Smart Solar PV is coming

What makes a utility want more distributed solar PV? In my experience, utilities look askance at the addition of distributed (small scale) rooftop and ground-mounted solar PV in their territories. First, these systems reduce utility revenue. Second, they create additional risks for line workers. Third, high penetrations (greater than 20%) of distributed solar PV on a single distribution feeder get increasingly disruptive to feeder operations, risking two-way power flow and potential damage to distribution substation equipment. Fourth, “dumb” PV systems cannot be dispatched by control center operators.
But what if the distributed systems came equipped with a smart PV inverter, one that could provide ancillary services on the distribution feeder, communicate with the utility, and even provide some energy storage, so that the utility could use the devices to help harmonize the power on the distribution feeder? Now, that would get the utility’s attention and they may even want some of that kind of solar PV on every one of their feeders.
Well, that‘s the outlook for 2015, according to “The World Market for PV Inverters”, a report released recently by IMS Research. A July 26 press release on PVmarketresearch.com
highlights the report and shows sales of Smart PV inverters passing sales of standard inverters within three years, driven by “utility concerns over grid imbalances, the growing proportion of PV connected to the grid, as well as the need for energy storage to take advantage of self-consumption tariffs and further incorporate PV into the smart grid.” Given the maturity of distributed generation system penetration in Germany, we should watch developments in Europe closely, to understand how distributed energy resources will impact smart grid and utility operations going forward.

In my post yesterday, I talked about the changes in Texas as seen from the consumer perspective, specifically from the perspective of the residential consumer. The deployment of millions of smart meters in Texas makes it different from other markets, and the influx of reams of data, which will be available to consumers on a website, means that perceptions from energy consumers will begin to evolve.

In Chapter 7 of our new book, The Advanced Smart Grid, we talk about the emerging smart energy consumer. As the graph above suggests, a first step for consumers will be to become aware of issues and go from a Consumer, passive and ignorant, to a Smart Consumer, now able to manage personal load in new ways ... and relate to the utility in new ways as well.

Consumer / Utility relationships today are relatively shallow, as most consumers rely on utilities, but do not interact much with them, short of using the electricity that comes to their house or office and paying their monthly bills. Thus changes to rate structure, which are a natural follow-up to the deployment of smart meters, pose questions for consumers and they will begin to seek answers. New time-of-use rates, as the name suggests, will be tied to the time of day the energy is consumed, linking energy consumption behavior to monthly bills. Shift your behavior, and you'll see savings. Carry on with business as usual, and you may be in for a surprise at the end of the month.

Such changes put the onus on utilities to warm up their consumers with education programs and other forms of outreach, so that consumers aren't surprised down the road when these changes are put into place. And to put it another way, utilities may not get so far as to get rates approved if they don't educate consumers first, as rate cases have a way of bringing opponents out of the closet. It will be to a utility's benefit to spend time understanding consumer perceptions and educating them so that future dialogue may be based on facts, rather than fears.

In a previous post, I gave a brief overview of the history of electricity in Texas. I meant to come back sooner to this topic, but events have swept me away. I have a new client in UtiliPoint International - see them here. Also, my book, The Advanced Smart Grid was published last week (buy it here), so I've been fielding notes of congratulations and busy marketing that. This is all good.

But I've been eager to come back to this post, because the transitions in electric industry are so compelling, and with Texas as my backyard, this economy offers a great way to study and contemplate those changes and what they mean.

In this post, let's take up the questions that all this change brings on. We should look at the change from different perspectives.

Today let's look at change from the customer perspective: change holds opportunities, but also risks - and given their lack of sophistication on the finer points of change, residential customers especially are more suspicious of the risks of change - the downside. Customers, by and large, have had it pretty good in the US when it comes to electricity, where the utilities provide incredible reliability and absent the occasional outage, we can count on the electricity being there when we throw a switch or plug in an appliance. In the industry, they call this Reliability, and it is the driving force for utility employees. Not just "keep the lights on" but all aspects of reliability.

