Getting it Right: Policy Recommendations on Distributed Energy Resources for the Evolving Electric Power Sector (2014)
- Chad Dibble, MBA/MS Sustainable Systems
- Braeden Gilchrist, MS Sustainable Systems
- Ryan Moody, MS Sustainable Systems
- Will Morrison, MBA/MS Sustainable Systems
- Markus Walther, MBA/MS Sustainable Systems
- David Wang, MBA/MS Sustainable Systems
- Hui Zhou, MA Economics/MS Environmental Policy and Planning and Sustainable Systems
Summary: This is a project for students interested in renewable energy and the issues of public policy and economics that surround the transition to a low-carbon electric infrastructure. The generation of electricity is becoming increasingly decentralized, as residential solar panel systems and other sources feed electricity into a grid originally designed for centralized power generation. This project offers students a chance to contribute to research and recommend new public policies that address issues of grid reliability and the distribution of costs and benefits.
Background: Today's high-technology society demands electricity to be available at the flip of a switch. To meet the challenge of developing reliable and secure electricity capable of supporting economic prosperity, the nation's shareholder-owned electric utilities are projected to spend more than $94 billion in 2012 on capital expenditures such as major transmission, distribution, and smart grid systems upgrades; new, cleaner generation capacity; and environmental and energy-efficiency improvements.
As part of that investment, the industry is modernizing local distribution systems to enhance grid resiliency, improve power quality, satisfy growing customer demands, and accommodate the vast array of new technologies coming to market, including alternative power supply options such as distributed energy resources (DER).
DER are non-centralized sources of electricity located at or near customers' homes or businesses. Examples of DER include solar panels, energy storage devices, wind turbines, and fuel cells. The growth of DER is increasingly decentralizing power supply and redefining the role of the electric distribution system, which was originally designed to deliver power in one direction - from bulk transmission system to end-user. Largely because of DER, distribution systems are now moving toward a grid that needs to absorb power generated at various customer locations and handle bi-directional and variable power flows.
DER presents a set of challenges and benefits to utilities and customers. Given the legacy design of one-way power flows, the integration of increasing amounts of DER needs to be done in a way that ensures that system reliability is maintained. Fairness in rates is a growing concern. Today's policies that support the development of DER through incentives and subsidies are criticized as introducing price distortions that lead to equity issues across income segments, potentially favoring affluent environmentally minded households while putting non-participating households at a disadvantage. This assertion needs to be examined and resolved. The benefits of increased DER penetration also need to be explored to allow for balanced analysis and informed decision making by utilities and their regulators.
This project provides SNRE students an opportunity to make their imprint on how best to structure electric power sector regulatory policies to provide for the sustainable development of DER.
This project seeks policy analysis and recommendations in the following areas:
- Reliability: How can utilities participate in DER markets through partnerships with customers and third-party developers, and/or utility ownership of DER assets to ensure the reliability of the electric power system?
- Integration Costs: What are the short-term and long-term costs of integrating DER into both the local distribution grid and the larger electric power system which often is managed by regional transmission organizations? Identifying a range of costs given different penetration levels of DER is important for regulators and policymakers to know given potential impacts on customer rates.
- Cost Shifting: Can DER be developed in a manner that does not introduce cost shifts from self-generating customers to non-self-generating customers? A careful evaluation of net metering policies will be the start of this recommendation effort.
- Cost Recovery and Rate Reform: What new rate structures and cost recovery methods are needed to ensure that utilities can support the growth of DER?
- Value of DER: What are the benefits of DER to participating customers, the utility sector, and society?
IEE and DTE Energy request completion of the project in 2013.
- Basic knowledge of the electric power sector, including how it operates and is regulated.
- Intermediate knowledge of benefit-cost analysis methods.
- Professional level writing skills
- MS Excel, PowerPoint, Word
- Adobe InDesign (optional)
IEE and DTE Energy are committed to providing a professional level experience to students interested in a career in energy and environmental fields. Career development benefits include:
- Arrange presentation and networking opportunities at professional conferences.
- Connect project team with representatives from the electric utilities and stakeholder bodies that form IEE's Strategy and Advisory Committees.
- Distribute project findings to key media contacts.
- Brief the 22 electric industry Chief Executive Officers that comprise IEE's Management Committee on the key project findings.
Key skills and experiences to be gained include:
- Learn how utilities develop and administer residential customer renewable energy policies and programs.
- Understand how electricity rates are determined.
- Explore how information technologies are being used to support the development of distributed energy sources.
Visit the following link to learn about IEE's Mission, Governance, and Committees: http://www.edisonfoundation.net/iee/about/Pages/Index.aspx.
IEE will supplement the University of Michigan funding available to the student team after such funding is exhausted.
IEE and DTE Energy will work with the eventual project team to develop a detailed scope. At a high level, IEE and DTE Energy expect the following deliverables:
- A final report that provides analysis and recommendations on DER policies for consideration by electric utilities and other stakeholders.
- A presentation slide deck.
- A copy of collateral material such as MS Excel workbooks used to develop exhibits featured in the report and presentation.