(The following article is based on a presentation by Gerry Braun at the California CCA Forum in Los Angeles California on May 19, 2015)
Summary
Decentralized energy technologies will transform the electricity sector over the next couple decades. Community choice aggregators (CCAs) can be leading agents of the transformation to the extent they push for, and secure, the freedom to transform themselves. The extent to which they evolve to take a more and more integrative role may determine whether local clean energy resources are developed or held back.
States lacks the capacity to account for decisive and locally specific factors affecting on-site and community based energy supply. Meanwhile increasing numbers of local jurisdictions are aiming for sustainability and resiliency in their goals and plans. In order to follow through they must have policies and programs in place that are responsive to on-the-ground energy trends and opportunities in their communities.
Most communities, and even existing CCAs, do not yet budget for long term energy related planning and analysis, in part because they do not typically have staff capacity that includes qualified energy managers. It is important that state public interest funds be used to begin to bridge this gap. Rapidly maturing CCAs could take the lead in their service areas. If they do, their sponsorship of integrated local energy analysis will enable smart local decision-making and collaboration among member communities.
What is community choice?
Enabled by California legislation, community choice aggregation, aka community choice energy, empowers local jurisdictions to decide how the electricity used in homes and businesses is produced and at what cost to energy users. Once a community choice service is formed, the incumbent utility continues to deliver the electricity procured by the CCA and also continues to perform billing, distribution system maintenance, and other grid management and operations functions.
California now has three operating CCAs whose success in meeting locally set goals has led a large number of population centers, counties, cities and across the state to proceed with exploration and formation activity. Drawing on the experience of CCAs already operating successfully in California, CCA formation can result in an effectively governed and competent authority to handle energy matters and reduce costs and greenhouse gas emissions.
The state and its cities and counties share an interest in the evolution and maturation of community choice programs and the development of locally accountable competence and capacity to guide and them.
Why does community choice matter at the state level?
States have an obvious interest in any measure that makes their economies more robust and resilient. Local clean energy deployment, aka distributed energy resources, does so in multiple ways. What principles apply to state policy regarding local clean energy?
One important principle is subsidiarity, an organizing principle that says matters ought to be handled by the smallest, lowest or least centralized competent authority. This principle is especially applicable to 21st century electricity. States have an interest in keeping their regional electric utilities focused on what they are designed to do. They also have an interest in creating local authorities that are competent to adjust for economically important differences from one jurisdiction to another. There is surprising, increasing and consequential diversity in energy usage patterns among even superficially similar communities. This creates an economic incentive to diversify the energy supply and service strategies available to local communities.
Why does CCA matter to Cities and Counties?
Each California community has unique goals/priorities, energy usage and distributed energy "prosumer" trends, plus local siting and resource opportunities. All face the same need to optimize local energy supply and infrastructure to minimize economic and environmental costs of service.
Cities and counties have an interest in effective and competent governance of energy services using the best available local information. Their work needs to be aligned with local goals in order to minimize both cost and greenhouse gas (GHG) emissions.
Originally a state-sponsored market intervention in California, community choice aggregation is increasingly driven by the aspirations of local communities. What do they want? Davis, California’s recently approved CCA vision is an example of local aspirations for CCA service. It distinguishes between near and long term aspirations as follows:
Start-up Phase Vision. The near term vision for Davis Community Choice Energy is to provide Davis residents and businesses greater choice as to the sources and prices of the electricity they use, by:
- Offering basic electricity service with higher renewable electricity content at a lower rate than current utility service;
- Offering other low carbon or local options at modest price premiums;
- Establishing an energy planning framework for developing local energy efficiency programs and local resources in the near future; and
- Accomplishing the above while accumulating reserve funds for future Davis energy programs and to manage energy costs and risks.
Long Term Vision. The future vision for Davis Community Choice Energy is to continuously improve the electricity choices for Davis residents and businesses, while expanding local energy-related economic opportunities, by:
- Evaluating and adopting the best planning and operational management practices in the electricity service industry;
- Substantially increasing the renewable electricity content of basic electricity service over time;
- Developing and managing customized programs for energy efficiency and on-site electricity production and storage;
- Accelerating deployment of local energy resources to increase local investment, employment, innovation and resilience;
- Working together with other Davis and Yolo County efforts, and in alignment with city goals, to achieve climate action goals and shape a sustainable energy future; and
- Saving Davis ratepayers money on their energy bills.
One local energy service plan no longer fits all
Usage diversity mentioned above means that energy profiles of comparable communities differ in technically and economically important metrics. For example , local solar and electric vehicle adoption rates in California are literally and figuratively all over the map. For example, the City of Davis’s solar adoption rate is five times the California average. Our electric vehicle adoption will lag on-site solar by a few years but comparable adoption rates are likely. Our current (thirteen hundred in 2014) on-site installations can expand to supply 20% of our electricity in 10 to 20 years even if the city does nothing. Imagine the result if a CCA paid for on-site solar electricity according to its value and removed impediments to cost-effective system sizing and net positive energy production.
