City/Utility Collaboration: To What End?

Introduction

An advisory committee pondering utility/city collaboration asked a basic question. Collaboration to what end?

There is anecdotal evidence of the need for collaboration. For proponents of local clean energy resources there is an even more basic question. Why energy resources that are both clean and local? The case is compelling. See link.

Simply put, local¹ clean energy resources are happening, unevenly around the world, mostly, except for California, outside the US. They come in many sizes. So do utilities. So do cities. Maybe we need a common denominator if we are to connect dots more strategically and less anecdotally.

 

It’s all about buildings

Energy utilities connect to them and provide “energy services” to building owners. All cities have buildings. Most cities provide non-energy utility services to them.

Almost all buildings are wired for electricity. The wires are organized into circuits and feed electricity to appliances, lights, etc. The configuration of wires in a building is, effectively, a “micro-grid.” It is smaller and less complicated than the local grid that delivers electricity generated outside the city to the building. But it is still a grid.

The high voltage “mega-grid” is even larger and more complicated. It can balance the amounts of power generated, stored and used. It is actively “operated” by companies responsible for real time balancing. Much of its operation can be automated. Automation is both a benefit and a vulnerability. Because power generation and storage facilities once followed the rule, “bigger is cheaper,” mega grids evolved to spread over states, countries and continents

What if the large plants and transmission corridors also left a legacy of environmental intrusion that could not be readily reversed? For about a century, the answer has been, “Do you want cheap, abundant electricity or not?”

What if bigger weren’t cheaper anymore? What if the cheapest place to make electricity were on a building, in a neighborhood, in a city, or right outside a city? This is exactly where current technology and cost trends are leading.

Can equipment that makes and stores cheaper power be connected to a building micro-grid? At what scale?

That is happening all around the world. For example, citizens and businesses of Davis, California now have, on their premises, nearly 20MW of solar PV, representing a $100 million investment in local energy assets. By 2020 Davis also expects to have 2500 electric vehicles, representing a roughly comparable $75 million investment in electricity storage batteries that are typically connected electricity to home micro-grids when not on the road.

So far, citizens and businesses have done the heavy lifting, buying and leasing solar equipment, electric vehicles and storage batteries, and playing by existing city and utility rules.

Local non-profits are taking on supportive roles, including information and awareness campaigns and local planning and deployment initiatives. A volunteer initiative, Cool Davis, can claim credit for the public awareness that has made Davis’ per capita on site solar deployment among the highest in the world.

Cities have been drawn into the local clean energy deployment process via their permitting responsibilities. The city role to date has been consequential, albeit passive and less visible. Cities enforce national and state rules for safe installation and operation of building-based energy consuming appliances, solar panels mounted on buildings and adjacent structures, and related internal building circuit upgrades. While active steps to require more energy efficient and lower carbon land development are not yet the norm, cities are taking inventory of the most environmentally and economically suitable siting opportunities for local renewable power projects.

In most states, electric utilities are required to accommodate customer owned solar electricity generators. These on-site power systems feed into building circuits “behind” the utility’s “revenue” meter, i.e. not into utility owned circuits. Some utilities require interconnection agreements that hold the solar customer accountable for any consequences of an installation’s design, size and equipment selection.

By limiting annual production to historical building usage, the agreements also limit the amounts of electricity that can flow from the building into the local grid. They also limit “net metered” solar production capacity connected to the neighborhood utility “feeder” circuit.

Other categories of “self-generation” by utility customers are allowed in some states. Some US utilities offer power purchase agreements to independent owners of projects that feed electricity into the lower voltage portions of their grids.

Citizen and local business decisions to use electricity produces on their premises and/or locally pay forward to their communities and beyond. Cities and utilities have a lot at stake. They need to work together to use building-based, grid connected electricity generation and storage assets to maximum effect in the public interest.

Integrated in grid planning and operations, building-based energy supply and storage can defer or avoid investment that would otherwise be required to ensure reliable electricity service to the community. The utility and its customers benefit. So does the local economy.

Integrated in a city’s resiliency plan and in the utility’s strategy to deal with grid emergencies, building-based energy supply and storage can also be used to increase local energy security and reduce risks of catastrophic disruptions of local services and commerce.

 

City/utility Collaboration

Are cities and utilities engaged constructively, or could they be doing more? Are they getting in their own way? Could they help one another do a better job maximizing the integrated economic value of locally-controlled energy assets?

Doing a better job would involve:

  1. Sizing, design and installation of local energy assets to maximize overall benefits vs. cost

  2. Economic gains from smarter asset utilization.

  3. Investments in compatible grid and building infrastructure, e.g. building energy automation, mini-grid controllers and smart substations.


A Perfect Storm of Cross Purposes: Sizing, design and installation of local energy

On-site projects, whether renewable, storage or both, require some degree of site engineering and optimization. Tools are available to make this task simple and inexpensive.

Minimizing the unit cost of electricity produced on-site is an impactful current opportunity that is routinely missed because of inflexible and outdated net energy metering rules. Another emerging opportunity involves using electric vehicle batteries to reduce power flow into the local grid when it isn’t needed and maximize it when it is. This opportunity that may remain elusive until the automotive and utility industries begin collaborating.

Fully capturing both opportunities would require that a building micro-grid become fully functional and capable of balancing building level supply and demand in real time. It would also require that on-site generation and storage systems be sized to optimize their life cycle economics. Neighborhood and community micro- and mini-grids will provide the framework for economic optimization, delivering both energy resilience and economic benefits to both city and utility.

