Emerging Utility Models The role of the Distribution Platform Optimizer. Nov 2015

Transcription

1 Emerging Utility Models The role of the Distribution Platform Optimizer Nov 2015

2 Introduction Alex Lago Global Lead, Intelligent Grid Operations Accenture Copyright 2015 Accenture All rights reserved. Confidential For Internal Use Only Do Not Forward 2

3 Agenda Challenges to the Current Distribution Model Shaping the Future Distribution Business Model Conclusions

4 Utility business model will change dramatically over next 10 years Current distribution model is under pressure from five forces in the market A proactive shaping of a new model is required: Disruption in consumption from new energy technologies Competition from new players in the value chain Change in customer behaviors and expectations Motivation and goals of regulators and policy makers Distribution role will migrate to optimizing and enabling competitive products and services The business will move to a performance-based model, where returns and earnings are tied to operating performance Utilities have the opportunity now to proactively shape, influence, and refine the new model Rising costs from increased complexity and obligations

5 Energy technologies are rapidly evolving and could disrupt consumption by more than 15% by 2025 Energy conservation and demand response Energy efficiency (Buildings, efficient appliances, lighting, controls) Honeywell Lyric for demand response Google Nest now has over 1 million customers Energy substitution (Electrification of transport and heating) Energy efficiency is the biggest emission reduction contributor in the EU energy roadmap to 2050 Smart home Distributed generation (Photovoltaics, storage, micro CHP, fuel cells) Nissan Leaf UK Government commits 500 million to electric vehicles German output from solar PV reached 25 GW on 9 Jun., 2014 PV provided 10% of demand in Italy from Jan. to Aug Sources: The soaring cost of tech s next big thing; Window on Wall Street, International New York Times, January 23, 2014; Energy efficiency is the biggest emission reduction contributor in the EU energy roadmap to 2050, Energy Roadmap 2050, European Commission, December 2011; UK Government commits 500 million to electric vehicles - Nick Clegg launches 500m scheme to boost electric cars in Britain, Independent Online, April 29, 2014; German output from solar PV reached 23C.1oGpWyriognh9t ,5GeArmcacnensotluarrePV. Agellnreirgahtiotnspreaskes ravteovde.r Ahaclfcoef ndetumraendcoonnjfuindee9nthti,a2l0i1n4f,oernmeragtyiomno.nitor Worldwide, June 19, 2014; PV provided 10% of demand in Italy from Jan to Aug Italy Faces Legal Backlash Over Renewables Subsidy Cuts, World Gas Intelligence, September 24, 2014.

6 In the US, compared to Status quo revenue reduction could range between $18 and $48bn annually US Residential and Commercial Demand (excluding prosumer generation) TWh PERFECT STORM STATUS QUO DEMAND DISRUPTION $18bn Source: Accenture analysis. $48bn 2 ² At current retail prices. Reduction in load of between 160 TWh to 460 TWh compared to Status quo scenario by 2025 for US utilities STATUS QUO ASSUMPTIONS Household numbers increase by average of 0.75% per year Electricity demand growth from EIA Energy Outlook Current trends for energy efficiency deployment maintained Federal subsidies for PV phased out by 2020 PV costs based on average of historic trends

7 Over 90% of executives expect greater competition for beyond meter and distributed energy services Retailers Digital Energy BOUNCE ENERGY POWERSHOP Energy Providers BEST BUY IKEA LOWE S MARKS & SPENCER THE HOME DEPOT Manufacturers BMW BYD CISCO FORD HONEYWELL NISSAN PHILIPS TESLA SAMSUNG Innovative Digital Players KICKSTARTER PROJECTS WINK APPLE Home Service Providers ADT AT&T COMCAST DODO DEUTSCHE TELEKOM GOOGLE ROGERS VERIZON

8 Customer sentiments regarding energy have made dramatic shift How interested are you in signing up for the following products and services if they were offered by your energy provider? Home energy generation products 62% Care for home energy devices 60% 52% 46% Back-up energy storage 57% 48% Connected home products 58% 51% 2015 New Energy Consumer survey results 2014 New Energy Consumer survey results 7

9 Digitally engaged consumers have higher potential value to utilities Globally, 44% of utility customers have engaged in digital interactions. They are: more satisfied with their energy provider 69% 55% 42% 13% more likely to recommend their current energy provider more trust in their energy provider 31% 41% 73% 51% more likely to share their personal information and energy usage information more likely to sign up for home energy generation products 53% 73% Digital Customers 80% 59% more likely to participate in an energy management program Digital channel users Non-digital channel users 48% 70% more likely to sign up for automated home energy management devices or services

10 Changing regulatory environments will influence if, how and which services utilities can provide to customers New York, Germany, Australia, UK, and CA are all changing the regulatory environment, impacting the business model for distribution service companies. Copyright 2015 Accenture All rights reserved.

