Opinion Here from DNV...

Opinion Here from DNV Kema
http://www.dnvkemautilityfuture.com/who-is-at-risk-with-the-fast-expansion-of-distributed-resources

"10/31/2013 by Ali Nourai

Who is at risk with the fast expansion of distributed resources?

A vision of the Future Energy System
I am sure you have all heard about the widespread adoption of renewables and all the adverse impact they may have on the grid and utility business if not controlled. Let me share some data with you to first set the stage on the extent of the issue and then figure out what or who is being hurt and what we can do to help out the situation. We are going to exclude wind as, due to its nature, it would be mostly deployed in large scale. Its intermittency and curtailment issues can be easily mitigated with proper deployment of energy storage. For the same reason, large solar installations are also excluded. Also, regardless of who owns them, they would not pose a threat to the current utility business model.

The real concern discussed here is the small solar energy (PV) that is being deployed in large scales at the edge of the grid, mostly on the customer side. The alarming issue is the rate of growth that is about “doubling each year” in certain residential areas. The 2012 annual report of Interstate Renewable Energy Council shows that while the MW size of solar energy installed by utilities is higher than those installed by customers, the activity or number of PV installations on the customer side of the meter is significantly more than the ones installed by the utility (see Figure 1).

This exponential growth of PV at the grid edge was also observed by the chairman of the Federal Energy Regulatory Commission (FERC), Jon Wellinghoff, stating that the total PV installation in the US is doubling every two years but the growth rate is much higher for the residential PV. He is forecasting that solar installations may overtake wind energy installation in 10 years (see Figure 2)

In its “Renewable Energy Future” study in 2010, National Renewable Energy Laboratory (NREL) forecast the decline in thePV system’s required capital (see figure 3). This cost reduction is expected to accelerate the rate of PV installations to the point of utilities running into a downward spiraling economic cycle (loss of electricity sales, leading to higher prices for other customers, leading to more customers using their own renewable generation, leading to further loss of electricity sales).

The combination of three factors can be very disruptive to the electric grid and its current business model; distributed PV system, distributed energy storage and demand reduction programs. All three elements are in the marketplace except that cost has historically inhibited their “combination.” With the sharp drop in PV system combined with the commercialization of energy storage, it is a matter of only a few years before we see more net zero neighborhoods and towns that would only use power lines for backup or a pathway to the open market place. Figure 4 shows one vision of how future energy systems or networks would look like with PV and other forms of distributed generation closer to the load centers. In this vision of the future energy systems, the role of large central fossil burning power plants will be reduced.

The coming Challenges and Risks A recent survey of electric utilities, shows that 82% of the US utilities believe their generation becomes a mix of central and distributed generation and 40% believe the current utility business model will be completely transformed by 2030 (see Figure 5).

A sign of the future that we will see more is Ergon Energy whose chairman, Malcolm Hall-Brown, suggests that renewables and storage will be cheaper than grid power in Australia within a decade and, thus, the company is moving away from investing in the traditional “poles and wires.”

While the rapid expansion of distributed resources at the grid edge is welcome for higher flexibility and many other benefits, it comes with some inherent risks for both the system operation and the business integrity of the operating utilities. Not long ago, the main form of transportation was passenger trains (like transmission lines) that were convenient as long as people were living near terminals. This lack of flexibility was tolerated until technology offered personal cars (distributed transportation). This higher flexibility, despite its much higher cost, was widely accepted and finally brought the demise of the railroad utility industry in the US and many parts of the world. Today’s passenger transportation map looks mainly like a bundle of self-sufficient cities (microgrids) connected together with air lines (transmission lines); not very different from the vision of future energy systems shown in Figure 4.

Figure 6 – Failure of Distributed Transportation

It is notable that people seem to prefer much more expensive personal transportation to public transportation due to their flexibility and other values but, are they happy when stuck in traffic jams? Inadequate preparation of the transportation infrastructure to handle the distributed transportation (cars) and the resulting traffic jams eroded the promised flexibility and freedom offered and defeated the main purpose of distributed resources (figure 6). This failure of distributed resources is also possible on electric grids especially if the responsible grid operators are reluctant to see and appreciate the rapid growth of distributed generation or adequately respond to the need.

Poor and unmanageable power flow is not the only risk of uncontrolled deployment of distributed resources. Like railroad utilities that gradually lost their business and profitability, electric utilities are at a high risk to lose control of their cash flow in addition to loss of their power flow. Earlier this month, the World Energy Council (WEC) stated that “current market designs and business models are unable to cope with the increasing renewable shares, decentralized systems.”

Like the airline and private cars/trucks that cut deeply into the market of railroad utilities, net zero communities and independent power producers are posed to push the traditional electric utilities out of business. If electric utilities do not road map their future today and conduct advanced planning around strategic steps, they will be replaced with new businesses offering services of much higher value as planes did to trains, digital photography did to film business and wireless smartphones did to wired phones.