Cities and utilities often drive sizing of net metered solar arrays in opposite directions. Cities set minimum sizing standards, e.g. requiring that new homes have a least one kW of solar capacity per bedroom. Utilities set maximum standards for retrofits, i.e. sizing to prevent “net surplus” generation on an annual basis.

One result is solar installations that not only do not fully use available roof area but are economically sub-optimal on a life cycles basis, and grossly so in cases of ultra-efficient energy use. Moreover, they can also become grossly undersized as heat pumps and electric vehicles replace gas furnaces and gasoline engines.

A city has an interest in the life cycle economics of its on-site solar installations, i.e. that it not be or become grossly sub-optimal. The utility may not share this interest, but there is potential for win-win compromises if state policy strikes a balance between local economic interests and preservation of current utility business models.


Choosing to be Smart Together: Economic gains from smarter asset utilization

If you own a factory that relies on costly equipment, you want your physical assets to work for you full time if possible. That’s why some factories operate 24/7. Their workers, managers and equipment are a team. Their equipment may be almost completely automated. Consequently, it provides instantaneous data that lets workers and managers make real time adjustments and correct problems before they cause a shutdown. The team’s work every day, week, month and year is carefully planned.

Cities know a lot more about a utility’s customers than the utility does. Utilities operate on the principle that all customers should ideally be able to use a lot or a little energy whenever they want. The electric system is designed to and built to accommodate aggregated customer decisions with near-perfect reliability. This convenience and flexibility comes at a substantial cost. Until recently there was no proven alternative approach. Smart meters are now the leading edge of better economic utilization of local grid assets. City geographic information systems (GIS) are the leading edge of smarter permitting and regulation of equipment on the customer side of the utility meter.

An obvious opportunity for data sharing and data mining? Not quite yet. Privacy concerns must be accommodated. The easiest way to ensure privacy is to share as little data as possible and then only based on a demonstrated “need to know”. This is the current state of City/Utility information and data exchange. The key to moving beyond it is recognition of (and compensation for) the value of so-called “demand-side” resources. The most impactful demand-side resources will be buildings that can feed energy into the grid when the grid needs. The next most impactful? Buildings that can shift demand to time periods when more and cheaper energy would otherwise be left unused.

Smart city and utility managers should be able to use the information to protect communities from economically catastrophic loss of grid energy service and having to bear the cost of a poorly integrated local energy system. A “both/and” result will be required, i.e. improving customer economics, while also achieving local energy resilience, while also protecting building owners from malicious use of information about their energy use and assets while

City and utility CIO’s should be talking with one another. Data platform owners like Facebook have similar both/and challenges, i.e. to protect privacy while also trading on legitimate public and commercial uses data they manage. Perhaps their experience can be instructive to cities and utilities.


Making Smart Energy Infrastructure Pay: Investments in integrative grid and building infrastructure

For every investment, there is a need for public or private capital. 21st century energy infrastructure will build upon the foundation of 20th century infrastructure. Local grids will be retrofitted with better brains, especially at gateways to a city’s energy grid. There will be a connection with other better brains embedded in building micro-grids and neighborhood and community mini-grids. Automated control of power flows will be local as well as regional.

The necessary capital deployment could be a slow process because investments on one side of the city/utility divide will depend on the other. Is there a need for speed? Yes, if changes outside a city’s or utility’s control are moving faster the city or utility is. What could enable acceleration, if needed?

States have a key role. They must first recognize the need for effective engagement between state regulated grid owners and local jurisdictions. States can identify issues needing joint planning and coordination, e.g.:

  1. regarding future customer investments in smarter and more completely integrated on-site energy infrastructure, and

  2. regarding local project siting and permitting that results in lower combined project and grid infrastructure life cycle costs.

State regulatory policy should reward investment in grid infrastructure that accommodates economically efficient and energy resilient local infrastructure. States could also require existing state finance agencies and infrastructure banks to make affordable capital available to cities and communities targeting greater local energy security. Their public/private partnerships can expedite projects that result in better and quicker integration between grid investments and demand-side investments.

 

Summary

Back to the question: To what end? Our answer is: To the end of identifying strategies for greater local energy collaboration and integration in the public interest. It is time to begin to see how these puzzle pieces can fit together. The table below is intended as a start. Also, to the end of state policies that enable, empower and reward city/utility collaboration. The table below highlights the key strategies outlined in the preceding pages.

 

City/Utility Collaboration Goals and Strategies


Goal 1: Cost-effective local energy asset use

Strategies

  1. Sizing of on-site solar and storage assets for best life-cycle economic performance and contributions to local energy resilience

  2. Allow/encourage fully functional building, neighborhood/community micro- and mini-grids

  3. Anticipate and develop programs for using electric vehicle batteries for solar assisted demand response.
     

Goal 2: Economic gains from smarter asset utilization

Strategies

  1. Recognize and compensate building owners for use of their “demand-side” resources

  2. Data sharing and data mining that for improved local energy integration and resilience

  3. Dialog and coordination between utility and city CIOs
     

Goal 3: Investments in smarter, more integrated infrastructure

State Strategies

  1. Identify joint city/utility planning and coordination issues

  2. Reward investment in local grid infrastructure that enables local energy resilience

  3. Require state finance agencies and infrastructure banks to solicit financing plans for local energy resilience projects

 


¹ aka "distributed"