Electricity revenues depend on usage; per capita usage differences among comparable northern California cities can range to as much as a factor of four and ratios of average to peak usage can vary by as much as 50%. These differences significantly affect both CCA revenues and costs.
Local planning and integration can and must account for major factors that simply didn’t exist in the 20th century. These include increasing levels of participation and decision-making by energy users. CCAs are offering tariff options featuring high percentages of renewable and local generation. Non-utility companies are offering them an increasing array of cost saving products and services that can be adopted without an energy utility’s help or encouragement. Communities need a community-wide model to enable sensible and timely energy decisions by all of their residents and local businesses.
CCA meets the need for a model that is feasible, efficient and adaptive. The right and left bubbles in the schematic below represent the components of electricity and fuel infrastructure and capital that electric utilities have planned and integrated for more than a century. The top and bottom bubbles represent fundamental changes. Top: Prosumers using the electricity they produce and selling the excess at opportune times will be aided by automated transactions that save everyone money. Bottom: Fuel switching in the transportation sector will have major impacts on local planning and integration as electric, natural gas and fuel cell vehicles take market share from gasoline and diesel fueled vehicles.
Local integrative analysis and planning
Accounting for local differences means conducting thorough local integrated energy analysis, jurisdiction by jurisdiction, and regularly updating analysis results and the plans they inform.
Updating requires monitoring of local trends, using and improving integrated planning models, looking at alternative local power deployment scenarios, understanding the methods and economics of balancing supply and demand, and comparing alternative service scenarios in terms of their environmental and economic benefits.
Fully developed, local integrated energy analysis will be needed to forecast: 1) potentially profound effects of substitution of low carbon energy sources for high carbon sources, and 2) the effects of energy user choices enabled by transformative information and communications technology.
Substitution of local power sources for centralized sources will occur at increasing but highly localized rates. Electricity usage patterns will change as climate conscious communities substitute electricity for natural gas and petroleum. Vehicles will be put to work providing not just mobility but also emergency power, demand response and energy storage. Automated pricing transactions will begin to shift usage profiles and create local economic and investment opportunities.
It is both feasible and illuminating to create a spreadsheet model to project substitution effects that are transformative over a couple decades. A spreadsheet model like the one the Integrated Resources Networkdeveloped for Davis just needs to be fed locally specific information and trends. Results often run counter to even the best educated guesses and intuition. So, sound, credible integrated local energy resource planning is no longer possible without such models.
Energy infrastructure planning requires accurate, reliable information. For example, anticipating this need, Davis, California recently completed a study targeting elements of an integrated community level net zero strategy, i.e.:
- Integrated use of city and county GIS systems for energy infrastructure planning
- Retrofit packages that can be marketed and offered in a targeted way according to the age and demographics of specific neighborhoods
- Identification of community solar and wind sites resulting in the least integrated cost of development and use.
New and better data analytics for local energy initiatives are also becoming available. For example, an effort by BIRA Energy to estimate on-site PV potential in Davis, California concluded that covering all available roof area with solar PV would generate a few times the amount of electricity currently consumed in Davis.[1]
Integrated local energy analysis will be essential to smart local decision-making during the transformation. Non-CCA jurisdictions can develop capacity for local planning and technical integration. In most cases such capacity does not yet exist. One strength of the CCA business model is that it provides the revenues to pay not only for electricity generation services but also for development of other planning and operational competence and capacity.
Capacity for local planning and integration will require time and iterative practice. The local planning and integration responsibilities not undertaken by the CCA service provider will need to be undertaken by other locally empowered authorities.
From wholesale procurement to locally integrated energy service
CCAs are driving toward more affordable and environmentally conscious wholesale electricity supply here and now. This is fundamentally important. Long term visions are only realizable by organizations that survive and thrive. Plus, there is no shortage of immediate challenges, including a playing field vulnerable to incessant efforts to tip it to favor of the static business models of regional monopolies.
Currently, CCA manifests as an alternative wholesale power procurement mechanism that can be more responsive to local priorities. At its current stage of development CCA accommodates but does not yet emphasize deployment of distributed energy resources, even though highly modular clean energy supply and storage technologies, when deployed locally, create opportunities for collateral cost savings and local macro-economic benefits.
The big CCA win is going to come over the long term as CCAs anticipate the direction new energy technologies are driving the energy market and learn to manage them on behalf of local communities. To quote Wayne Gretzky, a former professional hockey star, “I don’t skate to the puck, I skate to where the puck is going to be.” Applied to CCAs this means evolving to manage and integrate the forces that are transforming the energy sector. The hockey metaphor is particularly apt. Because of the large scale of electricity projects and systems, electricity was a slow moving game throughout the 20th century. The pace of the 21st century game is already much faster…and accelerating.
