Back in 2013, Greentech Media came up with the term “grid edge” to encompass the new world of rooftop solar PV, behind-the-meter batteries, energy-smart buildings and other distributed, customer-owned energy assets. We also predicted that utilities and governments would need to take on these non-traditional challenges sooner rather than later, if they wanted to convert them from existential threat into future opportunity.
One year later, and we’ve seen this forecast hold true -- and at a scale that we wouldn’t have begun to predict. Here’s our list of the five most important stories happening on the grid edge in 2014.
1) In Germany’s Solar-First Market, E.ON Migrates to the Edge
Germany has led the world in bringing solar and wind power to mass-market scale -- and it’s been rewarded by some serious disruptions to its energy sector, including plummeting wholesale power prices and a collapse of the economics of operating fossil-fuel-fired power plants. In December, Germany’s biggest utility, E.ON, announced its plan to spin off its central power plants as a separate company, and refocus its growth on renewables, distributed energy and “innovative, customer-oriented solutions.” Germany's second-biggest utility, RWE, is also planning to transform its power delivery business in favor of a "prosumer" business model. As for U.S. analogues, NRG Energy is getting into rooftop solar, electric vehicle charging and home energy management under its NRG Home business unit.
2) SoCal Surprise: Distributed Storage Becomes Competitive
Southern California Edison gave the grid-scale energy storage enthusiasts something to cheer about in November, when it included more than 250 megawatts of contracts for storage-based assets as part of its 2,200-megawatt Local Capacity Requirement (LCR) procurement for its grid-stressed West Los Angeles Basin region. That’s five times the 50-megawatt minimum state regulators had demanded, and includes a mix of behind-the-meter batteries, ice-making air conditioners for thermal storage, battery-based microgrids and the world’s largest lithium-ion grid battery. SCE isn’t disclosing the terms of its long-term power-purchase agreements with winning vendors like Stem, Ice Energy, Advanced Microgrid Solutions and AES Energy Storage -- but apparently it believes they’re cost-competitive with traditional alternatives.
3) Feds Flummox Traditional Demand Response, Open Door to Innovation
This development is the only negative on our list -- and it may have a silver lining for next-generation demand-side management. In May, a U.S. Court of Appeals decision overturned FERC Order 745, and opened up a much broader legal challenge to the capacity market mechanisms that account for much of the U.S.’s demand response. Power plant owners are happy, demand response aggregators like EnerNOC are outraged, and both sides are waiting for the U.S. Supreme Court to decide whether or not to hear FERC’s appeal. Grid operators like PJM are putting together contingency plans to allow DR aggregators to keep operating under new rules, while states are scrambling to fill the gaps with their own solutions. And new technologies and business models for delivering demand-side management could capitalize on the disruption.
4) REVing Up for Transition in New York
By far the most ambitious effort to reconfigure utility regulations and energy markets for the grid edge is New York’s Reforming the Energy Vision (REV) initiative. Officially launched in April by Gov. Andrew Cuomo and the state’s Public Service Commission, the REV process has since laid out a long-range vision for transforming the state’s utilities into distribution system platform providers (DSPPs), and enabling the trading of customer-owned, distributed energy supply and demand management across the state’s system. In the meantime, Consolidated Edison’s proposal to replace $1 billion in substation upgrades with $200 million in demand response, energy efficiency and energy storage will push the boundaries of how utilities and their customers will share the costs and benefits of grid-edge systems as long-term assets.
5) Hawaii Seeks Wholesale Change
Hawaii is arguably the state closest to the grid edge, with the country’s most expensive electricity generated by imported oil, and an island grid that’s facing the disruptions of intermittent wind and solar power without backup. The Hawaii Public Utilities Commission is also reworking its traditional cost-of-service regulations in ways similar to New York. It’s also demanding that Hawaiian Electric Industries, the state’s dominant utility, unblock its distributed solar bottlenecks, and chart a path forward for distributed energy storage, advanced solar inverters and demand response -- this in a landscape where battery-backed solar power could achieve grid parity in a few years. In December, NextEra Energy announced plans to acquire HEI for $4.3 billion, putting a big mainland wind and solar player -- and the owner of Florida Power & Light -- at the helm.
For a look at how Greentech Media visualizes the grid-edge ecosystem, see the cube below: