The Ducks are Coming. Smart Rate Design: An Essential Element of the Clean Power Transition

Transcription

1 The Ducks are Coming Smart Rate Design: An Essential Element of the Clean Power Transition California Municipal Rates Group Presented by Jim Lazar RAP Senior Advisor April 29, 2016 The Regulatory Assistance Project (RAP)

2 What s a Duck Curve? 2

3 Why is This an Issue? Solar helps meet daytime load Loads still rise in the early evening Compounded by wind coming and going 3

4

5 Ten Strategies to Align Loads to Resources (and Resources to Loads) with Illustrative Values for Each 1. Targeted energy efficiency 2. Peak-oriented renewables 3. Manage water pumping 4. Grid-integrated water heating 5. Storage air-conditioning 6. Rate design 7. Electricity storage in key locations 8. Demand response 9. Inter-regional exchanges 10. Retire inflexible older generating units Not every strategy will be applicable to every utility. 5

6 The Objective: An End-State Flatter Than the Pre-Solar Load 6

7 Strategy 1: Targeted Energy Efficiency 7

8 Strategy 2: Peak-Oriented Renewables Late-afternoon wind Hydro re-dispatch Solar/thermal West-facing solar 8

9 Strategy 3: Manage Water Loads 7% of national electricity usage Water and wastewater systems have storage May be costeffective to augment tanks and reservoirs 9

10 14% of residential usage Strategy 4: Water Heating Every water heater is a thermal battery Heat water when power is cheap; use hot water as needed 10

11 Strategy 5: Air Conditioning Storage A/C is ~30% of Peak Demand Commercial load doubles Residential load up 4X Option: Appliance standards Service standards Retrofit incentives 11

12 Storage Air Conditioning 12

13 Strategy 7: Electricity Storage Batteries need to do double-duty or triple-duty to be cost-effective 13

14 Strategy 8: Demand Response 14

15 Strategy 9: Inter-Regional Power Exchange Transmission lines mostly used for baseload connections and economy energy Also useful for peak diversity exchanges 15

16 Strategy 10: Retire Older Inflexible Generating Plant Older steam plants with night minimum loads and slow ramping are being replaced with gas flex units that ramp quickly. GE Flex Combined Cycle Unit 16

17 Teaching the Duck to Fly Requesting Permission for Take-Off

18 Oops.Forgot One Strategy 6: Rate Design

19 Strategy 6: Rate Design

20 Principle #1 A customer should be allowed to connect to the grid for no more than the cost of connecting to the grid. 20

21 Principle #2 Customers should pay for the grid in proportion to how much they use the grid, and when they use the grid. 21

22 Principle #2 Customers should pay for the grid in proportion to how much they use the grid, and when they use the grid. 22

23 Principle #3 Customers delivering power to the grid should receive full and fair value - no more and no less. 23

24 A Simple Cost-Based Residential Rate Design Cost to Connect to the Grid Billing $/month $4.00 Line Transformer $/kva/month $1.00 Bi-Directional Grid and Power Supply Off-Peak $/kwh $0.07 Mid-Peak $/kwh $0.09 On-Peak $/kwh $0.14 Critical Peak $/kwh $

25 Impact of Rate Design on Usage Simple Flat Rate Inclining Block High Fixed Charge Demand Charge Customer Charge $ 5.00 $ 5.00 $ $ 5.00 Demand Charge None None None $8.00/kW First 500 kwh $ 0.12 $ 0.08 $ 0.08 $ 0.08 Over 500 kwh 0.12 $ 0.15 $ 0.08 $ 0.08 $ Impact on Usage 25

26 Impact on Low-Income Consumers 26

27 TOU and Critical Peak Pricing Works 27

28 SMUD: Customers Actually Do Things 28

29 CPUC Recent Decisions Residential Rate Design Zero customer charge (for now) Flatten blocks Retain inclining block rate with 25% step Transition to default TOU Retain net energy metering Subject to non-bypassable charges 29

30 Strategy 6: Rate Design (Commercial) 30

31 California PUC Recent Decision Commercial Rate Design Stated differently, total coincident demand will never equal the sum of each customer s highest recorded demand during a given time period because of the variability of millions of customers demands. Due to the smoothing effect of load diversity, coincident loads in any interval will more closely resemble the sum of customers average loads during and near that interval than the sum of each customer s maximum load. Thus, customers with erratic loads are overcharged compared to customers with steady loads. Decision December 18,