Anticipatory self-transformation
Transformational change in the energy sector involve proceed along multiple parallel tracks. The shift from centralized to modular electricity generation is well underway, enabling critically important shift from high to low carbon sources. Decentralization will enable a shift from an emphasis on day to day scheduling to greater emphasis on real time transactions. Power flow at the local grid level is shifting from one way to multi-directional, enabling conversion of consumers to prosumers able to not only purchase electricity but to also be credited for electricity they produce and ultimately to automatically adjust the timing of consumption and production in response to real time price offers.
Further structural changes will favor differentiation over commoditization. The trend to community choice will expand the dimensions of energy user choice. As decentralization enables a greater variety of retail transactions, Wall Street’s dominant role in financing bulk supply projects will recede in importance as opportunities for local investors and prosumers expand. The 20th century innovation cycle relying on multi-stage, multi-decade R&D and centralized hardware scale-up will give way to an emphasis on IT driven annual incremental improvement, featuring information and communications technology vs. basic hardware design substitution. Change on these various tracks is accelerating and unstoppable.
Accelerating, because decentralized supply projects have short lead times and schedules. Solar PV trends provide a measure of a transformational pace that inverts established paradigms. For example, in 2014 sixty-five percent of the California solar PV market consisted of utility scale projects, while by 2018 sixty percent of the market is instead expected to consist of projects serving homes.
Unstoppable, because there is has also been a paradigm shift from economies of plant scale to economies of manufacturing scale. The fastest growing clean electricity technologies (solar and wind) are modular, mass produced, quick to deploy and entail no fuel risk and little performance risk. So, risks are more manageable even as their competitiveness continues to improve. Their variability requires upgrades, but not fundamental changes, in the flexibility available to grid operators.
Why? Because the same design principles that guided the creation of existing centralized infrastructure also apply to local electric system integration. Electricity usage is variable. Increasingly, as solar and wind capacity expands, so is supply. Current centralized electric systems are designed to handle changes in combined usage/supply variability. The moving parts of a local grid or micro-grid mimic those in the centralized case. The local grid model evaluated for Davis, California shows them to be smaller and local, e.g. on-site solar and community solar and wind, local electricity circuits and storage, and flexible generation to accommodate usage and supply variations that storage can’t handle economically. The schematic suggests the opportunity to shrink the supply side dynamics of the centralized model down to the level of a local electricity generation resource mix.
With energy sector change accelerating and unstoppable, the long term vision and goal of the CCA movement should be anticipatory self-transformation as well.
The fully evolved CCA
Fully evolved, community choice can be an efficient, adaptive model for local management of energy sector change and decentralization. Planning and integration will need to happen at both the centralized and local levels. There will be a compelling need for integration between these levels and between CCAs and grid owners and operators.
Like other competitive organizations, CCAs will need to develop portfolios of specialized competencies, especially in early development phases that necessarily focus on wholesale generation services sourcing and scheduling. Local energy futures are a moving target. So, a key evolving competency will be the ability to adapt the basic CCA model to be integrative across more functions and to accommodate diverse local parameters, capacities, trends, supply opportunities and energy user needs.
Local CCA competencies will need to evolve, because regional and local electric grids will be evolving from current designs that only enable radial power flow from big power plants through big wires to local grids and meters. The big pieces won’t need to change much. This is fortunate, because the pace of centralized supply portfolio change is currently way too slow to accommodate timely and sufficient GHG emissions reductions.
The smaller pieces, including local grids, will change more fundamentally and rapidly. They will need to accommodate 21st century electricity flows from local meters and micro-grids to other local meters and micro-grids as well as 20th century flows from outside the community to local meters. Local grids will need to be managed in a way such that electricity can be exchanged between consumers and even between communities. CCAs will need to evolve toward roles not only focused on supply but on the integration of supply, demand and local grid operations.
The fully evolved CCA will need to be competent to evaluate specific highly localized needs and opportunities and adapt the evolving CCA model to participate in delivering “integrated decentralized” energy service. CCAs can be powerful agents of acceleration as they evolve. The best fully evolved role will depend on the local parameters and priorities. A fully evolved CCA will enable maximum local sustainability and resiliency.
Recapitulation
Decentralized energy technologies will transform the electricity sector over the next two decades. Local energy sector change management can capture significant local economic benefits. Clean technologies will save more money for ratepayers if local deployment is properly planned and facilitated. Local economies will benefit as wealth is recirculated locally.
Building up local integrated energy analysis and planning capacity is essential, not just to local communities but to states as well. An increasing share of state managed energy innovation funding should be allocated to this public purpose in order to develop integrative capacity at a pace consistent with on-going local electricity supply and storage deployment.
CCAs can be leading agents shaping future energy ecosystems, electricity sector transformation and decentralized energy innovation. They can also help accelerate a trend to zero carbon footprint communities, to the extent they push for, and secure the freedom to transform themselves in partnership with the communities they serve.
[1] Source: Davis Future Renewable Energy and Efficiency Draft Report, August, 2015