Let me end my discussion with a famous quotation from Victor Hugo, “You can resist an invading army, but you cannot resist an idea whose time has come.” It is up to us to either deny or prepare for distributed resources. I think it is time to have an unbiased and thorough risk assessment for the impact of the coming changes on our businesses and have a good strategic road map for the needed transitions.

Dr. Ali Nouari joined DNV KEMA as an Executive Consultant in 2010 after a 30-year utility career with American Electric Power (AEP) where he launched AEP’s successful sodium sulfur (NaS) battery program and introduced the concept of the Community Energy Storage (CES). Dr. Nourai is an IEEE Fellow, a board member and former chairman of the Electricity Storage Association (ESA) dedicated to promoting development and commercial application of energy storage technologies as solutions to power and energy problems. For his full bio please visit our contributors page.



Locally though we see a I suppose predictable response in SA Power Networks we will need to see if it gets wound back or modified

http://reneweconomy.com.au/2013/sa-network-operator-puts-its-head-in-the-sand-on-solar-storage-42202

"SA network operator puts its head in the sand on solar storage

By Nigel Morris on 31 October 2013


Print Friendly

SA Power Networks is the monopoly distribution network operator in South Australia. In a subtle, surprise move, they very quietly recently announced that “If a customer currently receives feed-in credits under the Solar Feed-in Scheme, they will no longer be eligible for receipt of credits once they install a battery storage system or a Fuel Cell system”.

Given that the vast majority of South Australian solar households are currently on some type of FIT, this policy effectively wipes out the cost effectiveness of using storage in South Australia for the time being. Intriguingly, only a few weeks ago some Californian distributors used the same blocking tactics and refused to connect some customers who had purchased solar with storage systems although fortunately, only a week later new regulations were introduced that mandated the introduction of storage.

It is somewhat telling that in their own industry briefing SA Power Networks acknowledge that “..as customers and the Industry seek the next technological innovation to reduce electricity demand and reliance on conventional electricity distribution networks, the emergence of fuel cells and battery storage systems is starting to gain momentum”.

Innovation. Reduced demand. No thought given to embracing the advantages or optimizing the network benefits which could reduce all consumers costs; just an immediate reaction to stop any threat to conventional business models.

And they are monopoly so guess what; you have absolutely no choice and absolutely zero consumer power to challenge their decision. This lack of market power was eloquently and acutely described in the report “Going Solar: Renewing Australia’s electricity options” which was recently released by the Centre for Policy Development.

The report noted that:

“Solar consumers have the right to a fair contract with electricity retailers, and one that is not to their financial disadvantage, under the Australian Consumer Law.177 However, the structure of the electricity industry, and relationship between retailers and customers, means that solar consumers have limited market power. Where this constrains consumer choice or creates an uneven playing field for solar compared to other sources of electricity, governments may need to intervene to protect consumer rights” .

Although we are talking about a distributor in this case, I would think that equally, consumers have virtually no power here and are potentially being financially disadvantaged by this ruling. Ironically, stopping consumers from (potentially) making investments in storage has the bizarre consequence of allowing networks costs to potentially rise, or at least preventing the potential of helping to alleviate them, which would seem to be against the broader community’s interest.

Further, it is also plainly apparent that this ruling is a retrospective condition, added subsequently to householders signing up for the FIT, which would hardly seem in the spirit of consumer law.

The report goes on to say that:

“..the threat posed to ‘gentailer’ profits by rooftop solar is significant and the level of market power and access to information is so heavily weighted in the utilities’ favour that it would be challenging for any consumer advocacy body to get traction. If this proves to be the case, a stronger regulatory approach may be required – particularly if around a million new solar households become disenchanted with the status quo. A recent poll by Essential Media suggests this is more likely than not – power companies are considered the least likely industry to act in the public interest..”

The excuse that SA Power networks uses to enact this ruling is that “…this equipment can cause interference on our network and can impact the quality of supply for other users connected to the local network” obviously implying that they see a (perceived) technical risk.

Really?Really?

Can someone explain how storing energy from a solar system in a battery and using it in the home to peak times to avoid peak charges (effectively avoiding the purchase of energy) creates a power quality risk? The solar industry is one of the most regulated in the country and I am all for standards and accreditation, don’t get me wrong. Anything we sell or install should be the epitome of quality and safety lest we do ourselves a disservice, but lets not confuse a device that alleviates network load and consumer costs with something that simply threatens the status quo.

Now to be fair, SA Power Networks do talk about an interim process and pending modification of the Small Embedded Generator request process to take into account storage. So the ruling doesn’t say you cant do it, but by default it certainly discourage’s it for pretty much every single South Australian.

We urgently need standards and regulations developed which allow storage on networks and encourage innovation and reduced demand, not policies that block them and dis-empower consumer choice. Let’s hope the modifications to their rules take a much more adaptive and progressive approach.

You can read the relevant SA Power Networks Industry News here.http://www.sapowernetworks.com.au/public/download.jsp?id=27824

Nigel Morris is director of Solar Business Services. This article was reproduced with permission.
"