As California looks to get half its electricity from renewables by 2030, energy regulators in the state have never been busier.
Among the many pressing issues facing the California Public Utilities Commission this year: how to share data between utilities and distributed energy providers; how to allow utilities to rate-base distributed energy assets like storage, rooftop solar and electric-vehicle chargers; how to design new dynamic rates to shift demand and avoid cost-shifting; and whether to allow third parties to deploy infrastructure-as-a-service models in place of traditional generation, transmission and distribution build-out.
So are regulators prepared to address all these issues? GTM talked with CPUC Commissioner Catherine J.K. Sandoval about how to break down traditional regulatory silos in order to give California utilities the tools to manage large amounts of variable distributed energy.
In June, Commissioner Sandoval will join us at the Grid Edge World Forum in San Jose to share her insights on the state's challenges. She'll join a roster of the top names in the utility and distributed energy world -- so be sure to attend that three-day distributed energy extravaganza for a look at the future of the electricity system.
Stephen Lacey: What do you think the biggest near-term hurdles are when it comes to integrating more distributed renewables into California's grid?
Commissioner Sandoval: I think we're on the threshold of overcoming one of the big challenges: interconnection. I think this commission has been a leader in trying to promote interconnection, but we are a long way from the plug-and-play system that we see in the telecommunications network. Making distributed energy interconnection a more certain, more transparent and faster process is going to be very important.
We also need to facilitate interconnection of technologies like smart inverters so that distributed energy resources can become grid resources. When we get to that point, that changes everything.
Stephen Lacey: The CPUC recently upheld net metering with some modest changes. But you did not agree with that decision. Why?
Commissioner Sandoval: My concern was primarily with the very last-minute changes that exempt NEM customers from all transmission charges for 20 years. I had intended to vote for the decision. But because of that change, I decided to vote against it. I was very disappointed in the change because I thought that we had achieved a balance on transmission charges.
The issue revolved around whether NEM customers should pay for transmission services when they are not using the distributed energy resource. I thought the decision to exempt them from payment for grid services that they use for 20 years was really not well calibrated.
Stephen Lacey: I want to move into another point of contention in California -- how to share data. Utilities are understandably hesitant about sharing too much data about customers and the grid. Third parties are understandably eager to get that data. What kind of issues is the CPUC balancing when considering how to encourage data-sharing so that we can better target distributed resources?
Commissioner Sandoval: The CPUC was a leader in adapting and adopting rules that opened access to data on customers at the aggregate level. We would definitely invite suggestions for how that needs to adjusted in order to strike the right balance between consumer privacy and managing the grid better.
We are increasingly pushing the investor-owned utilities to make sure they are accurately collecting data about the grid and then making it accessible, so that developers know where the grid is congested and where are optimal places to connect projects. I think data is a multi-pronged need, and we definitely are interested in trying to get more accurate and complete data.
Stephen Lacey: Do you think we're close to coming to an agreement on exactly what data should be out there?
Commissioner Sandoval: I would actually say no. There is still some debate about what data is needed. There also has to be recognition that there is a cost involved in getting the data -- a cost that ratepayers may have to bear. So how do we pay for that? How do we avoid stranding these costs?
The developers really need this information. If we want to achieve the 50 percent renewable goal, we must have more concrete information about the grid. But there's still not full agreement on how to get it.
Stephen Lacey: Recently, Commissioner Mike Florio proposed a way for utilities to deploy distributed resources as an alternative to traditional infrastructure. It's kind of similar to the infrastructure-as-a-service model that has been touted by SolarCity and folks like Jon Wellinghoff. Where do you stand on proposals to remake rate design and encourage third parties to develop distributed alternatives to traditional infrastructure?
Commissioner Sandoval: I can't comment on the merits of a specific pending proposal. But what I can say is that I think we need to look creatively at how we're going to achieve California's 50 percent renewable goal in a way that yields safe, reliable service at just and reasonable rates. And if that means thinking differently about how we structure incentives to invest in the network, then I think we should consider those new ideas.
Stephen Lacey: Do you envision a regulatory overhaul in California like we're seeing in New York? California has been ahead on all these issues, but tended to rely on individual regulatory tracks instead of bringing it all together like New York. Do you see something more comprehensive on the horizon in California?
Commissioner Sandoval: Right now we haven't gotten to the point of adopting a unified model. But I think that there are some proceedings that are designed to bust through the silos. For example, I'm the assigned commissioner in the water-energy nexus proceeding, where we've ordered pilots to adopt what I call "matinee energy prices" -- adjusting pricing at different times of the day like a movie theater would.
We should be thinking about how we attract energy use to the middle of the day when solar and other distributed energy resources are abundant. Right now, we're still operating based on the past assumption that most energy peaks between noon and 5 p.m. on the grid -- that isn't true in California and hasn't been for a long time.
We're using a variety of different ways to hit 50 percent renewable energy without yet committing ourselves to one specific path. We're going to try lots of experiments to try to get us there.
Stephen Lacey: As you try to get there, the so-called "duck curve" is flattening. And we're already starting to see some curtailment and some teeth gnashing about the state already having too much wind and solar. Does California have the tools to manage that much renewable energy, or are you confident that the regulatory pieces are being put into place to develop those tools?
Commissioner Sandoval: That is exactly why I implemented the order about matinee pricing. Right now we've created situations that, in my mind, are a little crazy.
For example, there are some industrial companies that start their operations at 6 p.m. because that's when the peak time goes off and energy is cheaper. So they're doing what is economically rational for them, but it's not rational for the system. What they need in order to change their behavior is a lower rate during the day when we are in the "belly" of the duck -- and they also need more notice so they can plan and move their people and their processes.
This type of pricing is exactly what we're trying to work through. We also have another proceeding that's looking at time-of-use pricing. So I think there are a variety of tools at our disposal to help to manage these resources. But we've got to be smart about how we use them.
I am very excited about the energy future. I think we're seeing lots of change in terms of innovation, competition and customer choice. We always have to keep in mind the big picture -- and that means busting through silos of regulation. If we continue to do that, I'm confident we can balance innovation and reliability so that we get a grid that is good for the environment and good for ratepayers.
Experts will delve further into issues and opportunities shaping the next-generation energy system at GTM's Grid Edge World Forum taking place June 21-23, 2016 in San Jose, Calif. Register here.