32 California PUC Recent Decision Commercial Rate Design Shifting the collection of coincident capacity related costs to peak and part-peak TOU energy rates would more accurately reflect the benefits of load diversity and would appropriately mitigate the bill impacts of solar customers spikes in consumption of grid electricity that occur on overcast days. 32

33 CPUC Guidance on Commercial Demand Charges goes Double for Residential Diversity between customers is greater Probability of peak-coincidence is lower Customer understanding is lower 33

34 Demand Charges: History Commercial demand charges were devised when we could not do interval metering. Customer maximum demand was a proxy for contribution to peak. 34

35 Demand Charges: History When all power sources had about the same cost, this was a reasonable way to assign capacity-related costs. 35

36 We Do Things Differently Now Baseload Thermal Baseload Renewable Peaking Thermal Variable Renewable Demand Response Central Batteries Distributed Batteries 36

37 We Can Do Better Now 37

38 Even at the Line Transformer Level: Economies of Scale and Scope Customers/Xfmr: Rural 1 Suburban 5 10 Urban

39 Diversity: A Key Issue Many customers use system capacity at different times and can share system capacity: Church: Wednesday night and Sunday Schools: 7 AM to 4 PM Stadium Lighting: After Dark on Friday Some pre-empt capacity continuously: Denny s and 24-hour Mini-marts Three-shift Industries 39

40 High School Stadium Lighting: The Caricature of the Problem CP: None NCP: 1% Load Factor 40

41 Lower Load-Factor Customers Morning loads Evening loads 24/7 loads Both CP and NCP rates unfair to shared demand customers Can Share Capacity 41

42 Individual Load Shapes Vary Customer 3: 38% Load Factor Customer 3 42

43 The Utility Sees the Combined Load of Multiple Customers 43

44 Lots of Diversity at the Transformer: 26-Unit Apartment Complex, L.A. Area Individual Demand Total Grouped Demand Total 44

45 Small Users Are Losers: Southern California Edison 45

46 Garfield and Lovejoy Criteria CP Demand Charge NCP Demand Charge TOU Energy Charge All customers should contribute to the recovery of capacity costs N Y Y The longer the period of time that customers pre-empt the use of capacity, the more they should pay for the use of that capacity N N Y Any service making exclusive use of capacity should be assigned 100% of the relevant cost; Y N Y The allocation of capacity costs should change gradually with changes in the pattern of usage; N N Y Allocation of costs to one class should not be affected by how remaining costs are allocated to other classes; N N Y More demand costs should be allocated to usage onpeak than off-peak; Y N Y Interruptible service should be allocated less capacity costs, but still contribute something; Y N Y 46

47 Some Rates That Illustrate the Three Principles Burbank residential rate LADWP Electric Vehicle Rate Palo Alto Residential Rate Electricity de France Tempo Rate Up and Coming California IOU rates 47

48 Burbank Residential Rate Rate Element Amount Customer Charge $/month $7.11 Service Size Charge $/month Small Most multifamily $1.40 Medium Most single family $2.80 Large Over 400 Amp Panel $8.40 First 300 kwh $/kwh $.1153 Over 300 kwh $/kwh $

49 LADWP Electric Vehicle Rate March,

50 Palo Alto Residential Rate with Optional TOU Element Customer Charge None First 300 kwh $.095 Next 300 kwh $.130 Over 600 kwh $ Summer Peak Surcharge +$.0578 Summer Off-Peak Discount -$

51 France: Basic Rate Design 51

52 France: Tempo Rate Design 52

53 Illustrative Rate Design: CPUC Directives Post-2018 Minimum Bill $10.00 Off-Peak $.13 Mid-Peak $.18 On-Peak $.30 Baseline Credit ($.05) 53

54 About RAP The Regulatory Assistance Project (RAP) is a global, non-profit team of experts that focuses on the long-term economic and environmental sustainability of the power sector. RAP has deep expertise in regulatory and market policies that: Promote economic efficiency Protect the environment Ensure system reliability Allocate system benefits fairly among all consumers Learn more about RAP at Jim Lazar, jlazar@raponline.org