other state and there’s lessons to be learned from Europe. We have to kind of incorporate those lessons and bring them and their values down to the local level as I say distribution is always local. So we have, you know, those lessons learned aren’t necessarily easily transferred but they are lessons learned and they have the potential to help us accelerate to face the change, positive change. At the same time, I think the real big challenge, utilities are trying to work through as they move forward is this regulatory compact which keeps us responsible for the reliability and safety of the energy delivery system. I mean, the communities we serve and the services we provide are extremely vital to a fully functioning community and whether that’s as simple as the traffic lights in the ATM or just serious as the emergency room at the local hospital, we need to be able to provide that reliable good quality power at the most critical times. And I think there’s lots of opportunities for energy efficiency, DER, DEG to help build a more resilient system but I think all the parties have to remember there’s still the customer at the end of the line and it’s not just comfort and convenience that’s important to them. In some cases, it’s really the necessity for the operation of the community that we’re providing a vital service for.