11 Continued growth of capital investments in the current business model presents four major challenges Regulated rates of return are generallydeclining O&M is increasingwith rising capital investment 240 Regulators are ratcheting down utilities allowed rates of return Total Distribution O&M ($M) Y 2010Y 2013Y 2009Y 2008Y 2007Y 2012Y 120 Total Net Distribution Plant ($M) O&M costs rising at greater rate per unit of capital Credit ratings are trending downward Regulators and consumers will push back 100% 80% 60% 40% 20% 0% Regulated Utility Credit Rating History Below BBB- BBB- BBB BBB+ A- A or higher Spend levels having negative impact on credit rating Pushback from consumers and regulators on expanding rate base, customer rate impacts

12 Agenda Challenges to the Current Distribution Model Shaping the Future Distribution Business Model Conclusions

13 Three growth platforms are emerging that have significant potential for growth Residential and SMB GeMnaerrkaettion Operations / trading Transmission Distribution Smart meters Commercial and industrial Low Carbon Energy Producers Growth in low-carbon energy assets, focusing on performance of the right assets in the right geographies Distribution Platform Optimizers (DPO) Growing returns through system optimization, efficiency, and utilization while integrating new assets, technology, and market frameworks Energy Solution Integrators Emerging landscape of providers of innovative customer solutions and lifestyle services and new/evolving customer segments DPO Business Model Features From To Key Principle Obligation to serve (i.e. meet peak) Commitment to optimize Role Transportation company Network optimizer and enabler Market Mechanism Capacity model Demand and supply clearinghouse Regulatory Model Allowed return on assets Outcome-based incentives Tariff Structure Cost to serve Dynamic price signals and interconnections System Model Proprietary, closed Industry standards, interconnections Customer Interactions Traditional (calls, faxes, letters) Pervasively digital

14 The Traditional Distribution Business Model for a Distribution System Operator Plan Transmission Operator Long Term Planning to meet Demand Reliable Energy Transport Develop Intercon nect Operate Maintain

15 The DPO will optimize outcomes for distribution and enable a competitive market for energy services Governments Wealth Funds Private Equity Capital Project Consortia Distribution Cos Security HVAC Retailers Tech / Startups Wireless / Telco / Cable Device OEMs M A N U F A C T U R E R S Central Low Carbon Energy Producers New Energy Mix Distributed DG HVAC / Appliances / Energy Solution Integrators CHP Energy use, convenience & control Storage Energy Mgmnt e-vehicles Connected Home DR Residents Small Business Transmission System Operators Distribution Platform Optimizers S U P L I E R S Transmission Grid Clearinghouse for energy demand & supply Multi-way energy flows Efficiency, optimization, & utilization Integration of Prosumer Sources Dynamic pricing & Demand Response Smoothing of peaks and valleys, load shifting Enterprise Industrial Virtual Power Plants Microgrids

16 The new distribution business model will serve two market roles ISO / RTO Markets DPO Serves Two Market Roles Constraints Gen Trans Load Distribution System Operator Retail Price Bulk Metering & verification Optimization Dispatch Wholesale Prices For all Markets Customer Direct Load Control Supply Transmission Operator 2 Way Comms Aggregators 1. Integrate with ISO RTO markets Better communications on not just market but load Give more visibility to RTO 2. Serve as market operator for distribution level Optimize demand and supply Integrate market, network constraints, and demand, and DER circumstances Establish framework for price and interconnections Two-way communications unifies operation across market

17 And will perform a broader range of functions in the market Facilitate Coordinate Integrate Grid Operations Real time load & network monitoring Adaptive protection & Enhanced Fault Detection Automated outage detection and restoration Automated feeders & Line Switching Real Time Load Transfer Automated islanding & reconnecting Dynamic capability rating and derating Customer DER / Microgrid Direct two-way (near real time) communications Economic choice to either consume or curtail Direct load control Direct power control Automated islanding and reconnecting Supply and load optimization Analytics & probabilistic analysis Market (Supply & ISO) Price responsive demand Dynamic event and pricing notifications Dynamic model management Dynamic short interval dispatch Bid to bill systems Standardized measurement & verifications Standardized communication protocols