And electricity has by and large been an incredibly inexpensive product/service, when one considers how it has impacted our lives - we generally spend less than 10% of our household budget on electricity - only the poorest households see significant economic distress from paying their utility bill. So change, when it comes, has a challenge for residential customers at least. They already have it pretty good, so change may likely bring ... higher bills, less convenience?

With commercial customers, however, change represents the ability to improve how they manage a signficant cost item on their books. Every net dollar saved from the electricity bill of a business, after all, flows directly to the bottom line as increased profit. Change that makes electricity less risky in terms of price, that provides greater control to users, that gives them more information or more options? That is change they can believe in.

In Texas, we're working our way through a major change, one that will impact customers directly. Texas leads the nation in the deployment of Smart Meters - we're about halfway through the deployment in the deregulated portions of the state, with about 3 million more meters to go, with completion expected sometime in 2012. The data from those meters is already flowing into data banks and showing up on the website designed for customer acccess - SmartMeterTexas.com. It remains to be seen how customers will use this day-behind consumer data, and also, how utilities and retail electric providers will make use of a more informed marketplace.

But Texas is a big state - we must also look to those areas of Texas not included in ERCOT - looking at the previous post, one can see that that would include folks out in El Paso, up in the Panhandle, and over in deep east and southeast Texas. The changes sweeping over the rest of the state are surely occurring in those areas as well, because no utility is left out of these changes - all utilities are closely examining their operational models, looking for effiiencies in operations and in the ways they run their businesses. Truly, Texas has every type of utility environment, and pretty much, every type of climate as well.

The big questions to hit us here in Texas, and those that will hit those utilities, retailers, and consumers in other areas of the country, mostly concern adaptation to changing technolgies and changing environmental conditions, at both the climate and political levels. These changes, loosely understood by what we have already seen in telecom and internet markets, are even now impacting how we produce, distribute and consume electricity.

This post is getting a little long in the tooth, so I'll close for now, to revisit this subject I hope in the next few days. Change, and the questions it brings and hopefully the answers we develop in response, have arrived at the doorstep of the electric industry. We - both utilities and consumers - must understand change and its impacts, if we are to plan and react in ways that serve us in the long-term. Ignorance is rarely an optimal strategy - and these days - it may be fatal.

To understand the changes underway in today's electricity world, it's helpful to examine what has transpired in Texas over the last 50 years, given that Texas has an example of almost every major change during that time. Marketed as "a whole other country" by state tourism officials, Texas may be viewed that way (and it will certainly feel that way this summer if you happen to be driving from El Paso to Beaumont (829 miles) or from Dalhart to South Padre Island (888 miles)).

As with the rest of the country, the first to get electricity in Texas were the city residents in major population areas, served by investor owned utilities like Texas Power and Light (Dallas-FW), Houston Lighting & Power (Houston), Central Power & Light (Corpus Christi), and Eastern Texas Electric (Beaumont). And a strong city-owned industry developed in Texas with such cities as San Antonio, Austin, and Lubbock building their own distribution grids as enterprise departments within city government. The Lower Colorado River Authority was formed in 1934. And electric cooperatives were formed with the Rural Electrification Act in 1935; now Texas can boast 65 members in the Texas Electric Cooperative organization, the largest of its kind in the US.

The Electric Reliability Council of Texas (ERCOT) was formed in response to NERC requirements in 1970. ERCOT took on a market coordination role in 1981, which became more important with the deregulation of wholesale energy in 1995. Electricity wasn't regulated at the state level in Texas until 1975, when the Public Utility Commission of Texas was formed. But the monopoly investor-owned utlities in Texas vigorously defended their status as state-regulated, not federally-regulated entitites. In May 1976, the issue was forced when Central & South West technician connected grids in Vernon, TX and Aldus, OK, arguably putting all Texas electrons in interstate commerce. The issue was finally settled in 1980, when DC ties in Vernon and in East Texas connected ERCOT to the Eastern and Western Interconnections.