18 The DPO will perform market operations based on integrated view of demand and network economics DPO manages demand through a clearinghouse mechanism to optimize the grid and smooth demand through transactions with customers and 3 rd parties Supply / Market DPO Market Operations Revenues & Tariffs Energy Solution Integrators Wholesale Market Contract or realtime agreement Clearing of Debits and Credits Dynamic Pricing and Rules Engine Capacity from network (Debit) Feed-in excess energy (Credit) Prosumers ISOs Optimise grid and smooth local load Integrated Planning DR Planning / Targeting Scenario Planning Optimization Capital Investments Supply Optimization Dispatch Engine Grid and Load Optimisation Grid Optimization Demand Response Targeted and location based DR incentives Interconnection Agreements Price Signals / Rules DG Storage Consumers HVAC eveh Microgrids DR DR EMS IOT Virtual Power Plants Municipalities

19 In addition, power flow and costs to integrate and manage DG will be significant issues for Utilities Operational Issues and Implications Peak DG production occurs at lower points of demand even at low overall penetration (~5%) localized effects can be dramatic PV and other DG penetration will require management of bidirectional energy flows and regulation of voltage Over 60% of surveyed utility executives expect grid faults to increase by 2020 as a result of distributed renewable generation 1 DG and storage will require more sensing, automation, and grid control as well as improved DMS, MDM, and OMS capabilities GW Example: Powerflows Germany residential customers, July 1st, 2030 Prosumer PV exports Non prosumer demand Hour 1: Source: Accenture s Digitally Enabled Grid program, 2014 executive surveys. Source: Accenture analysis.

20 DPO will facilitate interconnection standards and practices for optimal integration of DR DPO will manage interconnection policies, standards and operating practices to integrate customers & facilitate growth of 3 rd party services Provide clearer rule governing regulated and deregulated activities to drive practices, protect customer information, and stimulate innovation Establish standard for integration and grid connected equipment Enable third parties on the network A successful platform model in the Utilities industry will require clarification of rules on: Interconnection agreements Tariff frameworks Property / connection agreements Market clearing / settling function Payment processing Technical standards and practices Example: Distribution Platform Provider Technical standards for Operating / Interconnection / Interoperability Smart Inverter Solar Array Smart Inverter Battery Storage

21 Likewise, the DPO will play a key role in enabling emerging Energy Solution Integrators Utilities in DPO role should be allowed to act as Energy Solution Integrators, subject to rules of engagement Service PV / DER Integration Storage Services Energy Efficiency Demand Response Home Automation & Control EV Integration Role of the Distribution Platform Optimizer Enabling customers to buy/sell back into grid Developing connection and integration standards Providing clearinghouse for transactions Encourage integration of economic DER for greatest value Manage two-way power flows resulting from DER proliferation Providing storage services (DG integration, peak power support,power quality) Ensuring reliability and resiliency using grid storage Integrating emerging technologies to improve system efficiency Providing recommendations and referrals on energy programs and services Attracting and retaining platform participants Enabling aggregation of controllable load through partnerships Establishingprice framework for management of DR programs Supporting technical and interconnection standards to support portfolio of products and services. Management of communication channels Providing platformfor integration of connecteddevices and services Deploying EV charging infrastructure Creating partnerships for charging infrastructure and services to promote adoption

22 A mature regulatory framework exists for wholesale markets, but largely undefined for the DPO Current Frameworks At FERC & State level, regulators have initiated regulatory actions to encourage DR and renewables participation at wholesale and state levels: Orders 745 DR compensation Oder 1000 Coordinated planning across State Lines Oder 792 Energy Storage and Small Generators Interconnections. Several States are also The use of existing infrastructure already funded by current exploring a number of policy ratepayers. actions to encourage integration Reliable switching, islanding and reconnecting protocols. and rate decoupling (Texas, Minnesota, NY etc. Needed Regulatory Framework A clearer definition of what the Distribution Platform Optimizer role and jurisdictions are. A lower threshold for market entry in the forms of lower regulatory, capital and interconnection requirements. A stronger link between a dynamic and liquid ISO/RTO markets to retail price (Wholesale to Retail energy price Integration. A national standard for the exchange of schedules, bids and offers, dispatch, price and events communications. Open and transparent energy price and reward structure in both returns to utilities and energy savings to consumers. Governance structure and the interplay between all Market Participants (Tariffs)

23 Agenda Challenges to the Current Distribution Model Shaping the Future Distribution Business Model Conclusions

24 The role of the Distribution System Operator will change Key role will be a Network Optimizer and Enabler instead of a Transportation Company A true market clearinghouse for energy supply and demand at the distribution level Integrated planning - role of integrating view of capital, grid operations, DER integration, and demand 16